Prescription sought for NM’s medical malpractice law
Legislature looking at changes to 2021 law designed to help doctors
SANTA FE — Just two years ago, lawmakers adopted a hardfought compromise reshaping New Mexico’s medical malpractice law.
It outlined a morass of deadlines, recovery caps, financial studies and liability requirements — the result of intense negotiation in the final days of the 2021 session.
The bill sailed through the Senate with bipartisan support, celebrated as a breakthrough balancing the interests of hospitals, providers and patients.
But the compromise quickly unraveled.
Just nine months after passage, independent physicians and outpatient clinics warned they couldn’t obtain medical malpractice insurance for the coming year, prompting emergency action in a special legislative session.
Within a year of the emergency legislation, New Mexico’s insurance superintendent raised his own questions about the 2021 law and recommended lawmakers step in with yet more changes.
And just this year, outpatient clinics owned by independent physicians warned again about an inability to obtain insurance for the coming year, citing a sharp increase in a cap on damages they’ll be subject to, starting Jan. 1 next year.
Now lawmakers face the prospect of diving again into a complex, emotional debate — framed by the shortage of doctors in New Mexico and justice sought by families who faced unbearable loss rooted in medical mistakes.
‘Actuarial death spiral’
A bipartisan group of lawmakers — including the only two physicians in the Legislature — is calling for immediate changes to the Medical Malpractice Act, one step in a longer-term strategy for making the state more attractive for doctors.
Democratic Sen. Martin Hickey, a retired Albuquerque physician and former CEO of Lovelace Health Systems, and Republican Sen. Gregg Schmedes, an ear, nose and throat surgeon from Tijeras, agree New Mexico’s medical malpractice system is in dire need of reform.
They have ideas big and small, short- and long-term.
Hickey said the state’s patient compensation fund — a state fund that covers all or a portion of medical malpractice claims that exceed a certain amount — faces an “actuarial death spiral” if changes aren’t made.
“I’ll just say the probabilities of the fund surviving are just not good,” Hickey said in an interview, “and if the fund doesn’t survive, the probabilities of attracting and retaining doctors in New Mexico are not good.”
Schmedes, for his part, said doctors already face skyrocketing legal insurance costs, which will worsen as more changes are phased in under the 2021 law.
“The medical malpractice fiasco we’re in now,” he said, “has resulted in decreased health care access for all New Mexicans.”
Schmedes said his own malpractice insurance shot up 23% this year.
Hickey has teamed up with Sen. Mark Moores — an Albuquerque Republican who works at a pathology lab — on legislation that would begin making some changes.
“Doctors, especially in women’s health care, are fleeing the state or choosing not to come to New Mexico,” Moores said.
The proposal, Senate Bill 296, would keep outpatient clinics that aren’t owned by hospitals under a $750,000 cap — plus an inflation adjustment — on the financial recovery available for injury or death due to malpractice. They otherwise face a $5 million cap set to go into effect Jan. 1 next year.
The new cap, according to the clinics, is a problem because — to stay open in 2024 — they would have to obtain extra malpractice insurance.
In 2023, for example, the clinics had to buy insurance to cover claims up to $250,000, and then the patient compensation fund covers the part of the claim that’s between $250,000 and the $750,000 cap.
Without legislative action, however, the clinics next year will need insurance not only for the first $250,000 but also the portion of the claim between $750,000 and up to a new $5 million cap. They have told legislators they cannot get insurance coverage for the $750,000 to $5 million.
The proposal by Hickey and Moores was introduced Tuesday and referred to two Senate committees.
‘Compromise’
Sen. Joseph Cervantes — a Las Cruces Democrat, trial lawyer and chairman of the Senate Judiciary Committee — said he is open to suggestions on revising the law or scrapping it altogether.
But he doesn’t sound convinced that reducing caps on damages is the right approach.
Every other profession, he said, finds a way to afford insurance.
“In the state of New Mexico,” Cervantes said, “the taxpayers subsidize a doctor’s medical malpractice insurance unlike any other profession, and taxpayers subsidize hospital profits.”
“The public should be aware of it. We should be deciding whether that’s good state policy or not.”
Furthermore, he noted, two years ago lawmakers were assured hospitals, attorneys and other stakeholders had negotiated a durable compromise.
Cervantes recalls being told that his committee shouldn’t “touch one thing on that bill” for fear of disrupting the balance.
“I was unhappy with the compromise result but respected the process,” he said. “Since then, those who agreed to that compromise have been trying to back away from it.”
Give it time to work
Rep. Christine Chandler, a Los Alamos Democrat, attorney and chairwoman of the House Judiciary Committee, said the interest of patients are on her mind as she sees new medical malpractice legislation pop up.
She noted that a Republicanbacked proposal on the House side calls for going back to the pre-2021 cap on damages of $600,000.
“You know, that’s not a lot of money for somebody who may never be able to work again — or somebody who lost a spouse or a child, or a child who lost a parent,” Chandler said.
Lawmakers, she said, should give the 2021 legislation time to work.
In the meantime, Chandler said, they can pursue other strategies to address the provider shortage — making changes to medical taxation, expanding loan forgiveness programs for early- and midcareer doctors, raising Medicaid reimbursement rates and injecting cash to help stabilize the patient compensation fund.
She expressed disappointment about the push to lower damages caps or revisit the law this session.
“My bottom line is, I made a commitment to the stakeholders who negotiated the bill — and that includes the patients — and I expect a reciprocal commitment from those entities who agreed to it,” Chandler said.
Handling the funds
Established in 1976, the state Medical Malpractice Act is designed to make it affordable for doctors to obtain medical malpractice insurance while also providing just compensation to patients harmed by medical errors.
Lawmakers in recent years have heard heart-wrenching testimony from families who endured catastrophic losses — including the death of a child — due to medical malpractice.
And they’ve heard from doctors who say the cost of medical malpractice insurance is dramatically higher in New Mexico than nearby states, exacerbating the shortage of doctors.
For legislators, much of the debate centers on how to handle the patient compensation fund — a centerpiece of the state’s strategy for limiting the cost of medical malpractice insurance.
Qualified health care providers pay fees into the fund, and the fund covers all or some of the medical malpractice claims that exceed a certain amount.
An independent doctor, for example, would be responsible for purchasing insurance that covers up to $250,000 in legal liability for medical errors they make. The patient compensation fund then would cover the portion of the doctor’s claims between $250,000 and $750,000.
The law also sets out a complex series of limits on the compensation available for injury or death due to medical malpractice. The caps on damages vary for providers, hospitals and clinics, with changes phased in over time.
The net effect is to give a hospital more financial exposure to a medical malpractice claim than an independent physician.
Before the 2021 revision, the cap was $600,000 for all claims. It climbed to $750,000 for independent medical providers last year and $4 million for hospitals under the 2021 law.
The recovery limits don’t apply to punitive damages or the cost of medical care.
The end result is a system designed to make medical malpractice premiums affordable for doctors but provide adequate compensation to patients injured by medical wrongdoing.
Surcharges
The 2021 rewrite of the Medical Malpractice Act called for health care providers to pay surcharges to help close a deficit in the fund and bring it into solvency by the end of 2026.
But that part of the law is also a factor in this year’s debate.
Then-Insurance Superintendent Russell Toal — who retired last month — issued an order last year in which he found the surcharges recommended by an actuary would likely be cost prohibitive.
The recommendation for independent providers, he said, would result in a “decrease in the number of providers who deliver services to New Mexicans.”
Consequently, he set a lower surcharge than recommended and asked the governor and Legislature for $32.5 million to help support the financial health of the patient compensation fund.
Let it stand or change it
Republican lawmakers — heavily outnumbered in both chambers — have been vocal about support for overhauling the medical malpractice law. Democratic legislators are split. That makes potential changes to the law a delicate balance, unless an unlikely consensus emerges.
In 2021, one version of the medical malpractice law — before the negotiated compromise — passed the House by just one vote.
Frankly, some lawmakers aren’t eager to revisit the byzantine, bruising debate of 2021.
They’d prefer to let the law stand for a bit before making more changes.
And with a windfall of new revenue available, lawmakers may pursue other strategies intended to help doctors, such as injecting cash into the patient compensation fund.