Paying out-of-pocket: N.M.'s thorny medical malpractice system explained

Dr. Debbie Vigil didn’t plan to retire in 2023.

Born and raised in Santa Fe, Vigil started practicing as an independent OB-GYN in the city in 1989, out of a desire to serve her home state.

“I was committed to the people of New Mexico,” she said. “I’m Hispanic. I speak the language. I know the culture. That was the whole reason I went into medicine.”

But Vigil said her choice to practice in New Mexico came at a cost, specifically the high cost of medical malpractice insurance in the state, which regularly runs OB-GYNs like Vigil more than $100,000 per year in premiums.

For Vigil, that cost ended up being too high.

“To remain as a solo practitioner, independent, paying all of my expenses or my bills, no,” she said.

It didn’t make financial sense, and it didn’t seem like things were going to change.

Vigil retired in July 2023 at age 65, though she estimated she had at least five more years in her.

Nobody is entirely happy with New Mexico’s medical malpractice system. Doctors like Vigil say the high price of malpractice insurance is making it impossible to practice in the state while injured patients endure years of legal battles without ever really being made whole.

This year, lawmakers are proposing a bill to reform medical malpractice in New Mexico. If passed, Senate Bill 176 would make three major alterations to the state’s medical malpractice cases: It would impose a cap on attorneys’ fees, disburse funds for future medical costs through a pay-as-you-go model and reinvest certain damages to improve health care quality and safety.

The bill is sponsored by Sen. Martin Hickey, an Albuquerque Democrat, physician and longtime health care administrator, and backed by nonpartisan think tank Think New Mexico.

“The reason we’re focused on this medical malpractice bill is we hope ... to change the medical malpractice system from a lawyer-centered system to a patient- and safety-centered system,” said Fred Nathan, founder and executive director of Think New Mexico.

He added, “We believe this bill will help New Mexico to retain the doctors we already have and make it easier to attract new ones.”

The proposal won’t go through without a fight. Trial lawyers in particular are hesitant about SB 176’s proposed changes, arguing lawmakers should prioritize public policy solutions — like setting safe staffing requirements, student loan debt repayment programs and changing tax and reimbursement rates on medical services — to prevent medical malpractice from happening in the first place.

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Cid Lopez

“Don’t let it get to the process of the patient being harmed. Let’s stop it at the beginning of this process to prevent the harm itself,” said Cid Lopez, an Albuquerque attorney who specializes in medical malpractice cases and member of the New Mexico Trial Lawyers Association.

Big mistakes by medical providers

Nearly 11 years ago, Ezra Spitzer — an Albuquerque resident about to become the father of twin girls — went to the hospital expecting everything to be fine.

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Ezra Spitzer

Though one of the girls was feet-first in the womb, Spitzer said doctors had assured him and his wife the breech baby could nonetheless be delivered naturally; a cesarean section wouldn’t be necessary.

The first twin was born uneventfully. But after her birth, the doctor spent more than an hour attempting to deliver the couple’s second daughter.

His wife sustained significant injuries, Spitzer said. And after being asphyxiated in the womb, his daughter, Effie, died at just 1 week old.

“That’s what people need to understand: Behind every lawsuit is just horrible, horrible loss that is really impossible to recover from,” Spitzer said.

Medical malpractice cases like the Spitzers’ task the court system with answering impossible questions: How much money would cover the patient’s lost wages? What about future medical expenses? And what is the plaintiff’s loss — loss of enjoyment, loss of an organ, loss of a child — worth?

In New Mexico, some of those answers exist in statute, Lopez explained.

Since the 1970s, the state has had caps on compensatory damages, or monetary compensation equivalent to the harm the plaintiff suffered, like the recovery of lost wages after an injury stops them from working.

No such cap exists in New Mexico for punitive damages, which are intended to serve as punishment for egregious behavior.

When his family left the hospital after his daughters’ birth, Spitzer got hit with a bill totaling close to $250,000.

He hired an attorney and set off toward litigation, in hopes of achieving some kind of guarantee that what happened to his family wouldn’t happen to another.

“No one gives you any assurances that they learned anything from what happened to you, and so you want to seek some sort of justice,” he said.

The case ultimately ended in a settlement — after seven years of dealing with a “terrible” court system, Spitzer said.

“I think just a lot of work is done to kind of drag on a case, to see if they can wear you down as a human, wear you down as a person,” he said.

Big challenges for independent practices

Vigil, the now-retired Santa Fe OB-GYN, never learned to run a business in medical school.

“We’re not taught to run a business; we’re taught to become medical doctors,” she said.

But then she became a doctor — and found herself running a business.

Vigil said she had become business-savvy for her practice to survive. She had to learn to keep track of the practice’s finances, pay her bills and monitor reimbursement rates from private insurers, Medicare and Medicaid.

Medical malpractice insurance — which doctors carry to ensure they’re covered in case of a claim against them — adds to independent practitioners’ overhead costs.

Much like car insurance, the cost of medical malpractice insurance is based on the proverbial driver’s record. Rates are determined by the doctor’s speciality and history of past claims, said Nick Autio, general counsel for the New Mexico Medical Society.

For OB-GYNs, whose jobs regularly involve high levels of risk, malpractice insurance premiums often cost between $105,000 to $115,000 per year, Autio said. That’s compared to policies half as expensive — ranging from $40,000 to $55,000 — in surrounding states.

How much insurance does a doctor need? To qualify under New Mexico’s Medical Malpractice Act, health care providers must have insurance that covers up to $250,000, Autio said. That means, in case a provider is sued for medical malpractice, their insurance would cover the first $250,000 in damages.

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Christian Myers

The majority of New Mexico doctors also participate in what’s known as the “patient’s compensation fund” by paying annual surcharges. That fund is now exclusively financed by providers’ surcharges, though past have required an additional infusion from the Legislature to true up deficits, said Christian Myers, chief actuary at the New Mexico Office of Superintendent of Insurance.

For participating doctors, the patient’s compensation fund will cover the next chunk of any medical malpractice settlement or jury award — from $250,000 to the legal cap on compensatory damages, which is now close to $900,000.

Notably, though damages for pain and suffering and economic recovery are capped at just under $900,000, the patient’s compensation fund also covers unlimited future medical expenses — like the cost of additional treatment or equipment — for injured patients.

Independent physicians are on the hook for damages beyond the patient compensation fund, including uncapped punitive damages.

As a result, Autio said, “What happens in these cases is, pretty much in any malpractice complaint we see nowadays, there is a request for punitive damages.”

All of that means doctors are often living in fear of the fallout from what Autio called “nuclear verdicts,” or massive jury awards of punitive damages.

“They have this threat of uncapped punitive damages hanging over them — in other words, a threat that their entire livelihood can be taken,” Autio said.

But the cost of medical malpractice insurance and the threat of paying punitive damages through the nose aren’t the only financial challenges independent practitioners face in trying to keep their businesses afloat.

New Mexico charges gross receipts tax on medical services — a cost providers can’t pass on to their patients and isn’t covered by insurance, Vigil noted. The tax, Autio said, requires providers eat a nearly 5% to nearly 9% cost, in addition to discouraging new providers to come to the state.

And lastly, there is the issue of low Medicaid reimbursement rates — which pay health care providers back for the care they offer. That particularly stings in a state where nearly half the population is covered by Medicaid, according to a 2023 Legislative Finance Committee report.

Though the Legislature has made strides in recent years toward increasing the state’s Medicaid reimbursement rate, Autio said, “it’s just still not enough” because of New Mexico’s large population of Medicaid recipients.

“Practices are able to keep their doors open now because of the commercial pay insurance patients that come into their practices, but sustaining a practice just on Medicaid reimbursements now is virtually impossible,” he said.

For Vigil — who had no malpractice claims against her as a doctor — running her business was the “hard part” of practicing medicine.

“Seeing patients, for me, is a joy, and it’s easy. I love seeing patients,” she said. “If I could see patients and not worry about the business side, I definitely would still be working.”

Big changes proposed by lawmakers

Senate Bill 176 is about “rebalancing” New Mexico’s medical malpractice system, said Hickey, the Albuquerque state senator; it’s about putting patients, attorneys and doctors on more equal footing.

“Let me be very clear that malpractice [cases] and trial attorneys are very necessary to the function of the system,” Hickey said in an interview. “They’re kind of the guardrails, and they always have been.”

The bill itself does three things.

First, it would cap attorneys’ fees, allowing lawyers to take at most a quarter of their client’s settlement money or a third of their client’s jury award.

“We think that’s fair to the lawyers and much more fair to patients,” said Nathan, of Think New Mexico.

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Fred Nathan

Second, it would require payments from the patient’s compensation fund to be made as medical expenses are incurred, so injured patients with lingering medical needs as a result of malpractice would send in their medical bills to be reimbursed.

The argument behind that change, Nathan said, is it will ensure their medical bills are paid — whether or not they exceed actuarial estimates on how long they’ll live.

And finally, SB 176 would siphon off 75% of any punitive damages to finance a “patient safety improvement fund,” a pot of money intended to preempt medical malpractice through reductions in staff ratios, enhanced training, modernized equipment and other uses. The remaining 25% of punitive damages would still go to the patient.

The three changes, Nathan argued, would drive down medical malpractice insurance premiums by decreasing potential attorneys’ fees, which in turn would result in fewer cases and fewer payouts.

Hickey likened New Mexico’s current medical malpractice system to trying to buy property insurance in the middle of a hurricane zone — another form of insurance that’s growing increasingly hard to find in certain areas and prohibitively expensive.

“It’s like in hurricanes: If you’re paying out so much money, you’re going to have to charge more or just stop insuring,” Hickey said.

That’s a concern, too, Nathan said: What if medical malpractice insurance providers simply leave New Mexico, driven out by a high rate of payouts?

The New Mexico Office of Superintendent of Insurance doesn’t anticipate that’ll happen, Myers said. He said he has “not been concerned” companies will stop offering medical malpractice insurance in the state.

“Yes, it’s painful that rates are increasing and doctors are having to pay more, but I think companies are getting the rate they need to make an adequate return,” Myers said.

Medical malpractice attorney Lopez argued, however, that the changes proposed in SB 176 don’t get at the “real solutions” to New Mexico’s shortage of doctors.

To Lopez, examples of real solutions include crafting policy requiring safe staffing levels or helping out providers with student loan repayment or home down payment assistance.

The common ground in all of this: Lopez agrees with providers and Think New Mexico that Medicaid reimbursement rates need to increase and medical services should be exempt from gross receipts tax.

The goal, Lopez said, is to “not make medicine so much of an assembly line, profit-driven practice here in this state — but to make it unique for each patient and those patients’ needs.”

As the father of a malpractice patient, Spitzer, too, said he worries about the implementation of SB 176, should it pass. The limit on attorneys’ fees could limit access to legal justice for other patients or incentivize going to trial to get the higher fees, he said, while the “patient safety improvement fund” feels disingenuous, since many providers already have the means to pay for improvements to patient safety.

He also argued the method of disbursements from the patient compensation fund should be left up to the patient’s preference. His family accepted a lump sum to avoid a consistent back-and-forth with fund administrators, but he said he could see how others would want the long-term certainty of reimbursements.

“This is a tough issue, and we all want easier access to health care, myself included,” Spitzer said.

But he added,” As a patient who has been harmed, I of course want access but I also want high-quality access.”

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