Five years after the state government took $100 million from a special medical liability fund in Pennsylvania, a settlement has been reached that provides key protections against future diversion and returns $200 million in overpayments to physicians and other health care providers.
The origins of the settlement go back to 2009 when the Pennsylvania government took $100 million from the Mcare Fund, a state-run medical liability fund that helps cover liability pay-outs. The funds come from annual assessments physicians and other health care providers pay.
Rather than using year-end balances to reduce the next year’s assessment, the state let money in the fund accrue for several years. Then, contrary to state law that established Mcare as a means of keeping medical liability costs in check, the government took $100 million from that special fund to use for general state purposes.
The Pennsylvania Medical Society (PAMED), with assistance from the Litigation Center of the AMA and State Medical Societies, took the state to court for this unlawful action.
The case was settled a few weeks ago with both retrospective and prospective relief for physicians, totaling $200 million:
- $139 million will be returned to physicians and other health care providers who paid into the fund for assessment overpayments.
- $61 million will go toward reducing assessments in 2015.
- The Mcare fund will be “pay-as-you-go” in future years, so physicians won’t be required to put money in the fund until it is needed.
- The state will not be permitted to build up substantial reserves in the fund or consider that money as general revenue that can be diverted to elsewhere.
“PAMED is grateful for the considerable assistance that the AMA Litigation Center provided, including its substantial monetary contribution to offset our legal expenses and the amicus curie brief in support of our cause in the Pennsylvania Supreme Court,” PAMED President Karen A. Rizzo, MD, said. “Both these actions helped position PAMED to settle the litigation on favorable terms.”
Setting a precedent for other states
A number of states across the country have similar medical liability funds to the one in Pennsylvania. This settlement confirms the constitutionality of making sure those funds are used solely for medical liability purposes and not as a kind of “physician tax.”
As the AMA Litigation Center noted in its friend-of-the-court brief (log in) filed with the Pennsylvania Supreme Court, cases previously arose in New York, New Hampshire and Wisconsin under “remarkably similar circumstances.” Each of the states’ high courts found the governments’ raids of the funds unconstitutional.
Learn more about the cases in New Hampshire, Wisconsin and Pennsylvania and related cases in which the AMA Litigation Center has been involved.
Claiming a refund
Any physician practicing in Pennsylvania who paid into the Mcare Fund for 2009, 2010, 2011, 2012 or 2014 is eligible for a refund from the settlement. (Calculations determined that overpayments were not made in 2013.) Physicians who have since retired or relocated to another state remain eligible.
Refund checks will be mailed to the most recent address on file with the Pennsylvania physician licensing boards, so physicians should make sure their mailing addresses on record are up to date. Learn how.
Refunds are not expected to be distributed until 2016 as a result of the complex nature of the calculations. Additional information about the settlement is available on the PAMED website.
