Medical liability-noneconomic damages.

11LSO-0290.L1

 

 

FISCAL NOTE

This bill contains an appropriation of $5,000,000 from the BUDGET RESERVE ACCOUNT to the Attorney General.  This appropriation is effective immediately.

 

This bill contains an appropriation of $50,000 from the GENERAL FUND to the Insurance Department.  This appropriation is effective immediately.

 

DETAIL OF APPROPRIATION

Agency #:  015     Agency Name:  Attorney General

Unit:  0101 Law Office

 

EXPENDITURE BY SERIES AND YEAR       FY 2011         FY 2012         FY 2013

0100  Personnel/Benefit Costs         $14,478         $328,095        $328,095

0200  Supportive Services Costs        $1,000          $50,000         $50,000

0400  Central/Data Services Costs                       $1,500          $1,500

0900  Contractual Services Costs                    $2,112,666      $2,112,666

 

Total Expenditure Per Year:           $15,478       $2,492,261      $2,492,261

 

Grand Total Expenditure:           $5,000,000

Total Appropriated to Agency:      $5,000,000

Total Appropriated by Fund

BUDGET RESERVE ACCOUNT   :         $5,000,000

 

Description of Appropriation:

The Attorney General’s Office would need to hire four new people:  a program manager (BARD08), two medical malpractice attorneys (AT05) and one paralegal (BALG08).  In addition, the AG’s Office would need to expend funds for the costs associated with defending these cases, as well as for an auditor to provide the report referenced in 35-1-1204(d).  We would need to hire the program manager immediately to promulgate rules and ensure that the program is up and running by July 1, 2011.

 

FY 2011  – these costs represent 3 months salary and benefits for the program manager.  We used the minimum salary for a BARD08 and added 25% for benefits.  The 200 series funds are for a computer, phone, etc.

 

FY 2012 and 2013 – the 100 series costs represent salary and benefits for the four new positions.  We used the minimum salary for the classifications and added 25% for benefits.  The 200 series costs are mainly for travel, but also include funds for computers, office supplies, etc.  The 900 series funds include two different categories:  1) costs of defense, i.e. experts, transcripts, court reporters, etc., ($865,750/year) and 2) funds available for settlement and judgments ($1,246,916/year).  The method we used for estimating defense costs follows under the “assumptions” category.  The amount representing funds available for settlements and judgments was solely based on the amount of funds remaining from the $5,000,000 proposed appropriation.

 

[Page 1 of 4]

 

 

Assumptions:

The new legislation requires the Attorney General’s Office participation, as a party, in every medical malpractice action filed against any physician, potentially entitled to coverage under the fund.   Given that virtually every physician in the state serves the Medicaid and CHiP populations, we have assumed that virtually every physician in the state will participate in the program.  We attempted to determine the number of medical malpractice lawsuits filed in a year and how far those cases proceed or the method in which the cases are resolved, i.e. settlement, dismissal on motion or judgment.  Unfortunately, there is no complete list of medical malpractice lawsuit statistics, so we used various sources to estimate the likely number of lawsuits and the percentage that are resolved at each stage of the proceeding. 

 

Over the last four years there have been 42, 37, 52 and 52 claims filed with the medical review panel.   Until July 2010, the Medical Review Panel did not keep statistics on how many of those cases are actually filed in court (no reports of any such cases since July, 2010).  There have been 13 total medical malpractice lawsuits filed in federal court over the last three years.  The State Courts do not keep statistics detailed enough to determine the number of medical malpractice lawsuits, although there have only been three medical malpractice lawsuits decided on appeal in the last three years.  The Insurance Commission also files reports regarding lawsuits filed against doctors and other health care providers and facilities in the state.  The most recent report, summarizing findings from 2008, identifies 557 insured physicians and 126 claims resulting in 35 settlements or verdicts with total awards of, including costs of defense, of $8,201,544.86.  The problem with the claim and total award numbers are that they include all health care professionals, not just physicians, and health care facilities (including labs, clinics, etc.).  The breakout for defense costs for all 126 claims was $2,502,349.81 but again this includes all health care providers and facilities.

 

According to a 2008 WWAMI report, between 900 and 1100 physicians actively practice in the state.

 

Based on past experience, the reports cited above and general conversations on trends with medical malpractice attorneys, there are between 25 and 50 medical malpractice lawsuits filed against physicians every year.  The percentage of those that result in a verdict for the plaintiff or a settlement was somewhere between 10% and 25%.  Based on this information, the average cost of defense for a medical malpractice lawsuit that goes to a verdict is between $200,000 and $300,000.  This includes attorney’s fees and costs including large expert witness fees.

 

The State Self Insurance Program provided us with the costs and fees for medical malpractice cases defended by the Attorney General’s Office.    We have only had a few small cases that have generally been abandoned after the Medical Review Panel.  There was one medical malpractice case that was settled shortly before trial for $90,000 and resulted in $235,000 in attorney's fees and costs (this case involved a conflict between two state employees so this number includes outside counsel's attorney's fees as well).

[Page 2 of 4]

 

The Attorney General’s Office acknowledges that there may be some cost savings because we will be an additional party with the same interests as defense counsel and have taken that into account in the following estimates.  We may also be able to limit the costs and share experts and other expenses.  In addition, our involvement would only be required if the amount of damages exceeded $500,000 (there are no statistics about the claimed damages but we are also taking that into account in the totals below).

 

The Attorney General’s Office believes that 25 to 50 medical malpractice physician lawsuits will be filed a year with approximately a third (based on the Commission's report) of those proceeding through settlement or verdict.  Based on the average case load of the litigators in the Attorney General’s Office, 10 to 15 cases per attorney, and the specialized nature of medical malpractice litigation, the AG’s Office would need at least two new attorney positions for experienced attorneys (ATPA05) and one paralegal position (BALG08).  In addition, we would need to anticipate defense costs (experts, travel, depositions, etc.) of $50,000 to $100,000 for the third of the cases filed that proceed through settlement or verdict for an average total of $600,000 or a high (if 50 suits are filed and the cost of all 16 proceeding to this stage is $100,000) of $1,200,000.  In addition, costs of $5,000 to $20,000 would have to be anticipated for the remaining 17 to 34 cases filed but resolved earlier in the process for an average of $315,750 or a high of $680,000.  These figures are per year and based on the reports and information provided above.  The figures detailed in the “detail of appropriation” section are based on the “average” figures, not the “high” ones.

 

In addition to the cost associated with participating in the cases, the Attorney General’s Office would need another staff person to run the program to insure some 900-1100 physicians (i.e. perform the duties regarding issuing the insurance certificates, promulgating rules, providing necessary reports). 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Page 3 of 4]

 

Agency #:  044     Agency Name:  Insurance Department

Program:  0101 Administration

 

EXPENDITURE BY SERIES AND YEAR       FY 2011         FY 2012         FY 2013

0900  Contractual Services Costs      $50,000                                   

 

Total Expenditure Per Year:           $50,000                                

 

Grand Total Expenditure:              $50,000

Total Appropriated to Agency:         $50,000

Total Appropriated by Fund

GENERAL FUND             :            $50,000

 

 

Discussion of Appropriation:

The bill appropriates $50,000 from the General Fund to the Department of Insurance to conduct an actuarial study to consider the benefits of reinsurance and to estimate the anticipated annual cost and terms of reinsurance for the Wyoming excess liability account established in the bill and overseen by the Attorney General.  The Department does not have a staff actuary and so the Department would need to contract with a consulting actuary to conduct the study.  The bill is effective immediately so that the monies should be expended or encumbered in FY2011.  The Department would likely issue an RFP for the actuarial work prior to awarding the contract.  It is expected that the appropriation would be used solely for contracting with a qualified actuary.

 

Assumptions:

The actual cost of the type of actuarial study required here is unknown.  However, the Department estimates based upon past experience in working with consulting actuaries that the cost of the study would be somewhere between $25,000 and $50,000.  

 

NOTICE-AGENCY ESTIMATE OF ADMINISTRATIVE IMPACT REQUESTED

 

This bill has administrative impact that appears to increase (or decrease) duties or responsibilities of one or more state agencies and may impact agency spending or staffing requirements. As introduced, the bill does not modify any state agency budget or current personnel authorizations.

The following state agencies will be asked to provide their estimate of the administrative fiscal impact prior to the first committee meeting held to consider the bill:

Attorney General’s Office

 

Prepared by:   Matthew Sackett, LSO   Phone: 777-7881

(Information provided by Elizabeth Gagen, Attorney General’s Office and Ken Vines, Insurance Department; Phones: 777-7847 and 777-6894 respectively)

 

[Page 4 of 4]