Governor Perry Reflects on Passage of Liability Reform

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Legislative Affairs Feature -- December 2003

By  Ken Ortolon
Senior Editor

Sweeping medical liability reforms enacted by the Texas Legislature earlier this year already are paying dividends for physicians and their patients. The state's largest medical liability insurance company, the Texas Medical Liability Trust, has announced it is cutting premiums on all policies as much as 12 percent.

The legislation and Proposition 12, the constitutional amendment that ensures that caps on noneconomic damages are not overturned in the courts, were enacted under the leadership of Lt. Gov. David Dewhurst and House Speaker Tom Craddick and a host of bipartisan cosponsors in the House and Senate.

But Gov. Rick Perry was the most visible advocate for Proposition 12 during the hotly contested constitutional amendment election that culminated in victory on Sept. 13.

State Rep. Jaime Capelo (D-Corpus Christi), a joint author of the reforms who was instrumental in pushing the bill through the House, says Governor Perry's decision to designate medical liability reform as an emergency issue was crucial to its success.

"The importance of Governor Perry's advocacy on such an important and highly controversial issue cannot be exaggerated," Representative Capelo said. "Declaring medical liability reform an emergency issue gave a huge head start in the battle to enact these vital reforms."

Texas Medicine -- along with Texas Medical Association President Charles W. Bailey Jr., MD, of Houston; Council on Communication Chair Vijay Koli, MD, of San Antonio; and Austin physicians Catherine Scholl, MD, and Cynthia Mingea, MD -- recently talked with the governor about how the medical liability victory was achieved and what challenges lay ahead for medicine in the next legislative session.

Texas Medicine: Medical liability reform was a key priority of physicians in the 78th legislative session, and you promised to make it an emergency issue during the 2002 election cycle. What brought you to the conclusion that liability reforms should be elevated to emergency status, and what is the significance of the designation in the legislative process? 

Governor Perry: Over the past three years, as I traveled the state, I asked doctors and other health care professionals what their main concerns are and what the state might be able to do to help. I heard stories about doctors whose liability insurance rose 400 percent, although they had never had a malpractice complaint, of others who were forced to give up their practices or their high-risk specialties because of insurance costs. I heard stories of women who had no access to an OB-Gyn because they lived in one of the many Texas counties without such a specialist, of families in the Rio Grande Valley and elsewhere who had to travel long distances to be treated by a neurosurgeon, and stories of other Texans across the state whose access to medical care was hampered as doctors were hanging up their stethoscopes because of skyrocketing insurance premiums. To me, it was clear Texas was facing a crisis in access to health care.

Between 2001 and 2002, 6,500 doctors saw their liability policies canceled -- in many cases because of the high-risk nature of the procedures they perform. We have seen neurosurgeons leave hospitals in medically underserved communities, and women in three out of five Texas counties do not have access to an obstetrician in their county. In 2001, medical liability rate increases were three times larger in states without caps than in states with caps. It was clear that solving this problem was a top priority. 

Texas Medicine: Why did you feel so strongly that the $250,000 noneconomic damage cap should be placed before voters as a constitutional amendment rather than just passing a bill and having a statute on the books?

Governor Perry: By passing a constitutional amendment we eliminated years of litigation we undoubtedly would have faced from trial lawyers challenging the legislature's ability to set caps. Our doctors need relief from spiraling malpractice insurance premiums as soon as possible. Texans cannot afford to have any more physicians leave the profession or leave the state because they cannot afford liability insurance. As a result, doctors are getting immediate relief because the Texas Medical Liability Trust has already announced a 12-percent rate reduction.

Texas Medicine: The decision to hold the constitutional amendment election, which included Proposition 12, in September drew criticism. Why did you support holding the election then instead of the more traditional month of November?

Governor Perry: I believed that the sooner we could address this health crisis the better. We needed to end the lawsuit lottery mentality and act expeditiously to prevent any more doctors from being driven from the practice of medicine.

There have been several occasions when constitutional elections were held in September. Sept. 13 was the first uniform election date on which we could hold the referendum and therefore was the earliest possible time we could have provided relief to our state's health care providers. 

Texas Medicine: Early in the legislative session, your office insisted on combining medical liability and general business tort reform into one bill. That was a controversial issue with certain members of the legislature and in the press. Some physicians were uncomfortable with the decision as well. What went into your thinking to support such a move?

Governor Perry: The same lawsuit lottery mentality that had overtaken the practice of medicine has also impacted businesses all across the state. Frivolous lawsuits are a job killer, and all Texans end up paying many times over because of frivolous lawsuits. When a computer company pays a $2 billion settlement in a frivolous lawsuit in Beaumont, we all pay higher prices for computers. And we all pay higher taxes to fund services for the workers who get laid off when a company scales back its operations in Texas -- or doesn't come here at all -- because the company has paid an excessive judgment or an excessive settlement in fear of a big judgment.

I believed it was important to combine both issues because we knew that trial lawyers would spend millions of dollars to defeat Proposition 12; doctors and health care professionals alone could not fight the battle. It took the combined efforts of doctors, hospitals, and the business community to pass historic legislation that has already been heralded around the country.

Texas Medicine: Proposition 12 included the three additional words, "any other actions." With passage of Proposition 12, the state constitution permits future legislatures to cap the noneconomic damages in other than medical malpractice cases. How does the potential for additional caps on noneconomic damages benefit physician practices?

Governor Perry: The business community saw this aspect of the constitutional amendment as important to assuring that relief was in sight for them in addressing the frivolous lawsuits they fight.

Texas Medicine: Despite several attempts to compromise on damage caps at levels substantially higher than $250,000 -- including efforts by business groups -- you staked out early ground on the issue and held firm on a $250,000 noneconomic damage cap. Why were you so convinced and inflexible on this issue?

Governor Perry: The experience California had in setting caps at $250,000 was a good guideline for Texas. Other states tried higher caps, none of which created the savings that bring lower malpractice premiums. We challenged the cap's opponents to show proof that another system would work, and they couldn't do it. The problem of doctors being priced out of the practice of medicine is serious. Our teaching hospitals need to attract world-class physicians, and we had already seen at least one instance in which a Texas teaching hospital lost the physician it had courted when the entire salary offered was the differential in medical liability insurance rates.

Texas Medicine: You felt strongly about strengthening the Texas State Board of Medical Examiners (TSBME) as part of solving the liability crisis. Can you tell us about the policy achievements and the tactical decision to enact the TSBME reform bill in advance of the tort reform debate?

Governor Perry: Texans first and foremost deserve quality care, and they need to know that when they visit a physician they can trust that doctor's medical advice. It is important that the Board of Medical Examiners be funded, staffed, and authorized to protect patients and doctors.

Senate Bill 104 redesigned the quality standards and enforcement mechanisms at the Board of Medical Examiners. House Bill 1614 established a program to monitor medical errors so that we can understand whether and how these errors occur and establish practices to prevent errors from happening. We also knew that opponents of tort reform would attempt to mislead the public into thinking that hordes of bad doctors -- rather than an out-of-control legal system -- were the real reason for our skyrocketing malpractice premiums.

Enhancing TSBME enforcement capabilities was one element of our combined approach to solving our health care access crisis.

Texas Medicine: Physicians were gratified by the support and cooperation of the business community, including the Texas Association of Business and local chambers, on the medical tort reform legislation. Do you see this as a template for possible further cooperation among physicians and the business community on other items of common interest?

Governor Perry: Physicians, the business community -- indeed all Texans -- will benefit from a stronger Texas. It is my goal to continue to work with the medical and business communities to forge alliances on a number of issues that will make Texas better.

Texas Medicine: Economic development and jobs have been a focus of yours. Physicians are vitally interested in a strong and vibrant economy because health insurance is an important factor in gaining timely access to appropriate health care. Can you tell us about your recent efforts to create jobs and to bring more industry to Texas?

Governor Perry: Texas is paving the way for job creation with the state economy moving forward, thanks to the successful efforts in the regular legislative session to balance the budget without taxes, create the Texas Enterprise Fund, and pass historic lawsuit abuse and homeowner reforms.

Texas is better off because we addressed a $10 billion budget challenge without raising taxes. We funded billion-dollar increases for public education and health care. We put a stop to skyrocketing homeowners insurance rates. We addressed the lawsuit abuse that kills jobs and drives doctors out of medicine, and we invested in jobs to grow the economy rather than the size of state government.

Some of our most recent successes are an $800 million Toyota plant in San Antonio that will create 2,000 jobs, a $500 million expansion of the Samsung chip plant in Austin, and Texas Instruments' decision to build a $3 billion research and manufacturing plant in Richardson.

INFONXX, a directory assistance service, announced plans for new San Antonio facilities that will bring thousands of jobs to the area. In addition, global teleservices giant Merkafon Teleperformance decided to build its newest call center in the Rio Grande Valley; T-Mobile opened a Customer Care Center in Mission, employing 600; EchoStar Communications opened a facility in Harlingen, creating 1,000 new jobs; and Hewlett-Packard announced it will transfer 475 jobs to Houston.

These important business decisions are strong signals of a successful business climate that is already working to strengthen our economy and create even more jobs statewide in the future. 

Texas Medicine: Many Texas physicians are concerned about the viability of our Medicaid program. How can we work with your office to develop a health care safety net that is affordable and provides high-quality care to needy Texas?

Governor Perry: I recently asked TMA and the Texas Hospital Association for recommendations for experts to participate on a Medicaid reform workgroup that I have asked my staff to organize. The workgroup will directly review the program and is charged to find innovative ways to improve the efficiency and effectiveness of the Medicaid program. Additionally, during the transition of the health and human services agencies under HB 2292, I will continue to work with Commissioner Albert Hawkins to improve the program. Your suggestions and assistance in the transition process are always welcome.

Texas Medicine: There are more uninsured persons in Texas than in any place in the country. How can the health care community work with business and government to address this problem?

Governor Perry: During the 2003 session, I approached the issue of the uninsured from two perspectives. I worked to make health insurance as affordable as possible by allowing for the sale of flexible health insurance plans. The Department of Insurance is reviewing some of the new plans now, and some carriers have predicted as much as a 14-percent decrease in premium rates. SB 10 and HB 897 will allow employers to share risk and jointly purchase health insurance.

I also successfully urged passage of $10 million in funding to increase the number of federally qualified health centers (FQHCs) in Texas. These centers provide routine and preventive care, primarily to uninsured Texans. These new centers will bring additional federal funds to Texas to help strengthen our health care safety net. The Texas Department of Health has already awarded $3.6 million in incubator grants to help communities across Texas develop FQHCs, and the federal government recently awarded Texas almost $3.9 million for six new health centers in Texas.

Texas Medicine: We were pleased with your appointment of Eduardo Sanchez, MD, as your commissioner of health. What are the major public health initiatives being addressed under your administration?

Governor Perry: Dr. Sanchez has done an excellent job at improving the operations and management of the department. Additionally, he is working to increase our immunization rate and to improve the health of Texans by bringing awareness to and education on the long-term health impact of obesity in children and adults. He also is working hard to ensure that Texas stays a leader in preparedness for any kind of public health emergency.

Texas Medicine: The medical community shares your concern about homeland security, particularly from the threat of bioterrorism. What initiatives have been put in place to address these concerns?

Governor Perry: The Texas Department of Health has received some $144 million in federal homeland security funding to update our capacity to respond to a public health threat, whether it be bioterrorism or a natural occurrence.

TDH launched the Health Alert Network, a secure Internet connection that links the state's health resources and provides information and warnings about bioterrorism and other health issues.

The framework for a state response to a bioterrorism attack has been approved as part of the Governor's Emergency Plan and outlines how TDH will lead the public health response to such an event. Texas cities and counties are writing their plans in coordination with this effort. Training for medical, nursing, and other health professions about bioterrorism is occurring throughout the state. Thousands of professionals have learned about bioterrorism agents and how to work with public health to assure a rapid identification and response to a bioterrorism event.

Additionally, Texas leads the nation in the number of hospital smallpox response team members and public health response team members who have been vaccinated against smallpox this year. The effort will continue next year to ensure that Texas communities have sufficient medical and public health team members protected against smallpox. Our continued efforts in this area will focus on making Texas better prepared to respond to any threat.

Ken Ortolon can be reached at (800) 880-1300, ext. 1392, or (512) 370-1392; or by email at Ken Ortolon.

December 2003 Texas Medicine Contents
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