State medical malpractice fund has $1 billion surplus

June 06-- Jun. 6--A $1.4 billion state-run fund for medical malpractice claims has a surplus of $1 billion, nearly $647 million more than recommended, according to a state audit released Wednesday.

Malpractice attorneys say the large size of the Injured Patients and Families Compensation Fund and its low number of payouts shows how difficult it is to win cases against doctors in Wisconsin.

"Wisconsin is a really tough place for people who are injured or who have relatives who die as the result of medical error," said Mike End, a malpractice attorney in Milwaukee. "It's paradise if you're a doctor."

Doctors say the fund provides stability and must be large enough to cover unexpected claims.

"The fund has paid out more than $870 million to injured patients since its inception while keeping umbrella liability insurance rates affordable, all while ensuring the fund has a healthy balance that can withstand changes in the markets or for large payouts," said Mark Grapentine, a lobbyist for the Wisconsin Medical Society. "Seems like all is well."

In 2007, then-Gov. Jim Doyle, a Democrat, and the state Legislature transferred $200 million from the fund to pay for other medical programs as part of a bipartisan deal that ended a budget stalemate. The state did not intend to restore the money it took.

But three years later, the Wisconsin Supreme Court ruled the state had to repay the fund the $200 million.

Doctors and some other health care providers are required to pay into the fund, which started in 1975 and covers malpractice awards of greater than $1 million. The providers must carry their own malpractice insurance up to that amount.

Wisconsin is one of at least 13 states with such funds.

The state Office of the Commissioner of Insurance, or OCI, which administers the fund, has been reducing doctors' annual fees in recent years. In 2017-18, doctors paid $424 to $2,798, depending on their type of practice, down from $1,311 to $8,653 in 2014-15.

Despite the lower fees, the fund grew to $1.4 billion as of June 30, 2018, up from $1.2 billion three years earlier, according to the new audit. The fund's net position, or surplus, was $1 billion, up from $783 million three years earlier.

The $1 billion surplus is $646.5 million more than the upper end of a range recommended in a 2017 actuarial report, according to the new audit.

The increase "was driven primarily by positive investment income and decreasing estimated loss liabilities," according to Joe Chrisman, state auditor.

"Although the fund's net position is above the target range, it is important that OCI continue to manage the fund prudently for the benefit of both the participating providers and the claimants," the audit said.

Recent payments

In 2016-17, the fund made just one payment of $5 million. In 2017-18, there were two payments totaling $8.3 million. In the fiscal year beginning July 1, 2018, the fund has made at least four payments totaling $28.9 million.

That includes $22.5 million awarded in April to a Fitchburg family in a lawsuit claiming a 6-week-old boy suffered permanent brain damage from oxygen deprivation during surgery at UW Health's American Family Children's Hospital.

The payment was the second-largest award made by the fund, according to state records going back to 1996. The largest was $32.3 million in 2008, in a case involving a 2-week-old boy who had a permanent brain injury after the family claimed a nurse at Waukesha Memorial Hospital allowed a pocket of air to enter an intravenous line during a blood transfusion.

From 1975 to June 30, 2018, in 673 claims, the fund has paid $874.9 million, less than the current surplus, according to the new audit.

State restrictions

Malpractice attorneys say injured patients in Wisconsin have a hard time getting compensation because of restrictions on who can sue, caps on damages and the fund.

Parents in Wisconsin can't sue if their adult children die from a medical error, and adult children can't sue if their parents die in the same way -- prohibitions found in few other states, attorneys say.

In other wrongful death cases, damages are capped at $500,000 for a child and $350,000 for an adult.

In other medical malpractice cases, non-economic damages, such as for pain and suffering, are capped at $750,000, a limit upheld by the state Supreme Court last year. Economic damages aren't limited.

The cap on total damages for UW-Madison doctors is $250,000.

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