Tuesday, October 13, 2009

10/13/09 - Mcare Funds "absorbed," PMS, HAP file suit

10/13/09 - Liability and Health News Update
Mcare Funds "absorbed," PMS, HAP file suit

by Donna Baver Rovito, Editor, "Liability and Health News Update"
Author, "Pennsylvania's Disappearing Doctors"
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1. Commentary

Just in case you've missed it - yes, the newly signed state budget does empty the Health Care Providers Retention Fund, as well as taking $100 million paid by doctors and hospitals into the Mcare Fund to balance the state budget - leaving virtually no reserves for Mcare's $1.6 billion unfunded liability.

The fight against this shortsighted and inherently unfair proposal was a valiant effort, of which PA's health care professionals should be proud. The sheer number of calls you made to your state legislators about the Mcare Fund was amazing - and even though we didn't prevail, we made an important mark. We are VERY GRATEFUL for your efforts and your support.

Please don't be discouraged from future participation in the process because we didn't prevail this time. Future efforts will be JUST as important, and your participation in this particular issue proves that you're out there, and you're willing to get involved. Don't lose the momentum, please.

Because, based on legal action filed yesterday by the PA Medical Society and HAP, this fight is NOT YET OVER.

The first two stories detail those legal actions - and demonstrate CLEARLY that every physician in Pennsylvania should be a member of the Pennsylvania Medical Society (www.pamedsoc.org). No excuses.

And if you want to carry it a little further, every physicians' SPOUSE should be a member of the Pennsylvania Medical Society Alliance. (http://www.pamedsoc.org/alliance)

When the Medical Society fights and wins for PA's physicians, all Pennsylvania physicians benefit. Those who sit on the sidelines directly benefit from the advocacy of these dedicated groups and take advantage of those who do make the commitment to participate - and their lack of participation makes the organizations weaker. Period.

Oh, and no one asked me to say that. Those who've been reading for a long time are well aware of my admiration for and support of these fine organizations. And while I may be a little annoyed at the AMA right now for its early support of national health care reform, I support their overall efforts as well, and STRONGLY believe that physicians who don't participate don't have the right to whine about how the organizations might not represent their interests....

Back to the budget. Sadly, in the final analysis, the hundreds of millions of dollars in the Mcare and the Provider Retention Fund were just too tempting for legislators on BOTH sides of the political aisle in their desperate attempt to balance the state budget. They saw it as a big pot of money they could take which, in their minds, would impact a relatively small group, i.e., doctors and hospitals. (Although they were ALL a bit surprised at how much noise that small group, with the support of concerned and knowledgeable patients, made during the process.)

It occurs to me that the powers-that-be have likely been lusting after that pot of money for quite a while, since they stopped transferring monies generated by the dedicated cigarette tax passed in 2003 INTO the Mcare account in 2005 - giving them easier access to the funds.

They consider it tax dollars, available to be spent however they see fit. PA's doctors, hospitals, and victims of medical malpractice considered it a promise. A promise broken.

So....we finally have a budget, 101 days late. Is it a good budget? Personally, I think it's frighteningly shortsighted, but others who know a lot more will be analyzing the repercussions of PA's 2009-2010 budget for a long time - possibly right into the negotiations for the NEXT budget.

The legislature won't have the luxury, though, during the NEXT budget battle, of draining the Rainy Day Fund or the health Care Providers Retention Fund - those have been drained to balance THIS year's budget. (I suppose it's no longer important to retain health care providers?)

Of course, doctors and hospitals will be forced by law to keep paying premiums to the Mcare Fund - PA's very own government-run insurance company. And now we know that the state has no problem taking those funds for its own purposes, instead of using them to compensate victims of medical malpractice. Hopefully, the courts will settle that issue.

People who support a "public option" or government-run insurance entity at the national level might do well to consider the hard lesson PA's doctors and hospitals learned about government-run insurance this year.

Once your money is in the hands of the government - be it state or federal - they can do whatever they want with it.

Remember the Social Security Trust Fund? WHAT Social Security Trust Fund, you may ask?

You mean the accounting gimmick the government has used for decades to transfer monies paid as Social Security taxes from the Social Security "lockbox" to the general fund, while giving Social Security IOU's in the form of bonds that will need to be repaid to Social Security as benefits need to be paid out to retirees, etc.?

Exactly. THAT illusory Trust Fund.

Several stories follow about the final passage of PA's budget. Frankly, it was very difficult to even FIND stories which mentioned that the state was "acquiring" the Mcare Fund and the Health Care Providers Retention Fund, or taking over the funding sources for those entities. Most stories mentioned the Rainy Day Fund, which was also drained, but media coverage of the outrage perpetrated on PA's hospitals and physicians, not to mention legitimate victims of medical malpractice, was scant and lackluster (with a few exceptions.) Some of the pieces are from BEFORE the budget was passed, but the information in them is still timely and educational.

You may want to grab your roll of duct tape, though, because there's a "Duct Tape Alert" in one of the following stories. For new readers, a "Duct Tape Alert" is offered up whenever there's a chance that something you read in this Update will make you SO angry that your head might explode. To prevent that, just wrap your head in duct tape BEFORE you read the piece - that way, if your head DOES explode, you'll at least have all the pieces for when you try to find a neurosurgeon to put your head back together again. (Yes, I shamelessly borrowed the duct tape idea from a radio talk show host - I added the part about not being able to find a neurosurgeon, though.)

Of course, now that the state is raiding the premiums doctors pay into the state-run malpractice insurance company, it's likely to be even harder to FIND a neurosurgeon in Pennsylvania.

And as to recruiting new, young neurosurgeons to our state in the future....fugeddaboudit....

So...lawsuits have been filed and it will be up to the courts to decide whether the state can take dedicated tax dollars for another purpose or "acquire" premium dollars paid by doctors and hospitals to protect victims of medical malpractice. Some legislators are a bit nervous about that possibility - and well they should be. Should the courts decide that what the legislature and the governor have done is illegal or unconstitutional, they'll have a pretty big budget gap to fill. So stay tuned.

And if you don't belong to the PA Medical Society - or its Alliance - JOIN. TODAY. Because they're out there fighting for ALL of PA's doctors and patients.

Lots of stuff happening at the federal level, too - the Senate Finance Committee is scheduled to vote on the Baucus Bill - or the OUTLINE of the Baucus bill, anyway - today. I haven't included any federal stories in this Update, but will follow with more news after the bill passes out of committee, of which there is no doubt.

Thank you again for your efforts to derail the state's takeover of the Mcare and Health Care Providers Retention Fund. We didn't win, but we put up a hell of a fight and made an indelible mark on our state's legislative process.



2. From the PA Medical Society Website
Battle May Be Lost, but War Is NOT Over for Mcare Fund
Thanks to physicians’ outcry, PA legislators know they’ll be held accountable for unconstitutional taking of Mcare Fund monies

On Friday, Oct. 9, the 101st day of the state budget battle, the state House and Senate approved and Gov. Ed Rendell signed the revenue package and the fiscal code measure that completed the state budget.

A key element of this budget is the transfer of $100 million in physicians’ premium dollars from the Mcare Fund. The Pennsylvania Medical Society and its membership have argued that these are not tax dollars, but premiums in the form of assessments that physicians have paid and thus should not be diverted for any other purpose.

During last week’s budget debate, every legislator was made aware that the raid was wrong, thanks to the outcry of Pennsylvania physicians.

State Society President Daniel J. Glunk, MD, said, “We were gratified by the unprecedented outpouring of calls and emails from our members to legislators. Now, we need to pick up our phones and thank those courageous lawmakers who voted to support our challenge to the Mcare Fund raid. As for those who voted to raid the Mcare Fund, we will let them know that sacrificing our patients’ health care to balance the state budget is unacceptable. Their vote against us has violated a trust and will have far reaching consequences.”

For more than two weeks, the core group of legislators involved in budget negotiations reported being flooded almost daily with an unprecedented number of calls and emails from physicians opposing the Mcare Fund raid.

Even so, a vote challenging the constitutionality of the raid fell just short.

The afternoon of Oct. 8, during debate pending a vote on a fiscal code bill authorizing the Mcare Fund raid, the group of legislators challenged the constitutionality of this legislative maneuver. They read a letter from State Society President Daniel J. Glunk, MD, on the floor of the General Assembly. Reps. Curt Schroder, Matt Baker, and Brian Cutler made it clear that they believed the raid to be unconstitutional and morally wrong, amounting to nothing more than a tax on physicians and patients. The vote: 99-98.

The budget also takes $700 million from the Health Care Provider Retention Account that was originally intended to provide subsidized medical liability insurance coverage for physicians. The Medical Society is analyzing other changes that redirect recurring funds into the general fund.

The Pennsylvania Medical Society, along with The Hospital and Healthsystem Association of Pennsylvania, have already filed the appropriate legal actions to challenge the constitutionality of the raid on Mcare Funds.

Last Updated: 10/13/2009


3. From the PA Medical Society Website
Medical Society Files Legal Actions to Challenge Raid of Mcare and Health Care Dollars

With the ink barely dry on the governor’s signature on the state budget, the Pennsylvania Medical Society this week took a series of legal actions to challenge the use of physicians’ premium dollars and other health care monies to balance the budget.

Two state-managed funds are at issue: the Mcare Fund and the Health Care Provider Retention Account (HCPRA).

Mcare Fund raid

On Oct. 12, the Medical Society and The Hospital and Healthsystem Association (HAP) filed lawsuits aimed at safeguarding approximately $100 million that was redirected from the Mcare Fund into the state’s general fund.

The Society contends that the Mcare Funds are not tax dollars, but rather premiums in the form of assessments paid by physicians, hospitals, and other providers, and should not be diverted for any other purpose.

The Society and HAP also filed a motion for a preliminary injunction asking the court to prevent transfer of the money from the Mcare Fund while the lawsuit is being litigated.

The notion by some in the legislature that the Mcare balance resulted from automobile moving violation surcharges deposited in the Fund is just plain wrong. The Medical Society contends that the money from moving violations was dedicated to covering the cost of the discount and abatement programs, and that, rather than “leftover” funds, those programs have a funding deficit in excess of $400 million.

Lawsuit to preserve HCPRA funds

Other legal actions, originally filed in December 2008 by the Medical Society and HAP, attempt to require transfer of funds in the Health Care Provider Retention Account (HCPRA) to Mcare to offset the shortfall in abatement funding of over $400 million. The HCPRA funds were also redirected to help balance the state budget.

In August, Commonwealth Court ruled in favor of the Medical Society and HAP, by rejecting the state’s motion to dismiss the HCPRA lawsuit. The Society’s position in the HCPRA litigation is that the administration failed to fully fund the abatements for the 2003-2007 assessments as required using cigarette tax revenue deposited in HCPRA and moving violations revenue.

On October 12, the Medical Society and HAP filed a motion for a preliminary injunction asking the court to prevent transfer of the HCPRA funds needed to fully fund the abatements while the lawsuit is being litigated.

Next steps

Essentially, the Medical Society and HAP contend that the state is balancing the budget on the backs of health care providers and their patients.

By filing this series of legal actions, the Society hopes not only to reverse the illegal redirection of physicians’ premium monies, but to also repair the damage inflicted on the state’s medical practice environment and ability to recruit new physicians.

Last Updated: 10/13/2009


4. Inquirer Harrisburg Bureau
Finally, Rendell signs $27.8 billion Pa. budget
By Mario F. Cattabiani and Amy Worden
Sat, Oct. 10, 2009

HARRISBURG - With strokes of the pen that took only seconds, Gov. Rendell last night signed into law a $27.8 billion state budget 101 days in the making.

With his "Edward G. Rendell" on three bills - taxes, spending, and the enabling fiscal code - the governor all but ended the nation's longest state budget impasse.

More important, his signatures will speed checks to the counties, schools, and social-service agencies that have stretched and strained to make ends meet while awaiting their months-overdue state subsidies.

"It is a responsible budget, but it took entirely too long. There is no excuse for us to put the public through three months of waiting," Rendell said at 9:05 p.m., after laying down the pen. "After months and months of wrangling, this budget, after difficulties and unconscionable delays, produces a good result for the people of Pennsylvania."

Rendell didn't order up a full bill-signing ceremony - the custom for major legislation - because "there is no reason to celebrate," he said.

The General Assembly still has work to do.

It must send Rendell several other pieces of legislation that make up the overall budget, including bills establishing funding for universities such as Pennsylvania State and Temple Universities, as well as the bill authorizing poker and other table games at slots parlors and resorts.

Officials said those bills may be delayed till early next week but would not impede completion of the overall budget.

Earlier yesterday, the Senate took the biggest step yet toward ending the budget stalemate by approving a spending plan, 42-7.

"I think the airplane is ready to come in for a landing," Senate President Pro Tempore Joe Scarnati (R., Jefferson) said in an interview shortly before the vote. "Alert the runway."

The budget process, made more difficult this year by a deep recession and dwindling state revenues, cuts overall spending by more than 1 percent from last year while increasing public school funding by $300 million. Rendell had set the added education money as his precondition to any budget deal.

The governor already had another budget bill waiting on his desk - legislation to hike by 25 cents the state tax on a pack of cigarettes, to add a new tax on little cigars known as cigarillos, and to increase the capital-stock and franchise-tax paid by some companies. It also drains dry the $755 million in the state's Rainy Day Fund.

State Treasurer Rob McCord said yesterday he would expedite billions in checks to "priority" recipients, among them thousands of agencies such as mental-health centers, food pantries and shelters, along with child-care providers, which have been struggling to stay open.

School districts, veterans, and libraries, too, will see their state money flowing again as early as Tuesday.

"We're not skipping any steps; we're just doing them as fast as humanly possible and working late nights and weekends," said McCord, who urged providers and others expecting checks to consult the agency Web site (www.patreasury.org) for more information.

"As soon as we are legally capable to expedite payments, we will," he added.

Yesterday, the Senate passed two bills related to table games.

One would set tougher gaming regulations, including reauthorizing a ban tossed out by the courts earlier this year on state politicians' campaign contributions from gaming interests. Legislators wrote new wording in hopes of enacting a ban that will pass muster in the courts.

The other bill would set the tax rate on poker and other table games at 14 percent - 12 percent to the state, 2 percent to the municipality. Racetracks with slot machines and standalone casinos would also pay a $15 million upfront licensing fee to run table games; smaller, resort casinos, would pay $7.5 million.

A version of the legislation in the House calls for a 34 percent tax and a $20 million license fee for larger casinos. Legislative leaders still working toward a compromise between the competing versions have signaled that they expect to come to terms soon.

House Minority Leader Sam Smith (R., Jefferson) said the budget spends too much, adds new taxes, and exposes the state to lingering effects of the recession.

"With more than a billion dollars in new or increased taxes, billions in federal stimulus dollars, and now, by draining the Rainy Day Fund . . . we are positioned on a giant funding cliff if the economy doesn't swing back," Smith said.

Speaking for perhaps everyone at the Capitol and across the state, House Majority Leader Todd Eachus (D., Luzerne) said, "I'm just glad it's over."


5. Williamsport Sun-Gazette
Everett, Baker both vote ‘no’; assail approved state budget

By MIKE REUTHER mreuther@sungazette.com
POSTED: October 12, 2009

With passage of the state's final budget now complete, a pair of area Republican lawmakers who voted against it took time to assail the $27.8 spending plan over the weekend.

Although the budget is some $400 million smaller than the previous year, state Rep. Garth Everett. R-Muncy, said he thought it could have been been whittled down a bit more.

"We spent more than I think we should have," he said.

The budget, passed Friday night, 101 days beyond its deadline, also drew negative reviews from state Rep. Matthew E. Baker, R-Wellsboro.

"I am relieved that county services, child care programs and other state-supported programs will now receive their long overdue payments from the state. However, I could not support a budget that drains every penny of our savings account and continues to spend more than we take in as a state," Baker said.

Both Baker and Everett were critical of draining the $708 million Health Care Provider and Retention Account and transfering of $100 million from the MCARE Fund, both used to cover malpractice insurance for doctors.

"It could affect our (state's) physician retention ability too," Everett said.

In fact, Everett went as far as predicting that doctors will file a lawsuit over the use of those funds.

Added Baker: "If these lawsuits are successful, the state could be forced to reopen the budget to fill an $800 million hole. I think this drainage of funds is not only unethical, given the fact that the doctors of Pennsylvania are the ones who paid into these accounts, but also unwise given the impending litigation."

Other means of funding the budget are taxes on cigarettes and small cigars, restoration of the capital stock and franchise tax (which was to be phased out), and use of the state's entire $755 million Rainy Day fund.

Baker said he's happy the budget process is over.

"I just regret that we didn't use the last 100 days to formulate and agree on a better budget that would have positioned the commonwealth for greater fiscal stability over the next couple of years."

Everett said he's afraid that the budget still is not workable, given that revenue projections continue to fall short of spending.

He's also doesn't like the inclusion in the budget of discretionary funds known as Walking Around Money, or WAMS.

The budget includes no increase in a broad-based tax, such as the state income or sales tax.

It relies on $2.6 billion in federal stimulus money and calls for table games at the state's casinos.


6. York Daily Record
County's House Republicans not happy with budget
Local Republican Representatives voted against it. They say the plan will just leave the state in another crisis next June.

Daily Record/Sunday News
Updated: 10/10/2009 10:30:29 PM EDT

After 101 days of delay, the governor and the majority leaders -- Democrats in the Pennsylvania House, Republicans in the Senate -- came to an agreement.

With the Pennsylvania budget passed and signed into law, the officials looked into the TV cameras Friday night and, with earnest voices, said they had learned a lesson from this year's protracted budget process. Such a stalemate can never be allowed to happen again.

Republican House members from York County -- all of whom voted against the final bill -- say it's a nice sentiment, but this $27.8 billion budget nearly ensures the state will go into next year with a deficit.

Instead of cutting at least another $400 million in spending, the local Republican representatives said, lawmakers have only delayed what could be the most painful and politically unpopular decisions another year.

"We're looking toward a financial cliff next year," said Rep. Keith Gillespie, R-Hellam Township. "There's going to be a big hole there."

Gov. Ed Rendell, Senators from both parties and House Democrats have said this budget can serve as a template for the next year's discussion. Rendell noted that the budget cut spending more than $500 million compared to last year, while increasing education funding.

To balance the budget, lawmakers approved new revenue sources, including raising the cigarette tax, taxing "little cigars," and allowing table games at the state's casinos.

But, the local Republican representatives say, those projections are too rosy, and other revenue estimates require the economy to recover at an unrealistic rate.

"They're predicting we'll bring in the same amount of money this year that we did last year and we're already $140 million behind what we brought in last year," said Rep. Stan Saylor, R-Windsor Township.

"Based upon talks to economists that I've had, I don't think Pennsylvania will bring in the same amount of revenue for any month before April of next year, which means we'll be $500 million or $1 billion behind where we are now."

Sen. Mike Waugh, R-Shrewsbury Township, said the budget does require the economy to recover, but provides a realistic blueprint for paying the bills this year.

Among the local Republican representatives' objections:

--- Corporate taxes: One area where the state has collected more money than expected this year is corporate tax, said Rep. Seth Grove, R-Dover Township. The budget calls for an increased capital stock and franchise tax. In this economy, Grove said, the raised tax will likely hurt corporations, and ultimately reduce the state's earnings.

--- Education spending: Gillespie said he supports education, but not the $300 million in new money.

"I think level funding would have been the fiscally prudent thing to do."

--- Oversight: Both Gillespie and Saylor said the leadership caucuses ignored a report by the state's Auditor General, a Democrat, that said the Department of Public Welfare could cut $700 million in waste and fraud.

--- One-time transfers: The budget calls for a series of one-time transfers from other funds into the state's general fund.

It will wipe out the $755 million "rainy day" contingency fund and use $44 million from an automobile insurance fund and $150 million from the tobacco settlement, the first time the state has used the principal from that fund, not the interest.

Once that money is spent, it can't be used again, Grove said.

--- MCare Fund: The state will also transfer $808 million from the so-called MCare fund, which helps doctors pay for medical malpractice insurance by covering large malpractice judgements. A group of doctors is expected to sue the state to stop the transfer.

If the doctors win, as Gillespie expects they will, the state would have to address the new budget hole in the middle of the year.

"That money doesn't belong to the taxpayers, it belongs to the doctors," said Rep Dan Moul, R-Conewago Township, Adams County.

--- Collection rates: Currently, the state collects sales tax once a month. Soon, it will begin collecting every two weeks, to get another collection period in this fiscal year, which will shift $217 million from the next fiscal year to this one.

"They're accounting tricks that can get you through a tight spot, but there has to be a light at the end of the tunnel so that you don't need them any more," Miller said.

Add it up, they said, and you have another crisis next June.

"If there's one thing I hope for its that Stan Saylor and the Republicans are wrong because that would be what's best for the taxpayer," Saylor said.

jfrantz@ydr.com; 771-2062


7. Modern Healthcare.com
Pa. budget is mixed bag for state healthcare sector
By Melanie Evans
Posted: October 12, 2009 - 3:00 pm EDT

Pennsylvania's overdue budget included smaller cuts to hospital revenue than proposed, but redirected existing taxes and fees into the state's $27.8 billion general fund from healthcare funds and added a Medicaid managed-care tax.

The Hospital and Healthsystem Association of Pennsylvania said the 2009-10 budget, signed by Gov. Ed Rendell late last week, scaled back $280 million in proposed cuts to state and federal hospital revenue for trauma and burn centers, academic medical centers, critical-access hospitals, medical education, community-access funds and disproportionate-share hospitals to $40.7 million, a 12% reduction from the prior year's budget.

Roughly $215 million in revenue from cigarette taxes and motor vehicle surcharges that previously funded medical malpractice subsidies was shifted to the state's general fund, according to the HHAP and the Pennsylvania Medical Society. The budget also transferred $708 million from the Health Care Provider Retention Account, which helped offset medical-malpractice costs, and $100 million from Mcare, the state's medical liability fund which will continue to be funded by premiums paid by hospitals and physicians. The newly adopted managed-care tax is expected to generate $528.5 million, according to the Pennsylvania Budget and Policy Center, an independent policy research group.


8. Somerset Daily American
Locals happy there is a budget, worried about cuts

Friday, October 9, 2009 11:04 PM EDT

Local officials were relieved to hear that the state has a budget after a 101-day stalemate.

Pennsylvania Gov. Ed Rendell signed the budget shortly after 9 p.m. Friday.

“I’m glad that the various factions of government worked out the problems and came to a compromise,” said Somerset County Commissioner Jim Marker. “It took much longer than it should have.”

He doesn’t know what Somerset County will be receiving from the state. Counties should be notified in the coming weeks.

Area Agency on Aging Executive Director Arthur N. DiLoreto said he hopes the long process was a learning experience for the legislators.

“I hope they will carry with them an awareness of the extent of the inconvenience and to some extent the harm that has occurred in the lives of the people they were called to office to serve,” DiLoreto said.

The most recent budget breakdown he saw had aging services “flat-funded” from last year’s budget. While that might sound like great news, if history repeats itself, the agency’s operating expenses will be up 3 percent or more. The Area Agency on Aging’s strategy of cost-containment and reductions where possible will continue.

DiLoreto is also concerned because the last time he heard about line items in the budget, money for the human services development fund was cut by 15 percent. That fund provides money for programs such as adult day care, homemaker service, life skills education and homeless assistance.

“We have to be concerned about that,” he said. “These people have no other place to turn. We’ll look closely so people with the greatest needs will receive the aid. Even though the budget will be signed, this is only temporary relief. The work of advocacy continues.”

State Rep. Carl Walker Metzgar, R-Somerset, is happy a budget has been passed; however, he voted against the spending plan because it raises taxes.

“The people of the 69th District have said in these tough economic times government needs to live within its means just like everyone else and not raise taxes,” Metzgar said. “This budget raises taxes so I listened to those I work for, the people of the 69th District, and voted against new taxes.”

Metzgar has concerns about emptying rainy day funds because of the looming pension crisis, he said.

“The budget that has passed was pretty irresponsible,” he said. “We will have problems this year and next. They raided the rainy day fund and stole from the physicians’ MCare funds.”

The MCare Fund is a statewide fund to cover large medical malpractice judgments. It is built with yearly assessments imposed on hospitals, physicians and other health professions. The state decided to use $100 million, representing two-thirds of the fund’s balance, for the general fund. Professional organizations representing physicians have threatened to sue if that happens.

State Rep. Frank Burns, D-East Taylor Township, said in a press release that he is sponsoring legislation that would require legislators to forfeit all compensation during budget negotiations when a budget isn’t passed by the June 30 deadline.

“Like many Pennsylvanians, I am frustrated by this year’s budget impasse,” Burns said. “This legislation provides an incentive for legislators to do the necessary work to pass a budget on time."
(Vicki Rock can be reached at vickir@dailyamerican.com. Comment on the online story at dailyamerican.com.)


9. Pittsburgh Post-Gazette
Medical malpractice funds headed for Pa. budget
Thursday, October 08, 2009
By Steve Twedt

A statewide fund to cover large medical malpractice judgments -- built with yearly assessments imposed on hospitals, physicians and other health professionals -- is about to get $100 million poorer.

A House Democratic spokesman this week confirmed that the money, representing two-thirds of the fund's balance, almost certainly will be transferred to the general fund when Pennsylvania's state budget is finalized.

"This is not an element of the budget that currently is in dispute," said Brett Marcy, an aide to House Majority Leader Todd Eachus, D-Hazleton. "This money would be used as part of our overall strategy at plugging a $3.2 billion deficit that we face this year. If we don't do this ... we face a significant tax increase next year."

However, professional associations representing Pennsylvania physicians, hospitals, midwives and others say the state is using them as its personal piggy bank and are threatening to sue if the money is transferred.

"We believe we have a vested property right to that money," said Scot Chadwick, director of governmental affairs for the Pennsylvania Medical Society.

The MCare Fund has collected an annual payment from physicians and other health care workers since the mid-1970s as a hedge against large medical malpractice judgments. It was formed because physicians were having trouble finding insurers who would offer them coverage.

State law requires all doctors to obtain malpractice insurance on their own and through the Mcare insurance fund, which charges doctors a fee and then pays malpractice claims out of the fund.

The Pennsylvania Medical Society and the Hospital and Healthsystem Association of Pennsylvania have already sued the state for allowing yearly surplus MCare funds to accumulate instead of using the money to reduce the next year's assessments. As a result, they say, the assessments have continued to grow.

"The whole idea of the MCare Fund was to lower the cost of medical liability, not to increase it or shift it to others," said Jim Redmond, senior vice president for legislative services at Healthsystem Association.

In December, the same associations filed suit over a second fund, the Healthcare Provider Retention Account, which was created in 2003 to reduce MCare assessments. The money for that fund comes from a cigarette tax.

Two years ago, though, the physician and hospital groups learned that state officials had not been transferring the money into the MCare Fund since 2005 -- totaling about $616 million, Mr. Chadwick said -- and sued when the state said it was not required to make the transfer.

In July, Commonwealth Court denied the state's 2009 motion to throw out the lawsuit.

Now, the Pennsylvania Medical Society and the Hospital and Healthsystem Association of Pennsylvania may be looking at filing a third lawsuit to prevent what they see as an unfair and illegal raid on MCare funds.

"Obviously, physicians are concerned," said John Krah, Allegheny County Medical Society executive director. "Our state malpractice liability premiums are still significantly higher than many other states, including surrounding states, and we do compete with other locations for attracting physicians."

He said physicians understood the state's need to balance a budget. "It's as if they essentially were placing a special tax on physicians. Why doesn't anyone suggest a special tax on plaintiff attorneys' contingency fees?"

Further darkening the picture for physicians is the possibility that the state insurance commissioner soon may begin phasing out MCare, as availability of insurance is no longer as big an issue. That's because more physicians are either employed by hospitals or get malpractice insurance coverage through a hospital, which also is why hospitals have a major stake in how MCare money is used.

The problem: MCare has an unfunded liability of an estimated $1.66 billion that is expected to be needed for future judgments and settlements, Mr. Chadwick said. That means the newly graduated doctors will be levied to cover those debts over a period of perhaps 20 years, even though they had no personal responsibility for the debt nor will they receive any benefit from the fund.

"It's like paying the MCare mortgage, but you don't get the MCare house," he said.

Mr. Marcy said legislators knew physicians were unhappy but noted that "this is a tremendously difficult budget year" due to higher unemployment and decreased revenues.

"There is an awful lot of pain throughout this budget. There are an awful lot of people who are not going to be happy about it, and we understand that. But we need help" to continue programs such as children's health insurance, child welfare and senior services and programs for veterans.

"We need to find the revenue to keep these services running."

((Duct tape alert!)) While physicians may feel unfairly singled out, he added, "The people who are hurting the most are the people who are unemployed and don't have health insurance." ((So....two wrongs make a right somehow? And....is the money the state is appropriating from physician and hospital premiums going to somehow provide jobs or health insurance for people who don't have them? No....I didn't think so....))

Reach Steve Twedt at stwedt@post-gazette.com or 412-263-1963


10. The Philadelphia Bulletin
Three Months In, PA Budget Details Unclear
Sunday, October 04, 2009

Two weeks after Gov. Ed Rendell, D, and leaders of both parties in the state legislature arrived at a budget deal that most believed could pass, and three months past the official annual budget deadline, negotiations continue.

The roughly $28 billion spending plan increases education spending by $300 million over last year and sustains spending on other state programs important to the governor and his allies in the General Assembly. It also broadens the state sales tax to cover arts and culture events. Also, to the chagrin of anti-tax economic experts, it also slows down the phase-out of the state’s punitive capital stock and franchise tax.

Nonetheless, some who benefit from Harrisburg’s largesse and who suffer from its decisions to tax are clamoring for a redo of the budget.

Despite the significant concessions Republicans have made to the Democrats in terms of higher corporate and tobacco taxes, many of the lingering concerns are attributable to Democrats who oppose the new taxes on attending arts events and on small games of chance.

Health Care And Budget Issues Converge

Pennsylvania’s doctors are also watching closely as state officials discuss a hefty expenditure the state makes each year in an effort to keep their costs manageable.

The compromise at which Mr. Rendell and the divided legislature arrived to balance the budget involves transferring $800 million from the Mcare (Medical Care Availability and Reduction of Error) fund to pay for a variety of commonwealth programs. The fund covers much of the costs incurred by Pennsylvania’s doctors as a result of malpractice lawsuits. Some physicians’ organizations are fuming about the decision to raid it.

Dr. Daniel J. Glunk, president of the Pennsylvania Medical Society, called shifting funds out of Mcare and into other programs a “profound violation” of the trust between the state and the physicians whose legal costs the state is covering.

“I can’t imagine how we are going to be able to recruit young physicians to come to Pennsylvania when they find out their liability premiums may be taken to balance the state budget,” he said. “I urge you to carefully weigh the impact balancing the budget on the backs of our state’s health-care providers will have on our patients.”

But while some doctors support Mcare, other medical professionals and experts say the program merely passes on the costs of frivolous lawsuits from doctors to the entire taxpaying public and that such costs cannot disappear without serious tort reforms.

Nathan Benefield, director of policy research at the Harrisburg-based Commonwealth Foundation, said many legislators intended the Mcare program to be a temporary stopgap measure to cover liability costs while the state pursued meaningful tort reform. But it has, he added, become something much less innocuous.

“I think in many ways it’s a perverse incentive,” he said, describing it as a “huge pot of money” that allows attorneys to enrich themselves by suing physicians.

Mr. Benefield said that Pennsylvania should pursue tort reforms that cap certain damage awards, limit lawyers’ fees and possibly enact a “loser-pays” system that would make plaintiffs accountable for lawsuits to which courts don’t give credence. ((It isn't like we haven't tried to go those routes in the past - all of which were prevented by the trial bar and Mr. Rendell. Chances of significant liability reform happening NOW in PA - zilch.)) He also said the state should reform “joint and several liability” which burdens parties not directly responsible for alleged medical malpractice with paying some of the awards to plaintiffs. ((Ah, well, the legislature actually PASSED that one - and our Democratic governor VETOED it.))

Since the advent of the health-care reform debate this year, lawyers and their allies in politics have argued that medical liability does not significantly worsen America’s spiraling health care costs. In defense of this premise, they cite an estimate from the Congressional Budget Office, which in 2004 said malpractice lawsuits raise the costs of health care in America by roughly two percent.

Mr. Benefield said that percentage has the effect of understating the real costs of malpractice lawsuits because, all told, it translates into many billions of dollars.

Bradley Vasoli can be reached at bvasoli@thebulletin.us


11. Doctor's Advocate
What Pennsylvania’s Budget Battle Told Us About Tort Reform

Lawmakers’ long, heavy-going struggle to enact Pennsylvania’s budget didn’t give state residents much to delight in, but it did help settle a timely debate: How much does the public pay for medical liability costs?

Tort-reform opponents insist that litigation against medical professionals bears minimally on the cost of medicine. We’re apparently to believe that patients end up covering no significant portion of the high malpractice insurance premiums that doctors have to pay. We’re expected to think that lawsuits aren’t driving physicians out of Pennsylvania, reducing the supply of practitioners and inflating health-care cots.

And still, the same Harrisburg that didn’t consider excessive litigation a big enough problem to approve tort reform instead created the Medical Care Availability and Reduction of Error Fund (Mcare) in 2002. When a jury orders a medical practitioner to pay damages to a plaintiff, Mcare helps pay those damages. (If the state thinks most plaintiffs deserve these awards, you have to wonder why it takes on a financial burden to help the defendants pay them.)

This year, though, lawmakers decided they needed to use $808 million from the Mcare fund to close a massive budget hole. That figure represents roughly 1/34 of the $27.799-billion spending plan that Gov. Ed Rendell signed. For a state that cannot legally run a deficit, that fraction is enormous. In other words, Mcare’s very existence threatened to throw Pennsylvanians’ state budget severely off-balance. (It still does, if some doctors successfully sue the commonwealth to restore Mcare’s funding.)

Remember, many politicians actually favor this costly program over letting doctors shoulder malpractice insurance costs on their own. That is, they expect Pennsylvanians would suffer even more without Mcare than with it. The upshot: Pennsylvanians pay dearly for the state’s medical-liability crisis, whether as patients or as taxpayers. Only real tort reform can eliminate these crushing expenses.

Don’t let frivolous lawsuits destroy your career, your practice, and your family. Call Doctor's Advocate today at 888-362-8202 or email info@doctorsadvocate.com to learn how you can stay in the exam room and out of the courtroom!

© Copyright 2009 Doctor's Advocate. All rights reserved.

DoctorsAdvocate.com Copyright © 2006-2009 Doctor's Advocate


12. The (Harrisburg) Patriot-News
Budget pulls from medical surplus
Friday, Sep. 25, 2009
David Wenner

Add doctors and hospitals to the list of those of who feel the state budget is being balanced at their expense.

The budget agreement would use about $800 million that had originally been set aside to help pay medical malpractice judgments against doctors, hospitals, nursing homes and nurse midwives.

The Pennsylvania Medical Society, which represents doctors, is especially upset. It contends doctors would lose $100 million from the Mcare program, which helps cover malpractice expenses.
Doctors pay into the fund, and a surplus has grown as malpractice claims have dropped in recent years.

Amy Kelchner, a spokeswoman for Gov. Ed Rendell, said the Mcare payments were collected according to a formula created years ago with input from doctors and hospitals. But she acknowledged the formula can produce a surplus, and a surplus now exists. The administration wants to use some of that money to help address the state’s financial crisis.

An additional $700 million would be taken from the Health Care Provider Retention Fund.

The fund is designed to keep doctors in the state, and its money comes mainly from a cigarette tax and a surcharge on speeding tickets. Rendell created it early in the decade to help doctors and hospitals cope with soaring medical malpractice costs, which many doctors said might force them to leave the state.

But malpractice claims and expenses have dropped in recent years, resulting in a surplus there, too.

What to do with that surplus has led to conflict between Rendell and health care providers.

Doctors and hospitals have argued that a substantial portion of the surplus should stay with Mcare, which provides $500,000 of malpractice coverage on top of the $500,000 in private coverage doctors must carry.

There are plans, which doctors and hospitals support, to phase out Mcare and allow health care providers to obtain all their malpractice coverage on the private market.

But providers emphasize that malpractice claims often arrive years after an incident and require additional years to resolve.

They say the Mcare fund must be preserved to cover these future claims, known as a “tail.” Otherwise, the state’s doctors will have to pay — a situation they say would make Pennsylvania unattractive to young doctors.

Rendell has agreed that some of the money should be used to cover the future claims. But he also wanted some of the money to be used to expand state coverage for the uninsured.

Kelchner said Rendell laid out a plan months ago to cover future Mcare costs and help the uninsured but found little support from health care providers or legislators.

Given that situation, there has been significant support among lawmakers to use the surplus to balance the budget, she said.

Read more: http://www.centredaily.com/talk-about/story/1527385.html#ixzz0SQA1K58Q


13. From the Governor's Office for Health Care Reform Website
((FASCINATING that this is STILL up on the governor's own Office for Health Care Reform website....))
Governor Rendell’s Medical Malpractice Abatement Funding Plan
Goal: Ensuring access to quality healthcare for all Pennsylvanians.
((Guess that's not a goal anymore....))

Funding Plan:
Cigarette tax of $.25

An increase in the cigarette tax of $.25 effective immediately would generate approximately $100 million from December 2003 to June 30, 2004, and approximately $181 million each fiscal year thereafter.

The proposal would increase the cigarette tax from $1 a pack to $1.25. Current taxes in our border states are: New Jersey and New York, $1.50; Maryland, $1; and West Virginia, Ohio and Delaware, $.55.

Use of Auto CAT Funds
Preserve the transfer of funds in the amount of $44 million each fiscal year beginning January 2004 from the Auto CAT Fund to the Mcare Fund (as required in Act 13). Part of these funds will be used to offset the discounted rates for health care providers not receiving the abatement (required by Act 13) and the remainder will be applied to the physicians’ abatement under the Governor’s proposal. (Approximately $10 million of the $44 million would be needed to fund the discounts. The remaining $33 million would be applied to the $220 million cost of the Governor’s proposed abatement.)

Long-term Use of Dedicated Cigarette Tax Revenue
Unless and until a revenue funding source is committed to paying off the long-term “tail” obligation of the Mcare Fund, the only source of payment is the ongoing assessment of health care providers, even after they purchase their $1 million mandated coverage in the marketplace (2009).

The long-term “tail” pay down is an enhancement to the Governor’s June Proposal in response to the valid concerns of physicians, hospitals and legislators that this burden, even in a greatly improved insurance market in Pennsylvania, would be a deterrent to retaining and attracting physicians for years to come.

Use of Auto CAT transferred funds until 2014, plus cigarette tax revenue not needed to fund the three-year abatement through 2005 (or 2007 if the Insurance Commissioner deems necessary) will be applied to the payoff of the Mcare long-term “tail” ($2.3 billion). ((Except that NOW there's nothing left in that fund to apply to the "tail....."))

Medicaid Matching Funds

The Administration fully intends to advance an initiative to draw down matching federal funds. If this initiative is acceptable to CMS (Centers for Medicaid and Medicare Services, Washington, DC), federal matching funds together with state funds (cigarette tax revenue) will be used to fund the abatement and to pay off the Mcare long-term “tail”. All excess cigarette tax revenue (state funds) will be applied immediately (as early as 2004) to accelerate the payoff of the long-term “tail” of the Mcare fund.


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