State Patient Compensation Funds At least thirteen states, including Florida, Indiana, Kansas, Louisiana, Nebraska, New Mexico,

New York, Oregon, Pennsylvania, South Carolina, Virginia, Wisconsin, and Wyoming have enacted legislation allowing the establishment of a patient compensation fund or excess coverage fund to provide coverage for judgments or settlements in a medical liability cause of action above a defined amount. Funds in three of these states, Florida, Oregon, and Wyoming are currently inactive and Pennsylvanias is scheduled to be phased out. In addition, funds in two states, Florida and Virginia, apply only to infants who have suffered a neurological injury. (note: Florida also had a broader patient compensation fund that is currently inactive). States vary in terms of when the fund begins to make payments for awards against a covered health care provider. For example, in Louisiana any award in excess of $100,000 shall be paid from the patient compensation fund, while in Indiana the fund makes payments for awards in excess of $250,000. To ensure financial solvency, many states also limit total payments made in a given year. For example, in Indiana if full payments cannot be made for all claims accrued, they shall be prorated and subsequent payments will be made during the following payment period. In every state the fund is financed through surcharges on qualified health care providers. Surcharges are typically collected by medical liability insurers and transferred to the fund. To participate in the fund, most states require health care providers to pay the annual surcharge and file a proof of financial responsibility verifying they have a certain level of medical liability insurance coverage or meet the requirements for self-insurance. In most states the fund is administered by a specifically created board, which is often composed of health care providers covered by the fund. To ensure the fund continues to be available for its intended purpose, many states hold the fund in an independent trust separate from the states general revenue, thereby prohibiting the legislature from dipping into the fund for other purposes. Several state patient compensation funds have had trouble maintaining their financial viability. For example, Pennsylvanias CAT Fund is more than $2 billion in deficit. In response, Pennsylvanias legislature replaced the fund with the Medical Care Availability Reduction of Error (MCARE) fund and has scheduled it to phase out over time. The reason for the funds financial woes is due in part to the states medical liability climate. Florida The Florida Patient Compensation Fund is currently inactive. Floridas Birth-Related Neurological Injury Compensation Plan provides compensation for severe, birthrelated injuries, without regard to a finding of negligence against a health care provider. The fund is financed by a surcharge placed on all health care providers. Obstetricians who would like to participate in the fund are required to pay an additional surcharge. Claimants must appear before an administrative law judge to determine whether they are entitled to coverage by the fund. Claimants eligible for compensation can be reimbursed for non-economic damages up to $100,000 and actual expenses for medical, rehabilitative and custodial care.

American Medical Association Advocacy Resource Center February 2008

Indiana Indianas Patient Compensation Fund makes payments for a judgment or settlement against a qualified health care provider in excess of their annual aggregate ($250,000 per occurrence or $750,000 per year). The PCF is funded through annual surcharges assessed against all qualified health care providers. The amount of the surcharge is based on the median malpractice liability premium of the three largest malpractice insurers in the state for all physicians in the same specialty. Malpractice insurers shall be responsible for collecting the surcharge from each qualified health care provider and shall forward these to the fund. The fund shall distribute payments bi-annually on July 15 and January 15. If the fund does not have enough money to pay all the claims, the claims shall be prorated and the balance must be paid before claims that become final during the following six-month period. Kansas Kansas Health Care Stabilization Fund makes payments for awards in medical malpractice cases that exceed the amount of professional liability insurance providers are required to maintain. The Fund, which is financed by surcharges assessed against all health care providers based on the coverage selected by the provider, shall be held in trust in the state treasury and accounted for separately from other state funds. Malpractice insurers shall be responsible for collecting the surcharge and forwarding this amount to the Fund. A Board of Governors, which is made up of health care providers covered under the Fund, is responsible for administering the Fund. The Fund shall be liable to pay any amount due from a judgment or settlement, which is in excess of the basic insurance coverage of the liable health care providers. Any payments for which the fund is liable up to $300,000 shall be paid promptly, while payments above $300,000 shall be made in installments of $300,000 or 10% of the amount of the judgment, including interest, whichever is greater, per fiscal year. To avoid paying interest the board may decide to pay the entire amount. Louisiana Louisianas Patient Compensation Fund provides coverage for judgments, settlements, and arbitration awards against a health care provider in excess of $100,000. In addition, payments for medial care and related benefits shall also be paid by the Fund. To qualify for coverage by the Patient Compensation Fund, providers must establish proof of financial responsibility and pay a surcharge. To prove financial responsibility the provider must either prove he or she has medical liability insurance of at least $100,000 per claim or that has deposited with the board $125,000 in cash, bonds, or other security approved by the board. The amount of the surcharge assessed against providers shall be determined by the Louisiana Insurance Rating Commission based upon actuarial principles and in accordance with an application for rate or rate changes, or both, filed by the Patients Compensation Fund Oversight Board. The surcharge shall be collected by each insurer on the same basis as premiums and then forwarded to the Fund. The total amount recoverable for all malpractice claims for injury to or death of a patient shall not exceed $500,000, however, payments for medical care and related benefits shall be paid by the patients compensation fund without regard to the $500,000 limit. If the fund would be exhausted by payment in full of all final claims in a given year, then the amount paid to each claimant shall be prorated and any amounts due and unpaid shall be paid in the following semi-annual periods. Nebraska Nebraskas Excess Liability Fund provides excess coverage for judgments or settlements against health care providers qualified under the Hospital-Medical Liability Act. The Fund shall be liable for judgments
American Medical Association Advocacy Resource Center February 2008

or settlements in excess of $500,000, but the amount paid from the fund plus payments by all health care providers may not exceed $1.75 million. To create and maintain the Fund an annual surcharge shall be levied on all health care providers. The surcharge shall not exceed 50 percent of the annual premium paid by such health care provider for medical malpractice insurance or the amount necessary to maintain the Fund at $4.5 million. If the fund exceeds $4.5 million after all expenses and claims are paid at the end of a given year, the director shall reduce the surcharge to maintain the fund at approximately $5 million. If at any time the director determines the amount in the Fund is inadequate to pay in full all claims in a given year, the director may levy a special surcharge on all qualified health care providers sufficient to permit full payment of all claims allowed against the fund during a calendar year. New Mexico New Mexicos Patient Compensation Fund provides coverage for damages in excess of $200,000 rendered against a health care provider pursuant to the Medical Malpractice Act. To qualify, individual health care providers must have at least $200,000 in medical liability insurance or deposit $600,000 in cash with the superintendent and pay a surcharge. The surcharge shall be determined by the superintendent based upon sound actuarial principles and must be collected from health care providers by medical liability insurers on the same basis as premiums. Payments from the Fund shall be made in accordance with the courts payment schedule. If the Fund would be exhausted by payment of all claims in a given year, the amount paid to each party shall be prorated for that year based on the percentage of each partys payment to the total outstanding payments with subsequent payments made in the following calendar years. New York New Yorks Excess Coverage Fund provides $1 million per occurrence/$3 million in the aggregate of excess coverage for physicians. To participate physicians must have primary coverage of at least $1.3 million per occurrence/$3.9 million in the aggregate and must have hospital privileges. New York is the only state in which the Fund is financed by the state rather than physician premiums. Hospitals purchase the coverage on behalf of providers who request the coverage and are then reimbursed from a large state pool used to pay for several health care programs, including the excess coverage fund. Pennsylvania HB 1802 (2002) eliminated Pennsylvanias CAT fund and replaced it with the Medical Care Availability Reduction of Error (Mcare) fund, which operates similarly to the CAT Fund. The Mcare statute mandates that each health care provider who renders 50% or more of his or her professional medical services within the Commonwealth must obtain basic professional liability insurance with an insurance carrier licensed or approved by the Pennsylvania Insurance Department or with an approved self-insurance plan. In addition, each participating health care provider must also obtain excess professional liability coverage by paying a certain percentage of the prevailing primary premium charged by the Pennsylvania Joint Underwriting Association (JUA) to Mcare. The appropriate percentage varies each year based upon payments made by Mcare in the previous year. For 2003 to present, the total required limit of medical professional liability coverage for participating health care providers, excluding hospitals, is $1,000,000 per occurrence, and $3,000,000 per annual policy year aggregate. The health care provider must obtain a policy for the first $500,000 per occurrence and $1,500,000 per annual. Mcare provides coverage for the other $500,000 per occurrence and $1,500,000 per annual. (Source What is Mcare? Pennsylvania Insurance Department -2/6/06) Mcare has offered abatements of its assessment in recent years in order to retain physicians in the state especially physicians in high risk specialties.
American Medical Association Advocacy Resource Center February 2008

South Carolina South Carolinas Patient Compensation Fund provides coverage for awards in a medical malpractice or general liability cause of action against a qualified health care provider in excess of $100,000 per incident or $300,000 in the aggregate for one year. To qualify for coverage under the fund, a health care provider must have primary coverage of at least $200,000 per claim/$600,000 in the aggregate, pay an annual membership fee and pay any deficit assessments filed by the Board of Governors. The fund must be held by the State Treasurer in a segregated account and may not become part of the general fund of the State. If the fund incurs liability exceeding $200,000 to any person for a single occurrence, the fund shall not pay more than $200,000 per year until the claim has been paid in full, unless the board wants to avoid the payment of interest. Claims shall be paid as they are filed in a given year. If the fund does not have enough money to pay all claims, those claims received after the funds are exhausted are immediately payable the following year in the order in which they were received. Virginia Virginias Birth Related Neurological Injury Compensation Fund provides coverage for permanently disabled infants suffering from birth-related neurological injury. The Fund pays for expenses related to medical, hospital, rehabilitative, residential, and custodial care, and of the state weekly wage after the child achieves age 18. Physicians and facilities must pay surcharges to the fund to qualify for coverage. Wisconsin Wisconsins Patient Compensation Fund makes payments for medical malpractice claims in excess of the amount of medical liability insurance coverage which providers must maintain, or the amount of the maximum liability limit for which the provider has coverage, whichever is greater. Every health care provider must maintain the following levels of liability insurance coverage on or after July 1, 1997: (1) occurrence coverage of at least $1,000,000 for each occurrence or $3,000,000 for all claims in a given year, (2) claims-made coverage of at least $1,000,000 for each claim arising from an occurrence on or after July 1, 1997 and $3,000,000 for all claims in any one reporting year, or (3) self-insurance that is less than $1,000,000, but not less than $600,000 for each occurrence on or after July 1, 1997 and before July 1, 1999 and less than $1,000,000 but not less than $800,000 for each occurrence on or after July 1, 1999 but before July 1, 2001. To participate in the fund, providers must pay an annual assessment based on a number of factors, such as the past and prospective loss and expense experience of the providers practice, the fund, and the individual provider. The fund shall provide occurrence coverage for claims against qualified health care providers and employees of these providers, and for reasonable and necessary expenses incurred in payment of claims and fund administrative expenses. Claims filed against the fund shall be paid in the order received within 90 days after filing. If the amount in the fund is not sufficient to pay all the claims, claims received after the fund is exhausted will be paid in the following year based on the order in which they were received. The fund shall be held in trust and may not be used for purposes other than those outlined in the statute. Wyoming Wyomings medical liability compensation account has never been implemented.

American Medical Association Advocacy Resource Center February 2008