Eye of the Storm

Access to Care at Stake in Tough, Budget-Driven Session

Texas Medicine Logo(1)

Cover Story -- February 2003  

By  Ken Ortolon
Senior Editor  

Texas Medical Association leaders have warned for months that several political, fiscal, and health care realities would converge in 2003 to create the "perfect storm" for lawmakers and organized medicine. That storm made landfall in Austin last month, and it appears that everyone will get wet.

The 78th Texas Legislature convened Jan. 14. From the opening gavel, lawmakers faced storm surges from skyrocketing medical liability premiums, continuing managed care payment hassles for physicians, and a multibillion-dollar budget deficit driven, in part, by rising Medicaid costs.

How the legislature deals with these issues will have a dramatic impact on all patients' access to care and on the strength of the health care delivery safety net for the poor and underserved.

On the one hand, says Waco internist Joe H. Cunningham, MD, chair of TMA's Council on Legislation, Texas physicians have a "historic opportunity" to push through meaningful liability reforms to rein in premium increases. Chances for passing a liability package received a "massive injection" of political steroids from the Republican victories in the November general election, he says.

On the other hand, that same Republican sweep brought into power legislators with a conservative bent that may make preserving current Medicaid funding levels problematic. A reduction in state Medicaid funding could cost Texas matching federal money, he says. Dr. Cunningham adds that succeeding on both liability reform and Medicaid funding will be critical to maintaining the economic viability of medical practices across the state.

Medical Liability  

Without a doubt, medical liability is the No. 1 concern of physicians in the current legislative session. Over the past few years, Texas physicians have experienced the shock of double, even triple, digit increases in their liability insurance premiums. Facing either unaffordable or simply unavailable liability coverage, some doctors are severely restricting their practices and leaving the lawsuit war zones.

"We are in a true state of crisis when it comes to medical malpractice insurance in this state," said Dr. Cunningham. "Our physicians are suffering ever-increasing premiums that are to the point where they just can't afford them anymore and it is affecting access to care in this state."

The good news is that Gov. Rick Perry made tort reform a centerpiece of his reelection bid and has already declared medical liability reform an emergency issue, meaning lawmakers can act on a reform package early in the session.

Speaking to a group of medical office managers in November, Mike McKinney, MD, who was the governor's chief of staff at the time, said medical liability reform was at the top of Governor Perry's priority list for 2003.

"Medical liability will be the governor's No. 1 issue," Dr. McKinney said. "That will be declared an emergency."

And the election of Republican majorities in both the House and Senate greatly improves chances of passage.

"The net effect for TMA is an enhanced momentum for tort reform," said Fort Worth surgeon Robert W. Sloane Jr., MD, chair of the TMA Committee on Professional Liability. "But our overarching concern is with the quality of the product. It has to meet two tests: Will it reduce medical losses and, therefore, reduce premium escalation over time? And, is it judicially sustainable? And that is no easy feat."

The centerpiece of TMA's liability reform package is a $250,000 cap on noneconomic damages that a jury may award a plaintiff in a liability case. Such a cap is the key provision of the Medical Injury Compensation Reform Act that has kept liability premiums stable in California since 1975.

TMA also supports limits on plaintiff's attorneys' contingency fees, periodic payments of judgments for future medical costs and economic damages, a collateral source rule to prevent plaintiffs from "double dipping" on damages, and removing loopholes from the state's expert witness requirements and investigating ways to prevent repeat spurious expert testimony.

Sen. Jane Nelson (R-Flower Mound), who chaired a special committee that looked at medical liability and prompt pay issues during the interim period between the 2001 and current legislative sessions, filed Senate Bill 12, which includes most of those provisions.

"My goal is to ensure that patients are not only safe but have access to the quality health care they need," Senator Nelson said. "Currently, patients are finding themselves abandoned because their health care provider has been forced out of business due to the exploding cost of liability insurance. Unlimited judgments result in unlimited premiums. Unlimited premiums result in restricted access to patient care. We need patients to have more care options, and our health care dollars need to be directed to patient care instead of bleeding into the legal system to the tune of $1 million a day."

Damage caps were enacted in Texas in 1977 but were ruled unconstitutional by the Texas Supreme Court in May 1988. Drafting a cap provision that will pass constitutional muster will be the biggest challenge facing tort reformers.

The Texas Alliance for Patient Access (TAPA), a broad-based coalition of health care professionals, consumer groups, professional associations, and insurance carriers working to address patient access to health care through medical liability reform, believes the constitutional question could be overcome by requiring physicians who want to benefit from the cap to carry higher levels of liability coverage.

TAPA has recommended a $250,000 cap on noneconomic and punitive damages that would apply to physicians and other health care professionals who show proof of financial responsibility. Under the TAPA proposal, physicians initially would have to carry liability coverage of $200,000 per incident and $600,000 total per year. That would rise to $500,000 per incident and $1.5 million per year in 2007. Hospitals initially would be required to carry coverage of $500,000 per incident and $1.5 million per year. That would increase to $1 million/$3 million in 2007.

But Dr. McKinney, who recently was named vice chancellor for health affairs for The University of Texas System, warns that the trade-off of higher coverage levels for a damage cap could backfire. "You don't want an unconstitutional cap but you don't want to increase the likelihood of lawsuits," he said. "If you create a lottery and start raising the jackpot, it will have exactly the opposite impact that you intended to have." 

Prompt Pay  

A second issue likely to be declared an emergency by the governor is prompt payment of physicians' claims to insurance companies. Despite veto of prompt pay legislation in 2001, Dr. McKinney says the governor remains committed to resolving the prompt pay issue.

Dr. Cunningham says that is critical because little has changed in health plans' payment practices despite millions of dollars in fines and restitution ordered by the Texas insurance commissioner.

"We continue to experience problems in managed care in the areas of prompt payment, contracting issues, and standardized credentialing," Dr. Cunningham said. "These are not problems that have gone away."

TMA supports the prompt pay recommendations produced by Senator Nelson's interim committee. That committee produced 18 recommendations that, among other things, would:

  • Require TDI to implement rules defining and standardizing the elements of information that may be required for payment of a clean claim and the forms through which those elements are conveyed;
  • Require a carrier, at a physician's request, to disclose its coding and bundling policies and methodologies and fee schedules in sufficient detail to allow the physician to submit a clean claim and determine if he or she is being compensated according to the contract;
  • Require carriers' and physicians' payment processes to use common coding procedures recognized in federal standardization guidelines;
  • Establish effective penalties for failure to comply with prompt pay statutes and rules, based on billed charges, that reflect the degree of violation; and
  • Clarify the authority of the attorney general and TDI regarding enforcement of those statutes and rules.

Senator Nelson has pledged to sponsor prompt payment legislation this year and was expected to file the bill early in the session.

Governor Perry has said he would sign prompt pay legislation if it does not include language prohibiting health plans from forcing physicians into binding arbitration. That provision in House Bill 1862 prompted his veto in 2001. Dallas orthopedic surgeon John Gill, MD, who led Physicians for Perry during the just-completed campaign, says he believes the governor will keep that pledge despite the fact that he "got crossways" with TMA during the last session.

"I think the governor has a good relationship and good feelings toward the doctors of Texas," said Dr. Gill, who also is a TEXPAC member. "He made it very clear [the arbitration language] was his major objection to the prompt pay bill. I believe he will sign a prompt pay bill minus that provision."

Dr. Gill says he and other physicians who supported the governor are working to reestablish the relationship between the governor and TMA. "I think both parties want that. I think we can be very helpful to one another in this session, especially on medical malpractice and tort reform. We're perfectly aligned on those issues. So I think there is a great complement there and a great opportunity for common ground."

TMA actually will seek a package of managed care reforms that includes not only prompt pay legislation similar to that vetoed in 2001, but also bills to require standardized managed care contracts and to strengthen the current physician negotiation law. The standardized contract bill would require the Texas Department of Insurance (TDI) to convene a work group with representation from physicians, consumers, and health plans to develop the contents and criteria for a standardized contract. A standardized contract bill cleared the Senate in 2001 but failed to make it to the floor for a House vote on the final day of the session.

The physician negotiation bill would extend the current law for four more years and provide confidentiality protections for certain business and financial information that physicians give the state attorney general as part of their application to negotiate.


While the outlook appears optimistic for medical liability and prompt payment reform, the picture is not so bright for the third front of the storm. A budget deficit that will be at least $5 billion and could go as high as $12 billion by some estimates is going to put tremendous pressure on lawmakers to cut spending. Medicaid almost certainly will be one of the first places they look for savings.

Dr. McKinney says there is almost no chance that lawmakers will approve any tax increase, at least not during the regular session. So the deficit will have to be made up from current revenues. "For the first time since 1876, both houses and the governor are controlled by the Republican Party. They won't [raise taxes] during the regular session."

The weakened economy produced higher-than-expected Medicaid caseloads in the first year of the current biennium. That, along with increased costs of drugs and technology, has produced significant cost overruns in the Medicaid program that are contributing to the deficit. Texas Health and Human Services Commission officials have asked for $2.7 billion in additional Medicaid funding for the next biennium. Some $450 million of that would cover current cost overruns.

Dr. Cunningham says the budget woes definitely pose a substantial risk that improvements made in the program in 2001 (such as simplification of the enrollment process for children's Medicaid) could be rolled back or that physician fees could be cut.

"Medicaid is highly vulnerable," he said. "We're at an intersection: We have a dramatic budget shortfall and a very deep 'no new taxes' commitment on the part of a lot of new legislators. I hesitate to predict what we can expect, but I do know that unless physicians take the time to help every single member of the legislature understand what Medicaid means to their community and to the viability of their medical practice, then we may be sadly disappointed at the end of the session."

El Paso nephrologist Manny Alvarez, MD, chair of the Border Health Caucus, says defending Medicaid funding will be critical, particularly for border, rural, and inner-city patients and physicians.

"We certainly need Medicaid reimbursements to be addressed during this legislative session so that we either maintain the same amount or give a little bit more to the pediatricians, those who need it the most," Dr. Alvarez said.

San Antonio otolaryngologist Jesse Moss Jr., MD, president of the Lone Star Medical Association, which represents African-American physicians, says the combination of low Medicaid reimbursement with high liability premiums and insurers' continuing no-pay/slow-pay practices are seriously impacting border and inner-city doctors' ability to keep their doors open.

"We now have physicians mortgaging their homes to pay for the liability increase," he said. "We have people taking money out of their retirement accounts to pay their overhead to keep going."

Dr. Alvarez and McAllen gastroenterologist Carlos Cardenas, MD, also a member of the Border Health Caucus, say their area must have both Medicaid improvements and medical liability reform if their practices are to remain viable. "This isn't rhetoric," Dr. Cardenas said. "For this community to remain viable, we've got to have both. We've got to at least hold the line on Medicaid and we've got to have tort reform."

Dr. Cunningham says TMA understands the budget situation and will put forth proposals to help hold the line on Medicaid spending. In a report to the Council on Socioeconomics and the Council on Legislation, the TMA Ad Hoc Committee on Medicaid recommended that the legislature approve the appointment of a Select Committee on Medicaid to develop recommendations to reengineer the program to achieve meaningful cost savings and improve physician and patient satisfaction with the program. The select committee would be composed of lawmakers, physicians, nurses, pharmacists, hospitals, health plans, consumers, and other stakeholders.

The ad hoc committee also recommended creating a preferred drug list within the Medicaid Vendor Drug Program for certain classes of drugs. A committee of clinicians including physicians and pharmacists would look at the efficacy of drugs in certain classes and exclude more expensive drugs if they do not produce better results. Some classes of new drugs that clearly produce better results -- such as behavioral health, cancer, and HIV/AIDS medications -- would not be subject to the preferred drug list. Physicians' use of nonpreferred drugs would not necessarily entail prior approval.

The ad hoc committee also recommends expanding primary care case management to border and rural counties not covered by Medicaid managed care; declaring a moratorium on any additional Medicaid health maintenance organization rollouts, except at local option; and protecting children's Medicaid simplification, which has increased the number of poor children insured through the program.

Best of the Rest  

While liability, prompt pay, and Medicaid top TMA's agenda, they are far from the only issues the association is advocating during the session. Typically, hundreds of health-related bills are filed each session, and TMA physician leaders and lobby staff track each and every one. Also, association priorities extend to numerous other policy areas, including public health, medical education, and allied health.

Among TMA's top priorities in these areas this year is legislation to improve childhood immunization rates. TMA, along with the Texas Pediatric Society and other physician groups, is supporting bills already filed by Sen. Judith Zaffirini (D-Laredo) that would address several issues related to immunizations. That legislative package would improve the state's immunization tracking system, improve education efforts for physicians and parents regarding immunizations, require all state-regulated and Employee Retirement Income Security Act health plans to cover vaccines recommended by the Advisory Committee on Immunization Practices, increase physician education and participation in the Vaccines for Children Program, address vaccine supply shortages, and examine the feasibility of a universal vaccine purchase plan.

On scope-of-practice issues, TMA is working collaboratively with nurse practitioners and physician assistants on legislation to allow those professionals to prescribe limited supplies of some controlled substances under delegation by a physician and to reduce the differential in Medicaid payments between physicians and nurses. Dr. Cunningham says the groups are close to an agreement on those issues.

TMA remains committed, however, to defeating legislation to grant prescriptive authority to psychologists. (See " Rx Battle," December 2002 Texas Medicine.)

TMA also may seek remedial legislation regarding the workers' compensation medical fee guidelines, depending on the outcome of a lawsuit now pending against the Texas Workers' Compensation Commission regarding its decision to use the baseline Medicare conversion factor in setting workers' compensation fees.

Another issue that almost certainly will surface during the session is competency testing for physicians. The Texas State Board of Medical Examiners (TSBME) has asked lawmakers to give it authority to require physicians to periodically obtain recertification through their specialty boards or pass a basic competency exam every 10 years to retain their licenses. TMA has not taken an official position on the proposal but has raised concerns that the competency exam is an untried concept that may not screen out incompetent doctors.

Dr. Cunningham says TMA is examining alternatives to accomplish that goal and will work with the TSBME. "We are firmly committed to a strong and effective Board of Medical Examiners. We want to weed out the bad doctors, help the impaired physicians, and not hassle the good physicians who are doing a good job. That is our firm commitment."

Finally, TMA will work to make sure physicians are not included in any tax bill that might surface, however unlikely. "We don't anticipate a tax bill but we would vigorously oppose including physicians in a tax bill," said Dr. Cunningham. "Given the fact that physicians' costs are going up and their revenue streams are declining, these small businessmen and women can't handle any type of a tax increase."

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

February 2003 Texas Medicine Contents
Texas Medicine Back Issues