Tennessee Citizen Action

AFFORDABLE HEALTH CARE

Tennessee Citizen Action supports safe, adequate and affordable health care for all citizens and endorse programs and initiatives which will provide wider coverage options for children, families and seniors. We have been at the forefront of efforts to reform the prescription drug program operated through Medicare to eliminate penalties and gaps in coverage and allow the government to negotiate with the drug companies for better prices.

STATE FAILS TO ADDRESS INSURANCE GOUGING

Refusal to Investigate Price History Hurts Doctors, Patients

Some Hope Remains for Further Reductions in Rates

More than two months after Tennessee Citizen Action asked the Tennessee Department of Commerce and Insurance to investigate a possible pattern of over-charging by the state’s largest medical malpractice insurer, state officials have refused to review the company’s rate-setting history. A current request for rate changes, however, remains under review.

State Volunteer Mutual Insurance Co. (SVMIC), which supplies liability coverage to the vast majority of physicians in the state, filed a rate request with the Department earlier this year to lower its malpractice rates across the board. The filing indicates that some high-insurance-cost medical specialties – including OB-GYNs – will see reductions of as much as 15 percent.

Bill Mason, executive director of Tennessee Citizen Action (TNCA), which represents the interests of consumers in such areas as health care, patients’ rights, and consumer safety, saw the rate request as proof positive that SVMIC’s premium rates have been excessive. “That filing was a long-overdue admission not only that Tennessee’s doctors have been overcharged, but also that the scare tactics of the insurance industry that there is some sort of malpractice lawsuit ‘crisis’ in this state is simply false,” Mason said.

In an initial inquiry to Commissioner Leslie A. Newman on May 30, and in a follow-up letter of June 28, Mason asked for an examination of SVMIC’s substantial reserves and cash flow to determine whether past premium rates have been excessive and whether SVMIC’s premium rates should be reduced even further than the level requested by the company in its current filing.

The August 2 response from Shawn Kiser Hawk, director of the department’s Actuarial Services Section, points out that Tennessee law prohibits rates that are “excessive, inadequate or unfairly discriminatory,” but added that “as yet, no issues have been identified which show that SVMIC’s previous rates may not have complied with applicable law.”

“The purpose of our inquiry was to give the Department an opportunity to identify the very issues and instances of past over-charging that we suspect,” Mason said. “Such a non-response on this particular facet of our request is frustrating. While the current filing by SVMIC for lower prices is great news for Tennessee doctors and for everyone who worries about the high cost of health care, it demands the obvious conclusion that Tennessee physicians have been over-charged – and even gouged – by SVMIC for quite some time.”

On the positive side, TNCA’s request that the Department consider whether SVMIC’s rates are still excessive and if its rates should be reduced even further than the level sought in the current filing remains on the table. Hawk’s response to TNCA notes that “the rate filing that prompted your recent correspondence to the Commissioner is still under review by our actuary.”

“I hope that the State of Tennessee will take a hard look at this rate adjustment request and not simply rubber-stamp SVMIC’s request,” Mason said. “Common sense tells you that our doctors have been over-charged for their malpractice insurance; we just can’t tell by how much.

“While I believe a review of past practices would have been tremendously helpful, an examination of the company’s huge reserves, cash flow, reinsurance arrangements, related companies, and dividend payments very likely will show that much larger reductions in rates are justified.”

The reduction in rates also reveals how disingenuous the insurance industry has been about the so-called malpractice “crisis” in Tennessee. For years, the medical industry and SVMIC have argued that high medical malpractice premiums were the result of a “crisis” in huge jury awards and frivolous malpractice lawsuits. The facts have never supported such a claim: a report by the Department of Commerce and Insurance shows that in 2005, there were only five jury malpractice awards, averaging $410,000.

“Apparently, the doctors themselves have caught on to the company’s over-charging practices,” Mason said. “SVMIC’s willingness to reduce its premium prices significantly shows clearly that there is no lawsuit-driven crisis in medical malpractice.”

WHAT MEDICAL LIABILITY CRISIS?

TENNESSEE MALPRACTICE RATES ARE FALLING

NASHVILLE—Tennessee’s physicians got great news this week – their major malpractice insurance company is lowering its malpractice premium rates by an average of 4.2 percent because doctors’ malpractice costs just aren’t escalating.

State Volunteer Medical Insurance Corp., the insurance mutual that provides malpractice coverage to around 90 percent of Tennessee’s physicians, filed a new ratings request with the state’s Department of Commerce and Insurance this week, reporting that its rates are too high and its reserves are so large that it is actually lowering the price of insurance for doctors, rather than returning the money later as in past years.

“This provides the most substantial proof available that there is no medical malpractice crisis in Tennessee,” said Bill Mason, executive director of Tennessee Citizen Action, the state’s consumer watchdog on Capitol Hill. “For years, the medical interests have claimed that waves of frivolous lawsuits and outrageous awards were driving huge premium increases for doctors. It’s just not true – and now SVMIC has admitted it’s been over-charging Tennessee doctors.”

In fact, rates in the field of gynecological surgery will drop by 14.1 percent – more than three times the average rate decrease. “Gynecology has been cited by the special interests as one of the most endangered specialties in this clearly-fabricated malpractice ‘crisis,’ and now we find that practitioners in that field have been among the most overcharged by their insurance providers.”

Tennessee Citizen Action is a grass-roots consumer protection lobby group, and has worked to protect consumers’ legal rights, including the right to hold health providers accountable for malpractice. “For years, the big medical interests have tried to convince legislators that there’s a ‘malpractice crisis’ in Tennessee,” Mason said. “But the facts just don’t support the scary stories: in 2005, there were just five malpractice verdicts in the state. Five cases, with an average award of $410,000.

“We fully expect that next year, the medical interests will bring another bill to take away patients’ legal rights or cap damage awards. But they won’t be able to make a case that the sky is falling any more. We’re glad SVMIC has taken this step to bring premiums more in line.

“This rate decrease demonstrates in a dramatic way that Tennessee’s doctors need to turn their attention away from efforts to limit the legal rights and options of their patients and towards the scare tactics and gouging engaged in by their insurers.”

CITIZEN ACTION WANTS REVIEW OF MALPRACTICE INSURER

Tennessee Citizen Action has asked Tennessee Commerce and Insurance Commissioner Leslie Newman to consider whether the state's largest medical malpractice insurer - State Volunteer Mutual Insurance Co. - may still be over-charging Tennessee's physicians for liability coverage.

SVMIC, which supplies liability coverage to the vast majority of physicians in the state, recently filed a rate request with Commissioner Newman's office to lower its malpractice rates by 4.2 percent overall. The filing indicates that some high-insurance-cost medical specialties - including OB-GYNs - will see reductions of as much as 15 percent.

"This lower price is great news for Tennessee doctors, and for everyone who worries about the high cost of health care,'' said Bill Mason, executive director of Tennessee Citizen Action. "But this filing clearly indicates that Tennessee physicians have been over-charged - and even gouged - by SVMIC. And you have to wonder whether these rates couldn't come down even more."

For years, the medical industry and SVMIC have argued that high medical malpractice premiums were the result of a "crisis" in huge jury awards and frivolous malpractice lawsuits. But the facts have never borne that out: a report by the Department of Commerce and Insurance shows that in 2005, there were only five jury malpractice awards, averaging $410,000. Now, SVMIC's filing shows that it is prepared to reduce its premium prices significantly, again showing that there is no lawsuit-driven crisis in medical malpractice.

Tennessee Citizen Action, which represents the interests of consumers in such areas as health care, patients' rights, and consumer safety, has asked Commissioner Newman to examine SVMIC's substantial reserves and cash flow to determine whether SVMIC's premium rates have been excessive. Further, in a May 29 letter to Commissioner Newman, Mason asks whether SVMIC's premium rates should be reduced even further than the level requested by the company in its filing.

"This is a company that insures close to 90 percent of the physicians in this state," said Mason. "For them to have such high rates for so long, and then come along and admit they're way too high - just cries out for a closer look. Our doctors have been over-charged for their insurance, we just can't tell by how much."

"As a mutual insurance company, SVMIC does pay a dividend to its doctor-members, but that's hardly a justification for over-charging in the first place,'' said Mason.

ATTACHMENTS: TNCA Letter to Commissioner Newman

Related Report from June 2005

Tennessee Losing $726 Million a Year

Allowing Medicare to Negotiate for Lower Drug Prices Would

Lower Costs, Aid Taxpayers, Save $30 Billion Nationally

NASHVILLE — Tennesseans would save $726 million in prescription drug costs in just one year if the federal government were directed to negotiate with pharmaceutical companies over Medicare prescription drug prices, according to a new report released today by Tennessee Citizen Action, a USAction affiliate.

The report, prepared by the Institute for America's Future, found that negotiations would save older people in Tennessee about $242 million a year in cheaper drugs and save Tennessee taxpayers a total of $484 million a year by lowering the government costs under Medicare Part D. In addition to this amount -- $726 million – the state’s taxpayers could save another $116 million in administrative costs by restructuring the prescription drug benefits program. So total savings for Tennesseans would amount to more than $842 million a year.

“Price negotiation helps America keep its commitment to quality, affordable health care for all by guaranteeing Americans on Medicare access to the medicines they need – with public savings too enormous to ignore" said Bill Mason, executive director of Tennessee Citizen Action. “Members of Congress face a clear choice: side with Tennessee patients and taxpayers, or further enrich drug industry lobbyists.”

With more than 85 percent of the country favoring the use of Medicare's collective bargaining power to lower prescription drug prices and with a potential savings of $30 billion per year, Americans are urging Congress to eliminate a controversial provision in The Medicare Modernization Act of 2003 that prohibits the government from interfering in negotiations between Part D plan participants and drug makers. The U.S. House of Representatives passed legislation to remove the provision in January with bipartisan support. Senate leaders are pushing for a vote on similar legislation next week.

“Senator Lamar Alexander and Senator Bob Corker have a real opportunity to step up to the plate and deliver some real and significant savings to the people of Tennessee,” Mason said. “We urge them to do the right thing and vote for this common sense provision.

Tennessee Citizen Action is part of Change America Now, a national coalition led by USAction, Americans United for Change and the Campaign for America’s Future to encourage members of Congress to make college affordable; to lower the cost of prescription drugs; to repeal tax breaks for oil companies and invest in alternative energy; and to raise the minimum wage.

THE FACTS ABOUT MEDICAL MALPRACTICE AND THE NEED FOR INSURANCE REFORM IN TENNESSEE

For years now, not only in Tennessee but also nationally, the debate over medical malpractice has been based, not on the facts, but instead on scare tactics promoted by the insurance industry. The time has come to look at the true situation here in Tennessee; and more importantly, it is time for the insurance industry to make the facts available to Tennesseans. Even insurance industry insiders will tell you that caps on medical malpractice damage awards won't lower high insurance premiums for doctors. Put simply, caps do not work. Instead of allowing the insurance industry to take away the rights of patients in Tennessee, we need to reform the insurance industry and reduce its control over health care. The vast majority of Tennessee doctors are competent. But, the facts clearly show that those in health care make mistakes that injure people. The problem with medical malpractice is actual medical error, which is extremely costly to consumers and to the health care delivery system. Putting limits on medical errors, rather than limits on the rights of patients, is the ultimate solution to problems associated with medical malpractice. In Tennessee, we need to focus on real solutions to the medical malpractice crisis, such as alleviating the critical shortage of nurses and more effective discipline for the few bad doctors. Meanwhile, scare tactics, hyperbole, and anecdotes are being used by the big insurance companies and their allies. Their aim is to take away our right to have a jury of our neighbors, co-workers and fellow citizens to determine the value of our quality of life. The jury is the last line of defense for the average citizen against corporate misconduct, and the right to a trial by jury must be preserved.

Fact #1: Tennessee is not a crisis state.
The Tennessee Department of Commerce and Insurance concluded in October of 2005 - only four months ago - that neither jury verdict nor payouts to injured patients were responsible for causing increased insurance premiums for doctors. In fact, juries returned only six verdicts against health care providers in Tennessee in all of 2004. In the same year, only 444 claims of any kind were paid for deaths or injuries in Tennessee, with an average payment of less than $46,000 per claim. Despite claims to the contrary, Tennessee is not a "crisis state" with problems that other states, such as Mississippi or West Virginia, might be experiencing. Our tort laws work to limit excessive awards. We have seen neither the so-called "jackpot" awards nor runaway increases in the cost of insurance here. Tennessee patients who have suffered because of medical malpractice are certainly not "lottery winners." In fact, there have been no "runaway juries" and no jackpot verdicts in this state. Not a single one of the top 100 malpractice verdicts of 2002 was from a Tennessee court. Only one of every eight medical errors leads to a lawsuit, and injured patients win only 23 percent of the trials that do go to a jury. Only 1.1 percent of patients who win in a trial receive punitive damages. Overall, 16 times as many patients suffer injuries as receive any compensation at all.

Fact #2: Existing Tennessee law already favors the insurance industry.
State Volunteer Mutual Insurance Company (SVMIC), a doctor-owned insurance company, is the preferred malpractice carrier of the Tennessee Medical Association. SVMIC covers approximately 11,000 of Tennessee's doctors. SVMIC has paid its doctor-owners $230 million in dividends since 1987. The company is clearly not losing money. Meanwhile, the company - along with a majority of the top carriers in Tennessee - refuses to make public the details about actual claims paid in Tennessee. SVMIC offers discounts to its doctors that greatly reduce the net premium costs of malpractice insurance. Due to these discounts and the dividends paid to doctors, the increases in costs for Tennessee doctors have been much lower than the medical inflation rate. Since 1987, national medical inflation rates have risen 113 percent, while medical malpractice insurance rates rose by only 52 percent. That is less than half the increase paid by consumers for healthcare. Tennessee already has enacted a number of malpractice reforms that favor big insurance companies. Joint liability reform, collateral source reform and limits on attorneys' fees, all sought by the insurance industry, are already in place here in Tennessee. Tennessee already has caps on what attorneys who represent victims can charge - but there are no limits for the lawyers who represent big insurance companies.

Fact #3: Caps do not work.
California's medical malpractice insurance rates continued to rise in California for more than 10 years after caps on non-economic damages were imposed. Insurance reform - not caps - reduced the rate of premium increases in California. Georgia enacted some of the nation's strongest measures in an attempt to limit medical malpractice lawsuits only a couple of years ago. And what has been the result? Patients who have been hurt by neglectful or incompetent medicine have almost no recourse in the courts. Physicians have seen very little reduction in their insurance premiums, if any. Health care is not more accessible, but the cost of practicing medicine is growing. Studies in Florida and Kentucky have confirmed that caps produce little, if any, savings for doctors - and caps sometime actually result in a hike in insurance premiums. And what is the response to the failure of caps to reduce either malpractice insurance premiums or the overall cost of health care? The American Insurance Association states simply that, "Insurers never promised that tort reform would achieve specific savings." The truth is that many states without caps have lower premiums than those with caps.

Fact #4: Insurance reform does work to bring down the cost of health care.
The greed of big insurance companies has come home to roost. In the 1980s and 1990s, big insurance companies were so eager to make huge profits in the markets, they actually undervalued their premiums to get money to fund their addiction to investment profits. But the insurance companies, like everyone else, lost money on their investments when the market crashed, and they have been trying ever since to make their money back by increasing premiums. Caps didn't work in California - stronger regulation of big insurance did. Tennessee should look at California's Proposition 103, a 1988 measure that changed insurance regulations and was the contributing factor to lower premiums in that state. Doctors' premiums in California increased by 190 percent in the twelve years following the passage of medical malpractice caps. Premiums did not drop until insurance reform was passed - 20 percent during the first three years after Proposition 103 was in place. Unlike many states, Tennessee does not really regulate medical malpractice insurance premiums. Yet, fair and substantive review and regulation of rate increases has been effective in many states.

Fact #5: Reducing medical error will reduce the cost of health care.
Each year, 98,000 people die from Medical errors, killing more people than car crashes. Overall, medical errors are the eighth leading cause of death in the United States. Medical errors cost the economy $29 billion a year. This is more than four times $6.4 billion spent on medical liability insurance. Public Citizen has estimated that the costs of preventable medical errors in Tennessee are as high as $586 million a year. This situation cries out for steps to weed out those who are responsible for medical errors. About 5 percent of doctors are responsible for more than 50 percent of all claims. Caps on damages remove the deterrent to bad doctors and further drive up health care costs for all of us. An Archives of Internal Medicine study has found that 75 percent of medical malpractice claims involving adverse drug reactions could be avoided with simple safety measures. Finally, the HMOs must be held accountable when they cause medical errors. HMOs cannot be allowed to escape responsibility when their profit-motivated bureaucratic decisions tie the hands of doctors and other health care professionals.