The second prong of the New York Legislature's attempt to try to provide incentives to the insurance companies engaged in furnishing medical malpractice coverage consisted of amendments to legislation enacted earlier to further refine the law where it appeared to need such refinement.
To establish a starting point we should have in mind the principal objectives in the earlier legislation. Physicians and hospitals were finding it impossible to renew their malpractice policies except at rates they considered prohibitive or with unsatisfactory limits. Many specialists threatened to withdraw from practice and some actually did so.The Legislature attempted to meet the crisis by giving the Superintendent of Insurance authority to regulate rates and to provide for the creation, operation and control of a Medical Malpractice Insurance Association together with a Stabilization Reserve Fund.
It was thought that this would provide a market for medical malpractice insurance for physicians and hospitals when such insurance was not available in the voluntary market.
Since such associations were not singularly successful financially in the past (in other lines of insurance) the Legislature created a Stabilization Reserve Fund to provide funds by assessment to cover both operating losses and any other deficits the Association might incur. Assessments were based on a surcharge of 20 percent of annual premium until the funds exceed $50 million.
With this background in mind, the 1986 legislation was directed at areas deemed requiring further refinement, since continued upward pressure on malpractice premiums threatens the public health by discouraging doctors and dentists from practicing in New York and by increasing health care costs to the public. Accordingly the legislature adopted a series of amendments to the law to accomplish the following:
Continue the authority of the Superintendent of Insurance to regulate rates and to gradually require the issuance of claims-made policies only.
Reduce lost earnings awards to reflect the effect of federal, state and local income taxes.
Require arbitration of malpractice claims, require health maintenance organizations to offer arbitration to their subscribers and require health care professionals to participate in such arbitration.
Establish a mechanism for the arbitration of damages when liability is not an issue.
Require plaintiff attorneys to file a certificate of merit in malpractice actions certified to by another doctor stating the case has merit.
Subject physicians responsible for professional misconduct to effective discipline.
While to a layman it would appear that the foregoing changes would be likely to have a beneficial effect on both the availability and the cost of medical malpractice insurance, the industry had very different reforms in mind.
Their position has been that the tort system is almost exclusively to blame for the intolerable conditions doctors and hospitals face. It claims that there has been an explosion in the number and size of awards made because of defects in the civil justice system and that the practice of medicine has become very complex because of technological advances in diagnosis and treatment, with a substantial increase in the number of doctors and other technicians involved in health care.
But chiefly, the problem rests with the civil court system's theories of strict liability, use of paid expert witnesses, theories of joint and several liability and res ipsa loquitur (the thing speaks for itself) being used as a substitute for proof. Compounding the problem are theories of informal consent, (in the absence of an emergency patients have a right to be informed of the risks and prognosis of the proposed treatment), awards for non-economic damages including punitive damages and pain and suffering, and awards generally in amounts bearing no resemblance to the actual damages proved.
Most unusual was the recent Agnes Mae Whitaker award against the city of New York (Lincoln Hospital) for $65 million, $7 million for actual damages and $58 million for non-economic damages. Undoubtedly this award will be substantially reduced before payment but it is an example of the problem.
As can be seen the new reform legislation is hardly what the industry wanted. In fact the creation of a Medical Malpractice Insurance Association is at the bottom of any wish list the industry has and probably would not even make the list.
The other single area which has produced violent opposition in the new medical malpractice legislation relates to the health maintenance organization arbitration option. The New York State Trial Lawyers Association denounced this provision as "unacceptable" and "outrageous" and claims it denies claimants a right to trial by jury.
On balance, the most that can be said for the new medical malpractice law is that it is an attempt to ride out the storm and take some action calculated to control raising rates for this essential coverage.