Budget Impasse Forces Some Physicians to Pay More for Liability Insurance

An impasse between the governor of Pennsylvania and that state's legislature has temporarily derailed a medical liability abatement program, thus forcing many Pennsylvania physicians to pay a higher rate for medical liability insurance.

"Family physicians are now required to pay anywhere from $1,500 to $2,500 in additional liability costs that would have been abated had the program been reauthorized by the state legislature," said Andrew Sandusky, vice president of governmental affairs at the Pennsylvania AFP.

According to Pennsylvania law, physicians are required to carry $1 million in liability insurance. Most physicians obtain half of the required coverage through the private market and the remaining half through a state-administered abatement program called the Medical Care Availability and Reduction of Error, or Mcare, Fund, which is financed by a tax on cigarettes.

In 2007, the legislature did not reauthorize the Mcare abatement program before it expired at the end of the year, but Gov. Ed Rendell issued an order extending the program for the first three months of 2008. That extension has now expired, and Rendell and members of the legislature still cannot agree on how to use a budget surplus generated by the cigarette tax.

Rendell wants to use some of the funds to cover more of the state's uninsured, but some state lawmakers oppose this proposal, saying that the money generated by the cigarette tax should be used to alleviate liability costs while eliminating the Mcare abatement program altogether. According to these legislators, physicians should purchase all of their liability insurance through the private market without relying on the state for insurance. Absent an agreement, the legislature and the governor allowed the Mcare Fund to lapse on March 31, forcing physicians to pay more for their liability insurance.

"Physicians can still get liability insurance, but they will not receive abatement until there is legislative reauthorization," said Sandusky.

FP Samuel Schrack, D.O., of Williamsport, Pa., has paid $2,500 in additional liability insurance costs since the Mcare abatement program expired on March 31, but he says there is a larger issue than the suspension of abatements.

"We have a liability problem in the state," said Schrack, chair of the Pennsylvania AFP legal and government affairs commission. "We have physicians leaving and residents who do not want to stay in practice here because of the cost of the liability (insurance) we have to carry."

Schrack called on the state legislature to enact tort reform by capping medical liability awards, which would lower the cost of medical liability insurance.

"Our state needs to tackle tort reform, and then we will get rid of this Mcare Fund and make it more reasonable to practice in Pennsylvania," Schrack said.