Malpractice Rebate for Md. Set at $84 Million

Gov. Martin O'Malley suggested that the malpractice crisis might have been exaggerated in 2004.
Gov. Martin O'Malley suggested that the malpractice crisis might have been exaggerated in 2004. (By Ricky Carioti -- The Washington Post)
By Lisa Rein
Washington Post Staff Writer
Friday, December 14, 2007

Maryland's largest insurer of doctors will return to the state $84 million it has collected through a taxpayer-financed subsidy program to help pay malpractice premiums, Gov. Martin O'Malley (D) and state regulators announced yesterday.

At the same time, the three-year-old subsidy program is being curtailed because a spike in malpractice awards has flattened out, O'Malley said. He suggested that his predecessor, Gov. Robert L. Ehrlich, Jr. (R), might have exaggerated the economic hardship facing doctors when he called the General Assembly into emergency session in 2004 to fix what he called a malpractice "crisis."

Asked to assess how serious a problem rising premiums were three years ago, O'Malley said, "What do you think?"

"A professional and competent regulatory body is back on the job," said O'Malley, flanked by his new insurance commissioner, Ralph S. Tyler. "One of the very important things Marylanders expect from their government . . . is a regulatory mechanism that's very proactive."

The insurer, Medical Mutual Liability Insurance Society of Maryland, raised rates by an average of 28 percent in 2004 and 33 percent in 2005. This fall, it announced that a decline in malpractice payouts would lead to a $68.6 million rebate, in the form of a dividend for policyholders.

Medical Mutual had planned to pay about two-thirds of the money to the state and distribute the rest to the 6,400 private-practice physicians it covers as a credit against next year's premiums. But Tyler blocked the plan in October, saying the money should not go to doctors. The surplus was generated by a 2 percent surcharge that the General Assembly imposed on HMO premiums to subsidize malpractice coverage.

Tyler gave the insurer 30 days to come up with an alternative plan. "In my view, the dividend was owed to the state," Tyler said yesterday.

In the meantime, the amount of the surplus to be returned grew by $30 million, to about $98 million. Jeff Poole, Medical Mutual's chief operating officer, said the improving malpractice insurance market made possible the larger surplus.

The state's $84 million will be placed in a subsidy fund for malpractice insurance that will exist through 2009, but officials don't expect to spend it. After that, the money will be applied to Maryland's expenses under Medicaid, the federal-state program for the poor.

The doctors' share, $13.8 million, will be used to avert an 8 percent increase in premiums next year. As a result, premiums will remain at this year's levels, Tyler said.

In an emergency Christmas week session in 2004, lawmakers enacted a four-year subsidy program after Medical Mutual, in response to rising claims, imposed double-digit rate increases. Doctors rallied in Annapolis, saying they would be forced to stop practicing in Maryland.

"We couldn't tell whether we were standing at the foot of a cliff or at a plateau with the mountains behind us," said Sen. Brian E. Frosh (D-Montgomery), who chairs a committee that approved the subsidy.

The agreement announced yesterday in effect will end the subsidy program a year early.

From 2001 to 2003, Medical Mutual's malpractice payouts ballooned from $50 million to $93.6 million, officials said, but had dropped to $53.7 million by 2005. Last year, awards rose to $65 million, and they are expected to remain about the same this year.

Physicians and state officials said they are at a loss to explain why payouts have dropped, but cited the cyclical nature of malpractice suits, legislation intended to hold down payouts and improved practices by doctors.

Martin Wasserman, executive director of the Maryland State Medical Society, said doctors "have persuaded the public they shouldn't sue as much," but he said doctors also "made an effort to be a little more careful."

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