Louisiana doctors, dentists and hospitals will see their medical malpractice surcharges drop by double digits in January, the first time the Patient's Compensation Fund has reduced those rates.

The rate cut resulted from legislation passed in the most recent session that removed the fund from the state insurance commissioner's oversight. The Louisiana Hospital Association led the push for the new law.

Under the rates approved by the PCF oversight board, physicians will see an average reduction of 15.8 percent, hospitals 11.2 percent and dentists, 16.5 percent, said Clark R. Cossé III, who chairs the PCF Oversight Board and serves as chief governmental officer and legal counsel for the Louisiana Hospital Association.

Certified registered nurse anesthetists will see rates drop by 18.6 percent. Nursing homes will see a 1.4 percent reduction.

Overall, healthcare providers will save $35 million as a result of the board's historic vote on Sept. 2, Cossé said.

"We're very happy to be able to provide relief. We would have provided some relief last year if the commissioner would have allowed it," Cossé said.

The PCF board had proposed reducing rates by as much as 17 percent for doctors and 15 percent for hospitals in 2010. But the board bowed to pressure from Insurance Commissioner Jim Donelon and instead raised rates by 2.8 percent overall.

Cossé said with the rate reduction, the PCF expects to collect around $145 million from the surcharge, roughly $20 million more than it will pay for medical malpractice claims.

"We will be more than solvent, and we will be able to provide our services to the healthcare providers at a more affordable rate this year," Cossé said.

Louisiana's med-mal rates will compare favorably to its neighbors, and competitors, Texas and Mississippi, Cossé said. But Louisiana can't catch Arkansas, whose rates are still far lower.

Cossé said Arkansas apparently has a different legal climate than Louisiana, where compassionate judges and juries have made awards which the PCF thinks are incorrect.

Still, the PCF board is pleased to be making the changes, he said.

The surcharge rate cuts will mean savings of around $500 a year for primary care physicians, Cossé said. But higher-risk practices will see bigger savings.

For example, an obstetrician/gynecologist will see a cut of $7,000 to $8,000, while a neurosurgeon might see a cut of $11,000, he said.

Louisiana has a two-tier system of medical malpractice coverage. The Patient's Compensation Fund accounts for nearly half of the total. The remainder is the cost of private insurance for the first $100,000 in liability.

The PCF board and Donelon had argued over whether the fund should be considered an insurance company. Donelon's position was that it was, and the fund needed to retire an unfunded liability of $400 million, the amount the fund owes and will owe in claims over and above the money it has on hand and would take in at its current rates.

Donelon had asked the PCF board to increase rates by 5 percent and commit to a seven-year plan to amortize the unfunded liability.
PCF board members said the $621 million the fund had was plenty and that forcing the fund to reserve more money would unnecessarily raise rates for providers.

Both sides offered bills to clear up the dispute during the most recent legislative session. The PCF board version, authored by Sen. Ed Murray, D-New Orleans, and Rep. Fred Mills, D-Parks, passed with only one vote in opposition.

Cossé said the PCF is still socking away money for the future, just not at the rate the commissioner wanted.

During the session, Cossé testified that stockpiling cash was driving rates skyward and destroying the original purpose of the Medical Malpractice Act of 1975.

The act was designed to provide an affordable, solvent and ready market for medical malpractice coverage, he said.

Cossé's research showed that Dr. John Cooksey of Monroe had brought a copy of the Indiana law to Louisiana, and that the Louisiana Legislature adopted it in near-identical form.

Although the laws were almost entirely the same, the insurance commissioner's regulation was resulting in rate increases the PCF board thought were unneeded.

In fact, Cossé said, Louisiana's PCF had three times as much money in the treasury as Indiana held in reserve, $621 million compared to $194 million.

The key lesson learned from Indiana's experience is to replace the dollars you pay out each year plus a little bit extra to cover inflation and rising expenses, Cossé said.

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