Medical-Tort Law: Ranking the States

How much do a state’s laws governing medical malpractice and other torts relevant to health care affect the availability of care?  Plenty!

Lawrence J. McQuillan’s & Hovannes Abramyan’s 2010 edition of the U.S. Tort Liability Index, which has a number of measurements included in the U.S. Index of Health Ownership, ranks states according to 42 variables.

Eight of the measurements in the U.S. Tort Liability Index are relevant to the U.S Index of Health Ownership: One output and seven inputs. The previous edition of the U.S Index of Health Ownership included six measurements of medical tort, but McQuillan & Abramyan have discovered more variables for their 2010 edition of the Tort Liability Index, allowing more detailed measurement.

As a partial update of the U.S. Index of Health Ownership, this brief analysis calculates a medical-tort index from a simple average of the eight relevant variables.  Mississippi, Nevada, Michigan, Colorado, and Louisiana lead the pack; while Vermont, Rhode Island, Kentucky, Pennsylvania, and Iowa bring up the rear. Even the leaders, however, lag in some measurements.

Mississippi, for example, leads on procedural rules: Pre-trial screening or arbitration and conditions on the use of expert witnesses. However, it does not limit lawyers’ ability to abuse their privilege by limiting their share of awards. Colorado and Louisiana also fail to impose limits. Unfortunately, the laggards do not show a similar pattern: The bottom five states perform poorly in all eight measurements.

Reducing the burden of medical tort is critical to increasing Americans’ health ownership and reducing medical costs that curtail our access to care. Some progress is evident, but states aiming to improve their medical-tort laws still have a long way to go.

What Does Your State’s Medicaid Program Pay For?

The Illinois Policy Institute celebrates the enactment of a law that should give taxpayers a better understanding of what their state’s Medicaid program is buying through the creation of an online database that lists how much medical clinics, hospitals, doctors, and others get paid from Medicaid.

A similar database in South Carolina, for example, shows that in 2008, the average Medicaid payment to Piedmont Healthcare System for inpatient services was $5,700. By contrast, payments to Greenville Hospital Center averaged over $11,000.

That sort of information, by itself, needs to be interpreted in context, but the database does give citizens the means of asking questions, which is good fiscal policy and good government.

Double Jeopardy? “Dropping” Sick Patients is Already Illegal

The health “reform” recently signed by President Obama is expensive and over-regulated. Nevertheless, some parts of it are undoubtedly popular. Unsurprisingly, the popular parts deal with “consumer protection.” It would be hard to criticise a law that prevents a health insurer from dropping a beneficiary after someone falls ill.

Indeed, H.R. 3590 § 2712 states that an insurer “shall not rescind such plan or coverage with respect to an enrollee once an enrollee is covered under such plan or coverage involved, except that this section shall not apply to a covered individual who has performed an act or practice that constitutes fraud or makes an intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage.”

Good news? Not really. This law will likely result in higher premiums because insurers will suffer “double jeopardy”: being fined twice for he same offence. That’s because Californians already enjoy protection from health insurers “dropping” them once they become sick. This is found in both California’s Insurance Code § 10384 through 10384.17, and the Health & Safety Code § 1389.3, which came into effect in 1993. The legal terms here are “rescission”, “medical underwriting”, and “postclaims underwriting.”

Although ObamaCare will soon make medical underwriting illegal, health insurers offering individual policies in California have been able to charge actuarially fair premiums. This means that they determine the applicant’s risk of illness. Usually, this is done trough a series of questions, as well as examining medical records. After the policy has been issued, the insurer can rescind it if it discovers that the applicant had misrepresented his health status. After a policy has been in force for two years, a health insurer cannot rescind for any reason.

What has been illegal since 1993 is “postclaims underwriting.” This occurs when the insurer performs only cursory medical underwriting upon receiving an application, issues the policy, deposits the newly insured person’s premium checks, and only decides to scour his medical records if and when it starts to receive expensive claims within a few months of issuing the policy.

Insurers must be confident that applicants are being truthful about their health. Otherwise, a health insurer will attract only applicants who wait until they become sick to buy health insurance, which could leave the insurer bankrupt. Despite the scare stories trafficked by President Obama and his supporters, rescissions rarely occur. WellPoint, one of the country’s largest health plans, enrolled approximately 873,000 new customers in 2008. Less than 0.15 percent of those customers had their policies rescinded.

The President appears to believe that laws like those in California are not being enforced, repeatedly claiming that “no one holds these companies accountable for these practices.” But that’s not true. State insurance commissioners are charged with enforcing good-faith execution of insurance contracts. The President should know better: his Secretary of Health & Human Services, Kathleen Sebelius, served for eight years as Kansas’ Insurance Commissioner.

Authorities in California are ruthless about policing rescission (as I’ve discussed in a series of posts). In September 2008, the California Department of Insurance ordered Health Net Inc. to reinstate 926 policies that had been incorrectly rescinded. The company also paid $3.6 million in fines and another $14 million in medical claims. But this was a minor sum after the $9 million that a California arbitrator ordered it to pay a rescinded policy holder earlier that year. In July 2008, Anthem Blue Cross agreed to pay $11 million in hospital claims derived from rescinded policies in California.

Examples from other states hardly demonstrate slackness in enforcing similar laws. Even the most horrific cases result in severe punishment for offending health insurers. In the New York Times, professor Paul Krugman recently cited the case of a 17-year-old in South Carolina who had an individual health-insurance policy issued by Assurant Health.

After the young man was diagnosed with HIV, Assurant Health allegedly scoured his medical records, determined that he had contracted HIV before he applied for the policy, but had failed to disclose it. The health insurer used this as grounds to rescind his policy. The youth denied the charge; and sued the health insurer. The result? A South Carolina jury awarded the youth $15 million in damages (subsequently rolled back to $10 million on appeal).

These cases demonstrate that state law is more than competent to deal with bad-faith rescissions by health insurers. It is hard to accept that President Obama’s advisors, especially Secretary Sebelius, are unaware of this. This aspect of federal reform will not increase protection for consumers, but it will almost certainly increase trial lawyers’ profits.

State Governments in Action

This has been a busy week in state governments.

In South Carolina, the Senate “approved a non-binding resolution that affirmed the state’s rights under the 2nd, 9th, 10th, and 14th amendments to the U.S. Constitution.”

In Idaho, “Gov. Butch Otter has announced his intention to sue if Congress passes a bill that increases the state’s Medicare commitments and requires people to buy health insurance.”

In addition, four state representatives introduced legislation that would declare Idahoans free “free from government compulsion in the selection of health insurance options.”

Also this week, the Missouri House of Representatives passed a similar measure, citing the Cornhusker Kickback and the cost to Missouri, among other concerns. Some Democrats who voted for the measure cited their pro-life concerns that federal health care reform would lead to taxpayer funding of abortion.

Two Constitutional Challenges to Health Bill

Henry McMaster, the attorney general for South Carolina, said he has the support of 14 other states’ attorneys general, as he challenges the constitutionality of the House and Senate health reform bills.

“The Constitution assigns broad spending authority to Congress, he said, but national spending may not be arbitrary and capricious.” That’s the Christian Science Monitor reporting on a press conference that McMaster held. At issue is the Cornhusker Kickback, which, McMaster said, puts a burden on his own state.

Meanwhile, Florida’s attorney general, Bill McCollum, is questioning the legality of the personal mandate that requires everyone to buy an insurance policy approved by government.

South Carolina Joins the List

South Carolina joins the list of states in which legislators have voiced their opposition to a federal takeover of health care.

Here’s a press release from the American Legislative Exchange Council, which is tracking and supporting such developments:

The American Legislative Exchange Council (ALEC), the nation’s largest individual membership association of state legislators, congratulates South Carolina State Representative Tim Scott for pre-filing a constitutional amendment to protect the right of individuals to make their own health care choices. South Carolina now becomes the 24th state where legislators have introduced, or will introduce, legislation modeled after ALEC’s Freedom of Choice in Health Care Act.“Congress should not expect the states to blindly accept a federal health care reform bill that just keeps getting longer and more complicated at every turn. We know that creating new mandates for individuals and employers will not reduce costs or increase competition, it will trample on the rights of individuals to make their own health care choices and hurt our economy,” said Iowa Representative Linda Upmeyer, minority whip, family nurse practitioner, and chair of ALEC’s Health and Human Services Task Force.

The proposed South Carolina constitutional amendment preserves the rights of individuals to pay directly for medical care—something not allowed in single-payer countries like Canada—and prohibits any individual from being penalized for not purchasing government-defined insurance. Any state attempt to require an individual to purchase health insurance—or forbid an individual from purchasing services outside of the required health care system—would be rendered unconstitutional. The measure may also cause a federalism clash if Congress passes a law with either of these provisions.

“This is not a battle that hasn’t been fought before or won before,” said Christie Herrera, health policy director for the American Legislative Exchange Council, a state legislator group coordinating the effort.

“States are allowed to give greater constitutional protection than what is provided for in the U.S. Constitution.  The U.S. Constitution provides a floor, not a ceiling, for the preservation of individual rights,” Herrera added.

Similar constitutional amendments have been filed or pre-filed in twelve states—Arizona, Florida, Indiana, Michigan, Minnesota, New Mexico, North Dakota, Ohio, Pennsylvania, South Carolina, West Virginia, and Wyoming. An additional twelve states have indicated their intent to introduce this legislation—Alabama, Alaska, Georgia, Kansas, Louisiana, Missouri, Mississippi, New Hampshire, Oklahoma, Montana, Tennessee, and Utah. Arizona’s measure, which passed the legislature in June, will be put before voters on the 2010 ballot.

Higher Costs, Lower Quality Ahead

Rather than fix the insurance market, the majority party in Congress wants to throw even more people into Medicaid. In some states, that means turning Medicaid from a program for children and the blind and disabled into one for single, childless adults.

The South Carolina Policy Council says that already Medicaid is a dominant player in the state. It pays for more than half of all births, and consumes 20 percent of the budget.

Under the first House proposal (HR 3200), the state budget would face even more demands from Medicaid, which could crowd out spending on education and other key priorities. In the last 10 years, Medicaid spending in the state has doubled, and the council projects that under HR3200, spending would more than double in the next 10. Among the results could be that patients have a hard time finding a doctor, given the low rates that Medicaid pays.

Subway at a School Near You

Something about this just doesn't seem right: The South Carolina Department of Education and Subway restaurants are teaming up an anti-childhood obesity effort.

Subway, the official fast-food restaurant of public schools?

U.S. Index of Health Ownership 2nd Edition Is Here

Pacific Research Institute has published the 2nd edition of the U.S. Index of Health Ownership, the only ranking of health care in the states that uses criteria of individual choice.

Americans lack the basic freedom to make their own health care decisions. The Index measures the degree to which individuals, be they patients, health professionals, entrepreneurs, or taxpayers, “own” the health care in their states.

The lack of health ownership is a real problem. Almost half of the country’s health care spending is in the hands of the government, instead of patients themselves. The other half is governed by regulations inflicted upon doctors, health plans and patients.

The Index uses 24 variables to quantify how state laws and regulations affect the liberty of citizens involved in state government health plans (primarily Medicaid), the private health-insurance market, and the provision of medical services. It also assesses the effect of medical tort on people’s freedom to engage health services.

Alabama, Montana, Nebraska, North Dakota, and New Hampshire finished in the top five, as the states that allow their citizens the highest degree of health ownership. Alabama leads the pack primarily because of a lightly regulated private insurance market, and good control of state government programs. Also, the state performs well on medical tort indicators. Alabama’s regulatory environment for providers favors competition, and government health programs run more effectively than in most states.

New York, Massachusetts, Rhode Island, Vermont, and North Carolina rounded out the bottom five, as the states in which the government has taken the most undue control of health care from its citizens. This is the second year that New York was in last place. The state suffers from government health-care programs that are out of control, a grossly overregulated private-insurance market, and almost completely uncompetitive provider markets.

A full listing of all 50 states and their rankings is contained in the Index.

The Index will give concerned citizens a good basis to demand reforms from their state politicians that will put American families in charge of American health care, instead of government and special interests.

South Carolina Squabbles over Government Health Care

South Carolina politicians want to expand government's involvement in health care – they just can't agree on how to do it. A proposal to raise the state's seven-cents-a-pack cigarette tax has stalled because of objections to creating a fund to subsidize health insurance premiums: 

The House-passed version of the bill now before the Senate would generate about $145 million.

Amendments adopted in the subcommittee Tuesday as it approved the bill with a 3-1 vote would use about $135 million for health care programs.

About $100 million of that would create a fund to cover 75 percent of health care policies for individuals who make up to roughly $21,600. The maximum credit would be $3,000. Employers with 25 or fewer low-income workers could get a 67 percent credit for each worker insured with the same limit.

The plan calls for the rest of the money to go into health care coverage for the people in high-risk health groups, cancer research, smoking cessation and agricultural marketing.

Senate Minority Leader John Land wants to use the money to expand Medicaid instead. As he points out, the $150 million would draw $450 million in federal funding.

I'm not enamored with insurance subsidies, but I think they are a better way to provide health care than Medicaid. But Sen. Land has a point — the feds are offering all this "free" money, so why not take it? It's another illustration into the unintended effects of the current Medicaid system. What may be a good idea may be defeated because there is a pot of federal money out there if the state expand Medicaid.