MINUTES OF THE ASSEMBLY COMMITTEE ON JUDICIARY Sixty-eighth Session May 26, 1995 The Committee on Judiciary was called to order at 8:10 a.m., on Friday, May 26, 1995, Chairman Anderson presiding in Room 119 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Bernie Anderson, Chairman Mr. David E. Humke, Chairman Ms. Barbara E. Buckley, Vice Chairman Mr. Brian Sandoval, Vice Chairman Mr. Thomas Batten Mr. John C. Carpenter Mr. David Goldwater Mr. Mark Manendo Mrs. Jan Monaghan Ms. Genie Ohrenschall Mr. Richard Perkins Mr. Michael A. (Mike) Schneider Ms. Dianne Steel Ms. Jeannine Stroth GUEST LEGISLATORS PRESENT: Lieutenant Governor and President of the Senate Lonnie L. Hammargren Assemblywoman Saundra Krenzer, District No. 19 STAFF MEMBERS PRESENT: Dennis Neilander, Research Analyst Patty Hicks, Committee Secretary OTHERS PRESENT: Gene Backus, Esq., of Thorndal, Backus, Armstrong & Balkenbush Law Firm Ms. Sheila A. Smith, Deputy Attorney General, Nevada Department of Human Resources OTHERS PRESENT: (Continued) Bill Bradley, Esq., Nevada Trial Lawyers Association Allen R. Earl, Esq., Nevada Trial Lawyers Association Rich Meyers, Esq. Nevada Trial Lawyers Association Ms. Shirley Stockwell Bob Perry, Esq., Nevada Trial Lawyers Association Mr. Gary A. Johnson Ms. Thelma Clark Mr. Doug de la Vaux Ms. Valerie J. Cooney, President, Nevada Trial Lawyers Association Ms. Jean Myles Robert Myles, M.D. Ms. Donna Wright Ms. Tina Atkins Ms. Alice L. Molasky, Division of Insurance Joe Guasch, Esq., Nevada Trial Lawyers Association Ms. Linda Small Jim Crockett, Esq., Nevada Trial Lawyers Association Steve Burris, Esq., Nevada Trial Lawyers Association Mr. Ray Robinson Jim Lavelle, Esq., Nevada Trial Lawyers Association Ms. Janice McIntosh Mr. Lenard Ormsby, SIIS Mr. Buddy Garfinkle Mr. Harvey Rosenfield COMMITTEE INTRODUCTION: ASSEMBLYMAN HUMKE MOVED FOR COMMITTEE INTRODUCTION OF BDR 15-726. ASSEMBLYMAN STEEL SECONDED THE MOTION. THE MOTION CARRIED. (ASSEMBLYMEN BATTEN, GOLDWATER AND PERKINS WERE NOT PRESENT FOR THE VOTE.) Chairman Anderson informed members of the committee may be coming in and out of the hearing because they have bills pending in other committees, and it is important for their constituencies to give their testimony during this time period to other committees, such as, Ways and Means, Government Affairs, etc. ASSEMBLY BILL NO. 520 - Makes various changes to provisions relating to actions for medical malpractice. Ms. Valerie J. Cooney, President, Nevada Trial Lawyers Association, advised their organization is in opposition to A.B. 520 and A.B. 180 and gave a brief outline of their presentation and speakers, attached as (Exhibit C). Allan R. Earl, Esq., Nevada Trial Lawyers Association, defense trial counsel, advised he is a third generation member of a pioneer family that came to southern Nevada 150 years ago to colonize and settle. Mr. Earl has appeared before every legislative session since 1977, perhaps by tradition. Mr. Earl's grandfather Joseph Ira Earl appeared before the Nevada legislature 90 years ago and spoke on behalf of teachers and farmers. Mr. Earl expressed his roots in this state go very deep. Mr. Earl testified A.B. 520 is highly specialized and privileged and specifically benefits insurance companies who insure doctors in the state. The difference between the perception and the reality of medical malpractice Mr. Earl advised is there is no claimant in the justice system where the table and deck are so heavily stacked against them. Mr. Earl commented it is more difficult to sue a health care provider in Nevada than any other profession. The average costs for prosecuting a case through trial ranges from $25,000-$50,000. Fewer lawyers are willing to undergo such risks. The average time involved in getting a resolution to a contested malpractice case is at least three years or longer. Every plaintiff's verdict that Mr. Earl has received has been invariably appealed which adds anywhere from a year to two and one-half years to process. Mr. Earl advised the resources available to defend doctors are considerably greater than those available to the average plaintiff. Mr. Earl stated there is a perception the screening panel is only mildly successful; however, it has accomplished its intent. Mr. Earl said the doctors always perceived the medical screening panel was to protect them. Mr. Earl stated doctors never came to grips emotionally or realistically with the process when the decision went against them, they were then supposed to settle the case. Mr. Earl advised the truth of the matter is there is as much or more abuse from doctors and their insurance carriers in failing to settle claims when the screening panel is against them as there is in lawyers continuing into the system and filing complaints when the screening panel final goes against them. There is a perception of a crisis in the health care industry and it is fueled by lawyers and lawsuit, Mr. Earl noted. Mr. Earl concluded the health care problems in America today would indicate that lawyers in lawsuits really have very little to do with the factors that drive health care costs. Mr. Earl finds it particularly offensive to the perception that juries are not to be trusted. Yesterday the reference to not giving juries unlimited discretion in the field of human pain and suffering, as a trial lawyer, Mr. Earl advised rhetoric does not do a great deal to juries in this state. Mr. Earl stated bad treatment, indifferent attitudes by physicians, and appalling human conditions created by medical negligence, moves juries. There exists in Nevada when there is a verdict that is truly outrageous and one that exceeds the conscience of the court, a process called the remitter wherein the trial judge reduces the size of the verdict to something more appropriate. Mr. Earl stated there is the perception that verdicts are always paid once they are received which is not accurate. Mr. Earl noted most often when large verdicts are obtained they are almost invariably appealed and then they are often compromised. Mr. Earl said the reason was the people who need the money so desperately cannot wait the time to have it go through the appellate process and that is the hammer used to hammer out settlements. Mr. Earl stated this is not a battle between doctors and lawyers as it was in 1985 when the screening panel statute was drafted. Mr. Earl was moved by the plight of the doctors from yesterday's testimony. Mr. Earl advised that A.B. 520 does not solve it and what it costs in human terms for patients and citizens in this state is a price too great to pay. In regard to the screening panel working and when doctors receive an adverse decision they refuse to settle the claim, Mrs. Monaghan asked if there are any statistics as far as when the attorney loses, he takes it to court which is not necessarily the process of the screening panel. Mr. Earl advised the screening panel originally was intended to take the very top level of cases that were bad and throw them out immediately. Where the doctors were clearly at fault, it was to be settled immediately and it is not working in this manner. Mr. Earl stated the common experience is if doctors do not wish to settle oftentimes they want their cause determined by a jury. Mrs. Monaghan inquired if there are statistics when a judge decreased the settlement award. Mr. Earl advised that is not something that is done often. Mr. Earl asked to keep in mind in the history of Nevada, there has been approximately 30-35 jury verdicts against the doctors in medical malpractice cases. Mr. Earl advised the term remitter applies to medical malpractice and otherwise and used in this state for very large verdicts. Two or three days ago Judge Pro in federal court threw out the million dollar verdict that was awarded to a criminal defendant because he thought it was outrageous. On p. 2 Mr. Carpenter requested explanation of what the bill would do in regard to joint and several liability. Mr. Earl deferred to Mr. Bradley who will speak specifically to that issue. Mr. Sandoval asked if Mr. Earl had tried medical malpractice cases to verdict. Mr. Earl advised he had experience in representing both sides. Mr. Sandoval requested what his experience was in non-economic damage awards. In reference to the last two cases of Mr. Earl's, they were women and were non-wage earners as a result there was very little economic damage. Mr. Earl advised almost all the damages involved pain and suffering and long term disability. The most recent case of a botched abortion was $250,000, Mr. Earl informed. In defense cases Mr. Sandoval asked if Mr. Earl was successful in defending them. Mr. Earl advised his law firm has never lost a medical malpractice case for the defense. Mr. Earl attributed that to a large extent to the wisdom of Bob Bird who allows the opportunity to settle cases that are bad and that meritorious cases be tried. Mr. Sandoval asked if Mr. Earl found the defense bar is more successful at trial level. Mr. Earl responded absolutely as the resources available in defending doctors is enormous. As a defense lawyer for insurance companies, Ms. Steel inquired if he had thousands of motions ready to go. Mr. Earl advised they have a number of motions to put severe obstacles in the path of plaintiffs. Yesterday Mr. Carpenter asked the proponents of this legislation if they would provide figures as to how many cases had been settled with a pain and suffering judgment of more than $250,000 and asked Mr. Earl from his experience if he knew. Mr. Earl advised a careful closed claim study would have to be done to find that out. His law firm settled a number of cases significantly higher because the damage was horrendous and below the standard of care. Mr. Earl informed there have only been five or six verdicts against doctors in excess of a million dollars. In reference to yesterday's testimony Mr. Carpenter mentioned the doctors felt all of the loss of income and medical bills should be fully compensated. Mr. Earl concurred. Mr. Carpenter asked if there were certain instances where the situation of pain suffering is considered. Mr. Earl advised that generally the way trials are presented, the economic damages are presented with very specific figures. Future economic damages are often presented by an economist, but actual economic damages are presented with exact figures, mostly on charts, and the jury has those figures in front of them. Mr. Earl advised pain and suffering deals with what the people go through as a result of the problems therein. Unless a special verdict is requested wherein the jury can tell specifically what they are awarding, Mr. Earl stated a lot of time they are lumped together. Bill Bradley, Esq., a member of Nevada Trial Lawyers Association, testified yesterday the committee heard a lot of anecdotes, guesses and hopes, referred to as the perception and today he will address reality, real facts, real people, and real solutions. In 1992 a congressional budget office study showed that the entire cost of the tort system was less than one percent of our national health care budget. If we eliminate a person's right to bring a wrongdoer into a courtroom for medical negligence, Mr. Bradley advised it would result in a savings of 26 cents on a $40 doctor's visit. In exchange the wrongdoer cannot be held accountable and will have to look to the taxpayers for the support they need to get them through the troubled times caused by the wrongdoer's act. In 1985 the medical screening panel legislation was enacted. As a direct result of that panel in 1989 and 1990 the doctor's company, the largest insurer, dropped their premium by 17%. In that same time period our health care costs continue to go up. Even if the people's right to hold wrongdoer's accountable was curtailed or eliminated, Mr. Bradley predicted the difference will not be realized in health care costs. Mr. Bradley referenced insurance profitability, attached as (Exhibit C). Mr. Mike Angelo, a UPS employee of Las Vegas, depicted on video tape, testified that his son was born severely brain damaged and lived for only five months due to negligence by the obstetrician. Mr. Angelo stated he and his wife only want basic fairness. Mr. Bradley stated A.B. 520 seeks to put a cap on cases such as this and asked who would give up a child for $250,000. Mr. Bradley advised a cap would eliminate personal responsibility. Under this proposed bill the jury is not told there is a cap so the jury sits there and works hard to determine what is a fair award to an injured victim. After the jury goes home, then the doctor's company, the insurance company, and the lawyer, decide it does not matter what the jury awarded, decrease it to $250,000. Furthermore, whether the jury determines $400,000-$500,000, it is reduced to $250,000, Mr. Bradley advised the wrongdoer is exonerated and no longer responsible. Mr. Bradley gave a hypothetical example of a patient rendered quadriplegic through the mistake of the physician and a car accident victim. Mr. Bradley informed the motor vehicle accident victim has no cap, yet the malpractice patient is capped at $250,000. Finally, Mr. Bradley advised the cap exonerates the wrongdoer, does not reduce health costs, and does not discourage frivolous lawsuits. Mr. Bradley reiterated the only thing the cap will do is benefit the insurance company and the negligent wrongdoer. Mr. Bradley advised the collateral source rule is the second cornerstone on the limitation on citizen's rights. The collateral source rule provides when negligent wrongdoer causes the injured patient to incur medical bills, then the negligent wrongdoer does not want to be responsible for them because the injured's insurance will pay. Mr. Bradley stated A.B. 520 will stop millions from going back to Medicaid, SIIS, and health insurance companies. Recently, Mr. Bradley informed SIIS reimbursed $5 MD, Medicaid, $1.5 MD, and insurance companies, untold millions. Mr. Bradley predicted the insurance premiums will have to increase when they are no longer able to be reimbursed. Mr. Bradley restated the abolition of the collateral source rule shifts the responsibility away from the negligent physician and onto the taxpayer's backs. At the same time Mr. Bradley referred to goals of maintaining personal responsibility, reducing medical costs and frivolous lawsuits and stressed A.B. 520 will not accomplish those goals. Mr. Bradley introduced Terry Ball, a medical negligence patient, who was fortunate to have SIIS pay for his medical bills, depicted on video tape he sustained a back injury of a herniated disk in the L4 and L5 region and underwent surgery to the wrong region of his back and later underwent corrective surgery. The settlement he received reimbursed SIIS $86,000. Mr. Ball advised under proposed A.B. 520 his settlement would have been less than half of what he received and SIIS would not have been reimbursed. Also, the settlement would be doled out over a period of time and in Mr. Ball's opinion it would be inadequate and unfair. Mr. Bradley realized that every time there is a settlement or verdict, periodic payments are an option. However, he stated it should be the injured person's choice to select periodic payments or a lump sum and not the insurance company and the wrongdoer to make the decision as proposed in A.B. 520. Mr. Bradley commented the insurance company wants to dole out payment sums over a longer period of time and hold on to the lump sum and generate the interest to receive the benefit of the interest despite the fact it is the injured patient who is entitled to the compensation. Mr. Bradley agreed with the remark free enterprise and the market ought to dictate the contract between two people in reference to the cap on attorney's fees. Under A.B. 520 Mr. Bradley noted there is no cap on defense attorney's fees and no limits on the number of attorneys, associates, paralegals, and motions. Mr. Bradley stated no one sums up the problems better than Bill Dixon, a retired Sparks policeman, who is another innocent victim of medical negligence who testified by video tape. A 1993 medical mistake rendered him quadriplegic. He has spent most of his life savings to remodel his home to accommodate his physical needs and his medical bills are over $300,000 which have been paid by the city of Sparks' medical plan. Mr. Dixon and his wife strongly oppose any law which would limit the damages for losing the enjoyment of their lives, restricting the contingency attorney's fee, periodic payments, and excuse those responsible for the injury. Mr. Bradley opposed reduction of the statute of limitations of all personal injury cases to one year. Reduction of the limitations would encourage the hiring of lawyers quicker, file lawsuits faster, and dramatically drive up the cost of this system. One year is not sufficient time for someone to realize they have an injury and Mr. Bradley advised it was not good policy. The present statute worked well over 100 years and there is no reason to change it. Mr. Bradley addressed Mr. Carpenter's concern in regard to joint and several liability. It means where two or more wrongdoers injure someone that they may be jointly or together liable for all damages even if one person does not have sufficient funds to pay his or her appropriate share. Mr. Bradley advised under Nevada laws if the injured patient was negligent then each wrongdoer is liable for his share of that person's injuries. This is when the patient is not himself at fault; however, if the injured person was at fault, then each person who contributed to his injury is only responsible for his share. Mr. Bradley advised when an injured person is without fault, the person should be totally reimbursed for the injuries; however, where the injured person does have some fault, then each person who contributed to the fault including himself is only responsible for that amount of the damages. Irrespective of whether the injured person was at fault or not, Mr. Bradley stated this proposal will only make each wrongdoer responsible for his proportionate share and will leave an innocent injured person not whole. Mr. Bradley noted this is contrary to public policy in this state for over 130 years. Mr. Bradley stated the next provision is the immunity to emergency room doctor bills. This provides any pregnant woman who arrives at an emergency room and is malpracticed has no cause of action unless that malpractice was gross negligence. Mr. Bradley informed in his 15 years experience he never had a case where he could convince a jury there was gross negligence. Mr. Bradley remarked he did not know if the man who had his back operated on in the wrong level would constitute gross negligence. Mr. Bradley asked why emergency room doctors should receive a special benefit. Mr. Bradley pointed out Nevada Coalition Alive for Patient Protection and asked for explanation if an innocent pregnant woman is malpracticed and only able to recover if it was gross negligence, how it possibly could be called patient protection. Mr. Bradley referred to the provision about punitive damages in malpractice cases and stated it simply does not exist. Another provision Mr. Bradley referred to was retired physicians giving uncompensated care to indigent persons should be given immunity to gross negligence. Mr. Bradley concurred it was good public policy to allow retired physicians who are volunteering their time treating indigent people to not have the threat of negligence over their head and strong support this concept. Other portions of A.B. 520 addresses technical and substantive changes in the medical screening panel. Mr. Bradley referred to the substantive change of increasing the number of panel numbers and advised it is a good idea to increase to 60 members. Confidentiality of doctor's names is a good idea, but from personal experience, Mr. Bradley, who sits on the panel, advised it usually is common knowledge when a panel finds a doctor negligent. Mr. Bradley expressed the opinion any person who is a health care provider must be administered through the screening panel before he can be taken to court. Mr. Bradley opposed allowing the insurance commissioner to decide whether a reply is appropriate. Basically, the reply should only address new issues when information was not available at the time of filing. If passed increased motions to the coordinator will be generated and increase the cost of litigation. In reference to Section 24, ll. 24-25, Mr. Bradley did not understand and recommended it be deleted. Another provision regarding expert witnesses, Mr. Bradley advised it was debated in 1985 with weeks of subcommittee study. Mr. Bradley offered the solution of lawyer accountability act to discourage frivolous lawsuits and closed claim study where independent auditors go into the doctor's company, Nevada medical liability insurance company, and medical insurance exchange company to look at the books to see what the case is about and the estimated value of the case. When a similar study was done in Minnesota, North and South Dakota, there was a multimillion dollar rebate given to the physicians and $250 MD shift in funds from an account called the reserve account into profits. Mr. Bradley briefly addressed A.B. 180 and noted the laws are much different in California than Nevada. In Nevada two absolute defenses to product liability are contributory negligence when the person himself is responsible and assumption of the risk. Mr. Bradley informed Nevada has very good product liability law and does not need to be changed. In conclusion Mr. Bradley stated A.B. 520 is an insurance company and physician's dream. It is designed to increase profits, reduce personal responsibility, and shift the cost of negligent medical care away from the wrongdoer and onto the shoulders of all Nevadans. Mr. Bradley stressed it punishes the people who are hurt the worst and creates two different classes of people, those who are responsible and those who are not. Mr. Bradley urged the committee to oppose A.B. 520 and A.B. 180. On p. 2, subsection 4, Mr. Carpenter asked the purpose of the addition of "the action". Mr. Bradley advised it was more housekeeping than anything else. Mr. Carpenter asked if the big change is in Section 5. Mr. Bradley confirmed and advised in 1987 joint and several liability was amended. Mr. Carpenter inquired if this bill would help rural area physicians in the situation when an OB presented for the first time in ER and the physician did everything to take care of the situation and later on a malpractice lawsuit was filed. Mr. Bradley added if that woman showed up on the doorsteps of a hospital and had been on drugs with a horrible prenatal history, it is not a case that would ever go forward. It may go to the screening panel and in all likelihood be rejected. However, if a woman from another state with good prenatal care, delivers in ER, Mr. Bradley stated the ER team is trained to handle emergencies. If there was a breakdown on the team that could have been prevented, then it may be a meritorious case which will also go to the screening panel. Mr. Bradley remarked the rural areas protect their doctors and the difficulty in obtaining a judgment. Recently, Mr. Bradley advised of a screening panel of one doctor in Elko where the jury awarded settlement exactly what the panel recommended. Winnemucca had a case that went to screening panel and was found 6-0 against the physician; there was no offer on the table and it went to trial, and the patient was awarded $350,000. Neither one of cases have been paid and are being appealed. Mr. Bradley estimated it will be another two or three years before the injured patients receive a dime of compensation. Mr. Carpenter referred to a chart where it shows malpractice insurance is most profitable and asked why are the premiums increased. Mr. Bradley did not know the answer and it troubles him greatly. From 1986-1987 increase in premiums was manufactured but is not occurring now. Mr. Bradley advised the insurance commissioner's office does a good job with the limited resources they have, but it is impossible for them to keep track with the numerous complicated issues in the state. Mr. Bradley informed this is why they asked for a closed claim study which will give the exact answer to that question. If through a closed claim study it shows that we have a problem in our civil justice system in the state of Nevada, Mr. Bradley said lawyers will ask for a change. Until this is shown, Mr. Bradley did not believe it is true because there are no verdicts in this state that justify the rates being charged. Mr. Batten requested clarification in reference to doling out the money and surmised if he was injured and won a million dollar settlement, who makes the determination of whether or not he gets his million dollars or a hundred dollars a month. Mr. Bradley advised under this bill a judge will make that determination. Mr. Batten concluded if he was friendly with the judge it would be to his advantage. Mr. Bradley stated they would like to think that judges are impartial, but it is a tremendous amount of power to give the judges. Mr. Bradley was of the opinion the insurance industry wants to make the judge the bad guy. Mr. Batten asked if the judge's determination on method of payment can be appealed. Mr. Bradley advised unless a judge abuses his discretion it is unlikely the decision will never be overturned. In reference to subsection 5 of Section 10 on p. 8, punitive damages, Mr. Humke asked if there was a rule for all punitive damages going to the state or do they go to the party. Mr. Bradley advised they go to the party now and it has always been the rule in this state and no punitive damages go to the state. Mr. Humke asked if there were statistics as to how many times punitive damages have been awarded in all cases in this state in the last five years. Mr. Bradley advised in the state of Nevada in the last five years there have been perhaps five punitive damage verdicts ranging between $50,000 to twenty million dollars. Several years ago there was an insurance company that was found particularly egregious and the jury awarded twenty million dollars in punitive damages; but, the judge reduced it and the supreme court awarded five million dollars. Mr. Humke commented there was a host of reasons of why not to award punitive damages to the Nevada Medicaid program: (1) highly wasteful program because of federal regulations; (2) not funds Nevada should depend upon and should go into a "rainy day fund." If punitive damages were to go to the state, Mr. Bradley said it is costly to litigate and the state should share in expenses necessary to achieve an award. Ms. Buckley recalled testimony where 30-35 verdicts were received in medical malpractice and last year there were 144 malpractice suits out of nine million visits of patients to physicians, indicating not much of a crisis. On the other hand, Ms. Buckley noted Nevada has the fourth highest malpractice premium in the country and she asked for explanation of that fact. Mr. Bradley advised he could not explain the reason and did not understand it. Until the closed claim study is completed, before there is a dramatic change in public policy, the facts are needed. Mr. Bradley further explained once a doctor reports a claim, the insurance company reviews the claim and sets aside a reserve account. Mr. Bradley believed there is an incentive to over value those reserves because it takes money out of the profit and puts it over into the reserve line. Then those reserves build up because of the two thousand claims and all of a sudden there is a huge amount of money that the companies had to reserve in Nevada to justify a rate increase. Mr. Bradley stated it is not known the disposition of the reserves and if they were paid out to victims. Mr. Bradley has a real problem with the policy of reserves being used in this fashion. Mr. Bradley informed the Minnesota insurance commissioner found St. Paul insurance had over reserved their cases by two hundred fifty million dollars and made them move this amount out of reserves and back into the profits which may be an answer. The closed claim study can make this determination. Mr. Schneider followed up with a question regarding California's health care rising on a higher curve than Nevada, but our malpractice insurance is half the cost and asked if there was a correlation there. Mr. Bradley stated he did not believe so and advised there is a larger market to share the risk in California and he has a gentlemen here to explain California's problem in detail. Mr. Schneider stated he heard conflicting testimony on the medical screening panel and asked if Mr. Bradley was in favor of this panel. Mr. Bradley affirmed he was in favor of the panel. Mr. Schneider made reference to articles and reports of conflicting report where maybe the trial lawyers were not in support and today Mr. Bradley testified the doctors' company appealed to the supreme court and they testified in favor of it yesterday. Mr. Schneider called over to supreme court and learned of a case where trial lawyers challenged the screening panel on the confidentiality. Mr. Bradley clarified the panel is effective for limiting frivolous cases and is not settling the meritorious cases as early as it was intended to do. The doctor's company was the first defendant to challenge the constitutionality of the panel and have done it repeatedly since; however, none of their constitutional challenges have ever been heard because the case was settled before the issue got to the supreme court. Recently, there has been two constitutional challenges not to the entire panel but to two specific provisions of the panel that have been filed on behalf of injured persons. In fact, one of the injured persons who filed a constitutional challenge to the panel is a physician who was malpracticed in Reno. Mr. Bradley restated there are constitutional challenges to the panel and it is not to invalidate the panel. In those two cases, in one the physician in Reno was awarded against him $350,000 in costs. A woman in Las Vegas who lost at the panel was awarded $900,000 in costs and the constitutional challenge deals with the absolute necessity to award every dime in costs. Mr. Bradley advised the reason for the constitutional challenges was whether the judges should be given the discretion or is it absolutely mandatory. Mr. Bradley advised the constitutional challenges were never intended to do away with the panel. Mr. Schneider asked since the panel was instituted, the trial lawyers never challenged the panel. Mr. Bradley explained in 1985 as part of the compromise there was a handshake agreement between the trial lawyers and the physicians to let the panel work and there would be no more attempts to seek court reform which stood up very well the next ten years. Two years ago Mr. Bradley advised the doctor's company wanted to start the coalition to establish tort reform and the deal had been broken. Not until that time, Mr. Bradley advised it was time to challenge some portions of the panel that are causing a problem and not intended to do away with the panel because they do believe the panel works and want to keep it. In reference to a closed claim study Ms. Steel heard of an insurance form filed that the information can be obtained from. Mr. Bradley confirmed there is a form the insurers are required to file with the insurance commissioner that is absolutely not adequate and not enough information to decide what the reserve is on the case. Mr. Bradley advised they want to look at how the cases are being reserved. The Minnesota insurance commissioner learned the form is not enough information. Mr. Bradley advised the only way to glean this information is to send auditors into the company. Mr. Bradley advised the forms show the payout, expenses and do not break down the expenses as to how much the defense lawyer was paid, overhead of the insurance company was charged and does not show what the case was finally settled for or the verdict, screening panel and judge's recommendation at settlement conference. Ms. Stroth referenced background information from research analyst insurance premiums of $16,000,000 in 1993 and judgments exceeded the total amount of premiums paid by the doctors that year. About the panel process Ms. Stroth asked if additional people can be added that may be negligent. Mr. Bradley informed if you go through the panel against one physician and onto the courtroom and during that litigation process after you have moved away from the panel into the open discovery process and you learn of another negligent health care provider, Mr. Bradley is of the opinion that newly discovered health care provider must be taken back to the panel. Ms. Stroth learned of a Las Vegas case filed with 43 defendants and asked how 43 people could be negligent on one person's case. Mr. Bradley advised it could be an entire floor, or obstetrical ward. In some cases the plaintiffs cannot find out who was negligent and everyone is named in the suit. Mr. Bradley advised this problem is what is addressed here. If he did not take everybody that may have been negligent to the panel and then move forward into the courtroom and find out there was someone else, Mr. Bradley advised that lawsuit would have to be stopped and go back to the screening panel with the other person. The time now to get through the panel is 300 days Mr. Bradley noted; thereby postponing the case by almost another year. Mr. Bradley advised he was not aware in 1993 of $16,000,000 in pay offs in this state and did not believe there were those kinds of verdicts in this state; but it is unknown. Mr. Bradley repeated a closed claim study would reveal this fact. In the premium study provided Mr. Carpenter noted Arkansas is the lowest but doubted if we needed Bill to come to Nevada. Mr. Bradley advised on the list of exposures where the doctors report possible malpractice means the number of doctors insured, not the number of exposures. Mr. Bradley will try to obtain accurate figures. Ms. Valerie Cooney, President of Nevada Trial Lawyers Association, introduced Mr. Harvey Rosenfield, a consumer advocate of California with vast experience in the medical malpractice area. A copy of Mr. Rosenfield's book entitled, "Silent Violence, Silent Death, The Hidden Epidemic of Medical Malpractice," a consumer guide to the medical malpractice epidemic, is attached as (Exhibit D). Mr. Harvey Rosenfield, a consumer advocate of California and head of proposition 103 enforcement project, advised of two insurance crises in California over the last thirty years. The first one was in 1975 when doctors began to report that malpractice liability insurance premiums were going through the roof. When asked the insurance industry told the medical community that was because of too much litigation as a result the insurance industry convinced the medical community to join it in an effort to pass the Medical Injury Compensation Reform Act (MICRA). It is not only the model of A.B. 520 but also for congress by the American Medical Association (AMA). Mr. Rosenfield explained the second insurance crisis was in the mid-1980's which affected not only automobile owners, physicians, businesses, homeowners, municipal insurance, referred to as the liability crisis of the 1980's. Mr. Rosenfield commented it was clear at the time there was no justification for the rising insurance premiums. It took the insurance industry five years to admit there was no litigation explosion and it had to do with its own revenue sources, investment practices in early 1980's, and high interest rates, when the decline forced the insurance companies to increase policyholders' premiums to offset the losses from their investment income. At a recent hearing the chief economist of the insurance industry publicly stated there was no litigation explosion in the mid-1980's and stated they were able to get tort reform through 50 state legislatures in the mid-1980's because people hate lawyers. After the second insurance crisis hit California pretty hard, Mr. Rosenfield and other consumer advocates decided it was time to pinpoint the cause of the crisis to find a resolution. Mr. Rosenfield offered what became known as proposition 103, a ballot initiative to stringently regulate the insurance industry, auto-homeowner business, medical malpractice, all forms of property casualty. The insurance industry spent $80 MD trying to defeat this initiative which was approved by the voters. Mr. Rosenfield stated three of the insurance companies own counter initiatives were defeated which contained various views of tort restrictions. Mr. Rosenfield advised proposition 103 mandated an immediate 20% rollback in all insurance premiums, malpractice, and auto-homeowner. It required prior approval of future rate increases with full disclosure by the insurance companies subject to public participation and approval by an elected insurance commissioner. It applied for the first time to the insurance industry the antitrust laws, consumer protection laws, the civil rights laws and banned certain other unfair, abusive industry practices. The United States Supreme Court recently rejected the insurance industry's final appeal of the rate rollbacks under proposition 103 in February. Mr. Rosenfield estimated so far over a billion dollars have been paid in refund checks to the voters and people have saved another one billion dollars a year in auto insurance alone because this initiative held the rates down. Mr. Rosenfield stressed it was important to understand the background of proposition 103 and defense of the proposition against a $250 MD legal challenge by the insurance industry. Mr. Rosenfield advised there are 3 lawyers on staff who are experts in looking at rate application requests that must be submitted to the insurance commissioner under proposition 103. In retrospect of the first insurance crisis in 1993, Mr. Rosenfield reviewed an updated report because it addresses the contention that the medical profession has made in the insurance companies' claim that MICRA has been a wonderful success. Mr. Rosenfield saw basically three goals: (1) by limiting lawsuits and compensation to victims of medical malpractice there will be lower health care costs in the country; (2) by limiting such lawsuits and reducing victim's access to the courts (Nevada) will reduce premiums physicians have to pay for medical malpractice liability insurance; (3) good for patients. Mr. Rosenfield briefly discussed these three contentions and suggested an alternative set of reforms to review. Mr. Rosenfield stated the cost of health care in California has risen ever since MICRA passed in 1975 and rose faster than the cost of health care in the country, 343% increase between 1975-1993 in CA versus 324% in U.S. Per capita health care expenditures in the state of CA have always been higher than anywhere else in the U. S. Hospital cost per day in CA are higher than other major industrialized states in the nation. Defensive medicine is what the insurance industry claims is the expenditure of medical resources, treatment not for the care of the patient, but to avoid lawsuits. The amount of defensive medicine is measured by the C-section rate in CA which is a good indicator it is the same as it is across the U.S. Mr. Rosenfield concluded that MICRA has not worked by the physician's own standards because they claim it would reduce health care costs in CA and it has had absolutely no impact on health care costs in the state compared to the nation. Mr. Rosenfield stated in 1993 in CA the compensation paid out to victims of medical malpractice by insurance companies totaled .18 of 1% of basically 1/5 of 1% of cost of health care expenditures in CA can be attributed to estimated payout by insurance companies for medical malpractice lawsuits. This number clearly shows Mr. Rosenfield contended could eliminate any access to the legal system for victims of medical malpractice in CA and still would not have any appreciable effect on health care costs in this state. It is quite clear MICRA had no impact on health care costs in CA. In discussing physician's premiums he must pay to insurance companies for protection against malpractice liability, Mr. Rosenfield recalled the assumption of lowering physician's premiums it will be translated to lower health care costs to the people. In CA per capita medical malpractice premiums have been higher than the average in the U.S. every year since MICRA passed since 1975-91, then after 1991 they went below the average. In 1985 a General Accounting Office (GAO) report concluded the caps in compensation and other provisions of MICRA in place in 1970's by CA and other states did not lower insurance premiums. In 1985 St. Paul and AETNA insurance companies were among those insurance companies ordered by the FL legislature to show what the impact would be of tort restrictions the legislature imposed in the midst of the liability crisis of the mid-80's. Both companies reported there would be no impact from these tort law restrictions on insurance premiums. Additionally, Mr. Rosenfield discovered that medical malpractice premium volume increased steadily ever since MICRA was passed through 1988. Interestingly, Mr. Rosenfield advised premiums increased in the nation through 1988 and then beginning in 1988 premiums went down in CA by 15%. Losses during that period in CA went down 38%. In other words the estimated compensation that insurance companies have to pay out for medical malpractice laws went down 38% and premiums only went down 15%. Around the U.S. losses were down 13%, yet premiums went up 2% since 1988. Mr. Rosenfield concluded that the insurance companies are still benefiting greatly and enormously despite proposition 103's more stringent prior approval regulatory process. In 1993 for every dollar that insurance companies took in premiums from physicians and hospitals for medical malpractice, they only paid out 38 cents in claims and the rest was pocketed. In explaining what these figures mean with respect to insurance premiums and the cost of health care in the nation. In other words did MICRA lower the cost of health care in CA and NV and Mr. Rosenfield stated the answer is no. In 1993 in CA the premiums that physicians pay for malpractice liability insurance were .48% of 1% of health care costs in CA. In 1993 in the U.S. they were .59% of 1% of health care costs in the nation. In other words the amount of premiums physicians and hospitals pay for medical malpractice liability insurance coverage is totally an insignificant amount compared to the cost of health care in CA or the nation. Mr. Rosenfield stated all premiums that physicians pay could be eliminated and still have no impact on health care costs in CA or the nation. On the bottom line on insurance premiums Mr. Rosenfield advised MICRA has not reduced the premiums. The CA experience indicates that the insurance companies are benefitting handsomely from the ability not to have to pay full compensation claims because of MICRA. Mr. Rosenfield stressed there is no effect on health care costs. The practical effect on doctors according to "Medical Economics" magazine the amount physicians pay for medical malpractice premiums are 2.9% of their gross income and it is tax deductible which should be compared to the amount physicians pay to maintain their automobiles for just 2.4%. Finally, Mr. Rosenfield briefly spoke about the human side of medical malpractice and stated he did not believe the committee could effectively consider A.B. 520 if it is not understood that 180,000 Americans are killed every year in hospitals alone by medical negligence which are more than all the deaths in the U.S. due to homicides, suicides, auto accidents, and HIV combined. When discussing the malpractice crisis, Mr. Rosenfield submitted to the committee to not look at malpractice litigation because there is no crisis there. Mr. Rosenfield maintained the crisis is in the amount of medical malpractice as the experts report that limiting access to the courts will increase the amount of malpractice by reducing the deterrent effect of the law instead should consider reforms that prohibit, punish, and prevent medical malpractice. Mr. Goldwater disclosed he worked for a group of doctors and they would be affected by this and he would not be voting. Yesterday Mr. Goldwater recalled doctors who testified because of malpractice premiums particularly in specialties that people are no longer going into those specialities thereby reducing the access and asked if the access question was addressed in Mr. Rosenfield's book. Mr. Rosenfield advised it was not and stated there is no empirical evidence of any problem with access effect. Mr. Rosenfield stated more physicians go to states where there are no caps on people's right to sue than to stated where there are caps. Mr. Rosenfield cautioned against these anecdotal statements that are by empirical information. Ms. Steel asked how the insurance companies would exist if the doctors did not pay any premiums. Mr. Rosenfield stated he was posing a worst case scenario in other words if all liability were eliminated, thus physicians would not need to buy insurance and malpractice coverage. It still would not make a dent in health care costs in CA and the nation. Mr. Rosenfield pointed out from yesterday's handout which shows the average premiums from physicians around the country and noted FL with the highest premiums has caps on damages as well as MI, AL, MD, WVA and a number of states higher than CA. Mr. Sandoval reminded Mr. Rosenfield he would provide some suggestions. Mr. Rosenfield was of the opinion the epidemic is not malpractice litigation and there is no evidence of any litigation problem from malpractice. Since 180,000 Americans are killed a year in hospitals due to medical malpractice, he suggested to target malpractice. Mr. Rosenfield cautioned with the advent of managed care, it will be even more pressure to lower quality of care which will lead to malpractice. He recommended tougher regulations of the physicians by the medical authorities in the state, full disclosure to the consumer and an accessible data on physicians who have been convicted of crimes or found liable for malpractice in their communities, stronger loss prevention practice guidelines, periodic re-certifications of physicians, conflict of interest between physicians, hospitals and insurance companies where there is a financial reason to limit the amount of care that is provided as trend of HMO's, regulate insurance rates with more resources of the insurance department, stringent review of the diversion of reserves and surplus to manipulate the appearance of losses when in fact they do not exist, and better rating system by insurers for the classification of specialists so that rather than having very few specialist with high rates, their rates could be spread out among a greater pool of all physicians in the state. Mr. Sandoval inquired if practice guidelines were treatment protocols. Mr. Rosenfield replied they should not be used for litigation purposes but rather to give guidance to physicians on what appropriate measures should be taken to treat a patient. Mr. Carpenter took exception to the statement that if a physician has been charged with a malpractice or had a judgment against him. He noted a case brought against his family doctor in Elko and he stated he would trust his life to him any time. Just because someone has made a mistake, he should be stigmatized for life, Mr. Carpenter took exception. Mr. Rosenfield stated it was a very important point and it was considered greatly. Given the lack of information for the consumer, Mr. Rosenfield said it was better to air on the side of full disclosure and let the physician explain what happened. Mr. Carpenter remarked Mr. Rosenfield was on the wrong track. Ms. Cooney advised of three individuals who would like to testify about their experience with medical negligence: Jeffrey White, Esq., medical malpractice attorney, testified his firm represented the largest medical practice insurer in Nevada and their policy was called the "scorched earth policy," or take no prisoners. As defense attorneys they would throw as many motions, time, and money necessary in order to defeat a claim whether it was legitimate or not. In this manner they could beat down just about any plaintiff's attorney in Reno who would dare to file a malpractice suit. Mr. White stated doing the malpractice work in Reno as a plaintiff's attorney in a small firm, the malpractice business is probably the least profitable in terms of what lawyers can accomplish, but also the most gratifying in helping patients. Mr. White stressed focus should be on the victim of malpractice. Mr. White affirmed the panel has worked successfully to discourage frivolous lawsuits. Mr. White stated he is opposed to A.B. 520 and also on the products liability context and asked the committee to let the jury system work. Ms. Linda Small of Las Vegas testified about her experience with medical negligence, attached as (Exhibit E). Mr. Joe Guasch, 53 years of age, testified his wife died June 30, 1994, who was 41 years of age at the time of her death, also the mother of a 7 year old daughter. Mr. Guasch believed her death could have been avoided and was concerned about placing a cap in these cases. Mr. Guasch advised without the help of an attorney he was without access to find out what happened. The death has affected his family financially and emotionally. Mr. Guasch advised insurance companies have a self serving agenda and strongly urged the committee not to pass A.B. 520. Mr. Ray Robinson of Las Vegas was accompanied by his counsel, Steve Burris, Esq. Mr. Robinson suffered a back injury and received surgery in California where the doctor took out the wrong disc. Since MICRA law was passed attorneys are reluctant to pursue these type of cases. Mr. Robinson informed he is the father of two children and emphasized A.B. 520 will destroy families. Ms. Thelma Clark of Las Vegas testified about her experience with medical negligence, attached as (Exhibit F). Ms. Donna Wright of Las Vegas testified about her experience with medical negligence, attached as (Exhibit G). Mr. Buddy Garfinkle, former Senator and retired school teacher, testified he went in for a simple root canal and proper precautions were not taken. As a result the root canal bacteria filtered into the aorta valve requiring open heart surgery. Mr. Garfinkle has a 2 year old and a 6 year old child. Mr. Garfinkle urged the committee to leave the door open so people can have some recourse. Ms. Cooney urged the committee to vote against A.B. 520 and provided copies of over 900 letters received from Nevada citizens which are on file at the Legislative Counsel Bureau, Research Library, a compilation of the names and addresses are attached as (Exhibit H). There being no further business to come before the committee, Chairman Anderson adjourned the meeting at 11:01 a.m. RESPECTFULLY SUBMITTED: Patty Hicks, Committee Secretary APPROVED BY: Assemblyman Bernie Anderson, Chairman Assemblyman David E. Humke, Chairman Assembly Committee on Judiciary May 26, 1995 Page