Storm and Stress

Power, Intrigue and High Drama in the Texas Legislature

by Jonathan Nelson

from July/August/September 2003 Texas Family Physician

Now that the regular session of the 78th Texas Legislature is over, is anybody in the mood for a light comedy? With the epic battles that took place on a daily basis at the state Capitol, it’s no wonder the Legislature meets only 140 days every two years. This session was a Greek tragedy of Texas-sized proportion. Even seasoned political insiders and hardened cynics are shaking their heads and catching their breath.

Several issues ago, TFP forecast a perfect storm brewing for medicine this session, given a sputtering economy that was already leaving a growing number of Texans to rely on the state’s health care safety net while falling reimbursement rates and astronomical liability premiums put the squeeze on doctors. We warned that these factors converging on a newly elected Republican Legislature that would most assuredly have to face a substantial budget shortfall and a boatload of hot-button issues meant we were in for some severe weather. What we didn’t predict was that the storm’s magnitude would be roughly equivalent to Jupiter’s Great Red Spot.

All new leadership in the House and the Senate steered the Legislature toward a more conservative platform than the body had known in recent sessions. Beset by a $10 billion budget shortfall and bound by election promises not to raise taxes, the leadership was determined to cut and reorganize their way to a balanced budget. Debates raged into the wee hours on several occasions involving auto and home insurance, tuition deregulation, the budget and tort reform.

Then of course there was the flight of the “Killer Ds” when 51 House Democrats slipped over the border into Oklahoma to block, at least temporarily, a Republican congressional redistricting plan by denying a quorum for four days straight.

Remarkably, medicine weathered the storm fairly well, tallying more wins than losses in the final count. The biggest victories include the passage of broad managed care reforms aimed at making health plans pay providers accurately and on time, measures to boost immunization rates for Texas’ children, a bill to strengthen the State Board of Medical Examiners, and the session’s crowning achievement — medical liability reform. But with substantial funding cuts to the state’s health care safety net, not to mention a 5-percent reduction in Medicaid reimbursement, the repeal of bonus payments for high volume Medicaid providers and deep cuts to graduate medical education, no one’s throwing a victory party yet. We are still out to sea and the forecast is anything but clear.

Part One: Tort Reform’s Fast and Furious Race Against the Clock

If the first 135 days of the 78th Legislature were a grueling odyssey, the last five days were a breakneck edge-of-your-seat thriller. Coming into the home stretch, legislators still had the bulk of the session’s work to do. They had yet to pass the budget. They were still working on a major bill to restructure the state’s Department of Health and Human Services, a hotly debated ethics bill, and a mammoth government reorganization bill nicknamed “the Deathstar” for its sheer size and complexity.

Hanging in the balance was TAFP’s top priority, medical liability reform. Since long before the session began, TAFP had been building support for legislation designed to reign in frivolous lawsuits and reverse soaring medical liability premium increases, which have forced many physicians to reduce services, relocate or close their practices altogether.

Recognizing the threat these conditions posed to health care access for Texas’ patients, Gov. Rick Perry declared medical liability reform a legislative emergency as the session convened. An interim committee led by Sen. Jane Nelson (R-Flower Mound), had held hearings across the state and heard hours upon hours of testimony from physicians, patients, representatives of hospitals, and many other concerned groups and individuals.

Medical liability carriers blamed rate increases on an unpredictable market due to spikes in the frequency and severity of malpractice claims. The key to reform, they argued, would be a $250,000 per claimant cap on non-economic damages in malpractice cases, similar to the cap California had enacted in its landmark 1976 Medical Injury Compensation Reform Act, which reformers say has kept premium increases well below the national average for almost three decades.

Sen. Nelson’s interim report came out just before the session began recommending much the same remedy and that report combined with the governor’s emergency declaration and a growing public awareness of the crisis led to the filing of H.B. 3, the medical liability reform bill.

The bill fell under the jurisdiction of the House Committee on Civil Practices, chaired by Rep. Joe Nixon, (R-Houston), where another major tort reform effort was underway. Championed by Texans for Lawsuit Reform, H.B. 4 contained a laundry list of reforms intended to shift the balance of power in favor of businesses in cases of product liability, premises liability, class action lawsuits and more.

In a secret meeting, Nixon’s committee rolled the medical liability bill into H.B. 4, a move that TAFP President Robert Hogue, M.D., says caused “considerable anxiety” among physician leaders. “The leadership across the board felt that it was not in the favor of medicine to have the bills combined,” Hogue says, but legislators argued that by putting the two bills together, the efforts of all groups calling for reform would be concentrated behind one bill.

The committee actually had to combine the bills again after Democrats raised a point of order complaining that the committee meeting had not been posted, but in the end the bills were joined. Many claimed the move was a ploy to make a vote against the broad tort package more difficult. “They held the physicians hostage for stuff that arguably protects bad actors more than it reforms the tort law,” Quorum Report’s Harvey Kronberg says, adding that without the medical liability issue, there may not have been a constituency willing to pass the broad set of reforms.

At the time, TAFP Director of Legislative Affairs, Tom Banning, told the Associated Press, “We are supporting the leadership on the decision to combine the bills. First and foremost our priority is to pass medical malpractice reform, it doesn’t matter if it’s in one or 300 bills.”

The House floor debate on H.B. 4 was one of the most heated of the session. Hundreds of amendments were proposed but in an example of the tough brand of leadership that ruled the House, virtually none were accepted. “They just crushed the opposition,” Kronberg says. “They expected everyone to walk in lockstep and there was always the implication of threat and punishment if they didn’t.”

The final bill passed out of the House contained a $250,000 per claimant cap on non-economic damages for physicians, hospitals, and institutions, and a requirement that future damages other than medical expenses be paid out over time. It also strengthened expert witness requirements. It did not contain limits on attorney contingency fees or requirements that juries be informed of collateral sources for recovery of damages, two reforms medical organizations had hoped to pass.

Also coming out of the House was H.J.R. 3, a constitutional amendment designed to head off an inevitable court challenge to the cap on non-economic damages. Without the constitutional amendment, the cap could be ruled in violation of the state’s open court doctrine, just like a similar cap passed by the Texas Legislature in 1977. Were the amendment to fail during the legislative process, H.B. 4 did contain other measures that reformers hoped would help the cap survive legal challenges, but many estimated that the courts could take several years to come to a decision on the matter.  Physicians in a state of crisis couldn’t wait that long.

Next it was the Senate’s turn. H.B. 4 was sent to the State Affairs Committee, chaired by Sen. Bill Ratliff, (R-Mt. Pleasant), perhaps the most respected person in the Senate and a longtime champion of the medical profession. Often the only committee member in the room, Ratliff listened to more than 60 hours of testimony on tort reform before writing his committee substitute. The bill he shepherded out of committee and through the Senate was substantially different from the House version. One of the biggest differences was the cap on non-economic damages.

Over and over, Ratliff voiced his concern that whatever reforms were passed, there needed to be some way to address the needs of victims of the most egregious cases of medical malpractice. The Senate cap would have limited non-economic damages at $250,000 per defendant, rather than per claimant, meaning each physician listed in a lawsuit could be liable for that amount, with the total non-economic damages capped at $750,000. The cap for hospitals and other institutions was $500,000. 

As is tradition, Speaker Tom Craddick then appointed five representatives to serve on a conference committee whose mission would be to iron out differences between the House and the Senate versions of the bill, and all eyes turned to the Senate. That was May 21, and a week later with only six days left in the session, the Senate still hadn’t budged. 

“It hadn’t really crossed our minds that the Senate would choose not to proceed with appointing conferees, but after about 48 hours, it became clear that was exactly what was happening,” says Jenny Young, TMA’s Associate Director of Legislative Affairs. If the Senate decided not to appoint a conference committee, one of two things would occur. Either the House would vote to adopt the Senate version, which liability carriers had said would not bring down premiums, or the bill would have died, forcing a special session.

“The last thing we wanted was to go into a special session,” Banning says. “There would have been much harsher scrutiny of the bill, a wider gap would have developed between the House and the Senate versions, there would have been fewer issues to horse trade, and we would have lost any leverage we had. Worse, we would have risked stigmatizing voters uncomfortably close to the election date of the constitutional amendment.” 

According to one prominent trial lawyer lobbyist, “We were hoping for a train wreck to get into a special session because we did not believe the reforms that were being debated would stand up to public scrutiny in the light of day.”

What’s more, according to Kronberg the buzz around the Capitol was that some legislators were looking for a major bill to tank so Perry could call a special session and address redistricting at the same time. If the differences on H.B. 4 couldn’t be worked out, medical liability reform would make the perfect vehicle for such a move.

“We knew if we could only get to the table we would be able to work out a strong package of reforms,” Banning says. “Our real challenge was getting to the table.”

“We were all getting nervous about the time frame for getting the bill passed,” says Rocky Wilcox, general counsel for TMA. On the morning of May 28, he had spoken with John Coppedge, M.D., a politically active surgeon from Longview and longtime supporter of Lt. Gov. David Dewhurst and Sen. Ratliff. As Wilcox tells it, Coppedge said he would call Dewhurst to try to get things moving. “Within an hour I got a call from Dewhurst inviting TMA to come talk to him about H.B. 4 with Senator Ratliff,” Wilcox says.

Wilcox, Young, TMA Executive Vice President Lou Goodman and a few physician leaders  “went over and spent the day being ping-ponged back and forth between the House and the Senate,” Wilcox says. The talks evolved into nine hours of meetings with Lt. Gov. Dewhurst, Sen. Ratliff, Rep. Nixon, and several legislators who came in and out, joining in the discussion, lending advice, and even bringing in sandwiches for the negotiators. The Senate’s two physician members, Sen. Bob Deuell, (R-Greenville), and Sen. Kyle Janek, (R-Houston), both played key roles in the negotiations, Young says.

Late in the evening, they had reached a critical point. Ratliff had moved substantially from his original position and Young says the best deal of the night was on the table, a $250,000 cap on non-economic damages for physicians and $500,000 for hospitals and other institutions. But the TMA negotiators were in a jam. “Because of the intense squeeze that we were in — that TMA was in between the House and the Senate — we were in a position where we couldn’t take the deal at that particular moment,” she says.

Banning knew what was going on because Young had been using her cell phone’s text messaging feature to communicate with him, so he called members of TAFP’s leadership and explained the situation. Knowing that this was more than they could have hoped for even hours before, they gave Banning the authority to take the deal. Banning then called Sen. Deuell, who was still on the Senate floor. Deuell marched into the meeting and announced that the family doctors would support the proposed cap 100 percent. At that point, Dewhurst and Ratliff gave the TMA until 11 a.m. the next morning to come back with an answer and Young and the other negotiators went home to sleep on it.

Dozens of doctors in white coats descended upon the Capitol that next day to help keep the momentum going in their favor. Outside the House chamber, the doctors lobbied their representatives as newspaper and television reporters with lights and cameras swarmed around them.

Meanwhile, the TMA negotiators were being whipsawed between the Senate, the governor and the House. “The two chambers obviously had different strategies and we were walking a tightrope between them,” Young says.

Kronberg says he thinks the compromise was ultimately made because word got out to the doctors who then instructed their leaders to take the deal rather than risk a special session. “I think it was one of those rare moments where grassroots actually might have worked,” Kronberg says.

So a deal was struck and Dewhurst appointed conferees. The next day the conference report was filed and the rest is history. Banning says the deal with the Senate created a floor for the physicians’ cap on non-economic damages, allowing the conference committee’s appointment. “There we could continue to negotiate on the cap for hospitals and other institutions, as well as some of our other priorities, like periodic payments and expert witness reforms,” he says. “The important thing was we got a conference committee and a strong package of reforms.”

The bill the governor signed contains the $250,000 per claimant cap on non-economic damages for physicians, a similar $250,000 cap for health care institutions and another $250,000 cap for a second institution, which must be completely separate from the first institution but still liable for the same act of malpractice. The bill also has a strong set of expert witness reforms and it requires future medical expenses to be paid out as they accrue. Neither limits on lawyers’ contingency fees nor collateral source rules made it into the bill.

Now the question is, will it work?

The answer depends on whom you ask, but almost everyone agrees only time will tell. “What we’ve got right now is a nice idea, but it doesn’t work without the constitutional amendment,” says Russell Thomas, D.O., chair of TAFP’s Commission on Legislative and Public Affairs. A “no” vote on the amendment, which will be Proposition 12 on the Sept.13, 2003 ballot, would make H.B. 4 a “hollow bill,” Thomas says, adding that physicians need to tell their patients about the importance of voting “yes” on Proposition 12.

Even if the amendment passes, the question remains. Insurance carriers have maintained that tort reform is the preferred way to control rising premiums and physician groups have agreed, but not everyone is convinced.

Sen. Deuell says that while a flurry of lawsuits filed in anticipation of the reforms means doctors might have to wait three to five years before seeing the fruits of their labor, he still has other concerns. “I think [the reforms] will lower premiums, although I certainly think that we need to look at insurance underwriting practices of the companies that are left and hopefully the companies that will come to Texas, because I have some concerns about underwriting by the malpractice companies,” he says. Though California’s tort reforms are often hailed as the model, Deuell points out that the Golden State followed MICRA with insurance reforms. “The trial lawyers are trying to tell you that that was what brought the premiums down, but in reality, I think they both went hand in hand.”

Ironically, just as Texas doctors were celebrating tort reform’s passage, Weiss Ratings, a Florida firm that rates financial companies, released a study saying tort reform does little to affect malpractice premiums, but it works to fatten profits for insurance companies quite nicely. A number of malpractice insurance reform bills were filed during the session, most seeking to give the Texas Department of Insurance more regulatory power to request information from the carriers and control rate hikes. None of them made it through the process.

“We are going to vigorously monitor these reforms over the interim to make sure physicians receive relief in their premiums,” Banning says. “If they don’t, I think insurance reform will probably top our agenda next session.”

The largest malpractice carrier in the state put its money where its mouth is in support of H.B. 4 during the session. In a letter to Rep. Nixon and the members of the House Committee on Civil Practices dated March 3, Thomas Cotten, president and CEO of Texas Medical Liability Trust, pledged to “voluntarily adopt a 12-percent premium reduction when the $250,000 hard cap legislation has been passed and is in effect.” Cotten declined an interview for this article other than to say the company is withholding comment regarding the promised reduction until the fate of Proposition 12 is known.

“There is a legitimate argument out there that says that tort reform is manufactured by the insurance industry as an alternative to insurance company regulation,” Harvey Kronberg says. “This is the toughest [tort reform legislation] that anybody’s ever seen, so I guess we’ll have an opportunity to find out whether rates drift lower or whether it’s just a sham that takes the heat off the insurance companies for a few years.”

Read Part 2: Prompt Pay Reloaded