The Texas Medical Association and Medical Malpractice Reform

By Laura Hermer
Health Law & Policy Institute

In Texas and across the nation, medical malpractice insurance premiums have been rising dramatically.  The premiums of some physicians have gone up 200 percent or more in the last year.1   Physicians and hospitals blame increasing premium costs for the close of labor and delivery wards in several hospitals across the nation and the early retirement of certain hard-hit physicians such as obstetricians and gynecologists.2

In response, the Texas Medical Association, among other groups, has called for reform of Texas’ current regulation of medical malpractice claims.  Presently, the Texas Medical Liability and Insurance Improvement Act (MLIIA) caps only non-economic damages and prejudgment interest in wrongful death suits.3   While the statute itself does not contain any limitation to such suits, the Texas Supreme Court held in Lucas v. U.S. that the cap violates Texas’ “open courts” doctrine, as provided in article 1, section 13 of the Texas Constitution, with respect to common law claims.4   The MLIIA’s cap therefore applies only to causes of action conferred solely by statute, such as claims for wrongful death.5

The Texas Medical Association (TMA) proposes that the cap on non-economic damages be lowered from its present level of about $1.4 million – an amount which adjusts with inflation – to a flat $250,000.6   The TMA also wants the cap to apply to non-economic damages in all medical malpractice cases, not merely wrongful death suits – a measure which would almost certainly require a constitutional amendment.

Such a proposal might make sense if rising premiums were based on unreasonable, skyrocketing judgments.  However, there appears to be little evidence for this in Texas.  According to the Texas State Board of Medical Examiners (TSBME), in 1988, the average amount paid in all medical malpractice suits in which some indemnity was paid was $243,384.  Thirteen years later, in 2001, it was $267,263.8   In only two years between 1988 and 2001 did the average payment exceed $300,000.While astronomical verdicts may get significant attention, it would appear from figures such as these that the average indemnification in a medical malpractice claim has not even kept up with inflation over the past decade or more.  If it had done so, then in 2001 the average payment would have totaled well over $350,000.10

There does not, therefore, appear to be a crisis of escalating medical malpractice payments in Texas.  The TSBME’s data suggest that instituting a constitutional damage cap on non-economic damages in medical malpractice claims should have little if any effect on rising medical malpractice premiums.  It is unlikely, then, that stricter damage caps can be justified by referring to the present insurance crisis.  Barring sound evidence to the contrary, stricter damage caps ought not to have much place in the current medical malpractice reform debate.

The TMA further recommends that insurers be permitted to pay out economic damage awards in periodic payments over time, rather than in a lump sum.11  This, the TMA writes, “would ensure that all necessary care is available when needed, but that any dollars awarded for such care remain in the ‘system’ should the specific plaintiff no longer require anticipated care or services.”12   This suggestion may indeed have a salutary effect for insurers, by allowing them to retain control of money awarded to plaintiffs and the interest generated from it during payout.  However, it does so at the potential expense of injured plaintiffs, who rely on the funds to pay for necessary medical care, treatment and rehabilitation.  Depending on how the periodic payment system is structured, plaintiffs may not be able to have their payments restructured to account for an unexpected increase in medical expenses, or may only be able to do so by going through the expense and trouble of additional court appearances.  Moreover, if the insurer goes bankrupt, plaintiffs may find themselves with a significantly reduced recovery, which they may be able to claim only by taking part in lengthy bankruptcy proceedings.13   It is advisable that any periodic payment mandate should take account of issues such as these and provide plaintiffs with suitable protections.

The TMA also recommends collateral source reform.  Presently, a medical malpractice defendant cannot inform a jury that, for example, a plaintiff’s health insurer has already paid for her medical bills.  Thus, a jury may award damages for medical expense that have already been paid by another source.  The plaintiff does not necessarily get to pocket these funds, however.  Should judgment be entered against the defendant, the health insurer, who already paid the plaintiff’s medical bills, can then seek their recovery from the plaintiff.  The TMA recommends that defendants be permitted to disclose other sources from which the plaintiff has recovered expenses, and that health insurers and others collateral sources be prevented from recovering expenses paid to treat patients whose injuries result from malpractice following judgment against a defendant.14   Yet this recommendation merely shifts the burden of paying for injuries caused by medical malpractice from medical malpractice insurers – whose business it is to insure against medical malpractice losses - to health, disability and other insurers.  This is neither fair nor warranted, particularly in light of the issues other types of insurers, such as health insurers, are facing with respect to escalating premiums and costs.

The TMA further recommends a number of expert witness reforms, including elimination of the present cost bond requirement.  Under the MLIIA, plaintiffs must file an expert report as to each defendant, providing a “fair summary of the expert's opinions ... regarding applicable standards of care, the manner in which the care rendered ... failed to meet the standards, and the causal relationship between that failure and the injury, harm, or damages claimed.”15   The TMA suggests that present law allows plaintiffs to avoid filing an expert report by instead filing a cost bond.16   This is not quite correct.  Under the MLIIA, a plaintiff has 90 days to file an expert report by a qualified physician as to each defendant.17   If the plaintiff does not file the expert report within 90 days, he or she must file a $5,000 cost bond with respect to each defendant.18   That, however, is not the end of the matter.  The cost bond only buys a plaintiff 90 extra days in which to file an expert report.  Article 4590i requires a court, upon defendant’s motion, to dismiss with prejudice the cases of all plaintiffs who have failed to file an expert report within 180 days after filing suit.19   It further permits a defendant to recover attorney’s fees and costs from the plaintiff in such an event and provides for the forfeiture of the cost bond to cover those expenses.20

It is reasonable for plaintiffs to have more than three months after filing suit to find an expert, who often must be obtained from out of state due to the reticence many physicians have to testify against a member of their local professional community, and to obtain a report from the expert.  It also is reasonable to require plaintiffs who cannot file an expert report within 90 days of filing suit to obtain a cost bond as to each defendant.  The cost bond requirement helps weed out the most frivolous suits earlier rather than later.  It also ensures that there is a source of funds for the plaintiff to pay the defendant’s attorney’s fees and costs should the plaintiff fail to obtain an expert report by the 180 day deadline and also fail to nonsuit the case.  As such, the cost bond requirement helps defendants, rather than hurts them.  The TMA – and legislators seeking to propose physician-friendly medical malpractice legislation - may wish to reconsider this recommendation.

1. See, e.g., Leigh Hopper, Hospital Takes Permanent Maternity Leave / High Costs Force Obstetrics Unit to Close,   HOUSTON CHRONICLE A1 (October 12, 2002).
2.  Id.
3.  See Tex. Health & Safety Code 4590i, sec. 11.02 (West 2002); Columbia Hosp. Corp. v. Moore, 2002 WL 1378961 (Tex. 2002) (holding that the legislature did not intend to exclude prejudgment interest from the MLIIA’s damage cap).
4.  757 S.W.2d 687, 690 (Tex. 1988).
5.  Rose v. Doctor’s Hospital, 801 S.W.2d 841, 845 (Tex. 1992).
8.  Id.
9.  Id.  In 1998, the average judgment was $342,285.  In 2000, it was $322,462.
10.  See, e.g., U.S. Dep’t of Labor, Bureau of Labor Statistics (BLS), at  Using BLS’s Consumer Price Index calculator for all South urban areas, the average judgment amount of $243,384 in 1988 was worth $357,757 in 2001.
11.  See TMA, supra note 6.
12.  Id.
13.  See, e.g., Jamie Court, Impact of Litigation on Health Care Access, Testimony before the Committee on House Energy and Commerce Subcommittee on Health, July 17, 2002.
14.  See TMA, supra note 6.
15.  See Tex. Health & Safety Code 4590i, sec. 13.01 (r)(6) (West 2002); Am. Transitional Care Centers of Tex. v. Palacios, 46 S.W.3d 873, 879 (Tex. 2001).
16.  See TMA, supra note 6.
17.  Tex. Health & Safety Code 4590i, sec. 13.01 (a).
18.  Id.
19.  See Tex. Health & Safety Code 4590i, sec. 13.01 (d).
20.  See Tex. Health & Safety Code 4590i, sec. 13.01 (e).