20 years of Texas tort reform
by Brian Dittmar, Director of Government Relations, and
Bill Messer, Messer Garcia & Shannon
The 1970s were not the “best of times" for physicians in Texas. In those days, it was often assumed that an unexpected medical outcome would result in someone having to “pay for it” — regardless of fault. Claim outcomes were so bad that most insurance companies either refused to write medical liability coverage or left the state altogether. For physicians, choices were limited and insurance was costly. From 1971 to 1976, premiums in Texas increased as much as 600 percent.
In 1977, the Texas legislature intervened with the passage of Article 4590i, the Medical Liability Insurance and Improvement Act. Among other reforms, this Act established a $500,000 damage cap on the liability of a physician, other health care provider, or hospital. At the time, no one knew whether the reforms included in the act would mend the broken system.
It was in this environment that TMLT was born. TMLT’s stated goal was to provide physicians with a stable and reliable source for medical liability coverage. Since its inception, this goal as been our top priority.
In the years following the passage of Article 4590i, the courts either eroded or completely eviscerated many of the protections contained in the Act. The original $500,000 damage cap was declared unconstitutional in personal injury cases. The statute of limitations was extended for some cases. Judicial discretion made expert report requirements ineffective in preventing unwarranted litigation or in obtaining dismissal of meritless suits. No significant repercussions existed for suing a physician without adequate cause.
The frequency of medical liability suits became unsustainable. One in five Texas physicians had to defend their practice against lawsuits every year. Physicians felt trapped in a system that was not interested in reviewing the quality of the medical care, only the potential value of a claim.
By the late 1990s, the liability environment for health care providers had deteriorated to the point that many professional liability insurance carriers went out of business, left the state, or curtailed the amount of business they were willing to write in Texas. In addition, the high cost of medical liability coverage and fear of unwarranted litigation pushed many physicians into early retirement. Others reduced their practice or ceased providing certain treatments due to liability concerns. Unbridled lawsuits made practicing medicine in certain regions of Texas simply too risky. Emergency rooms were understaffed. Many rural areas lost hope of recruiting physicians. Patients lost access to their physicians.
A solution had to be found — and fast. This led TMLT to do the previously unthinkable — approach competitors and other stakeholders in organized medicine to join a statewide liability coalition and work toward a solution. This led to the formation of the Texas Alliance for Patient Access (TAPA).
TAPA immediately set out to correct the problems that desperately needed fixing. The TAPA Legal and Claims Committee included experts from the insurance carriers, defense counsel, and appellate counsel. The committee spent a year debating and developing the legislative proposals that were then presented to the governor and members of the legislature.
In 2003, Governor Rick Perry promised to support major tort reforms at every level of state government. There were five major stages of the tort reform process between January and September 2003. During these months, Governor Perry and the legislature introduced House Bill 4 (HB 4) as a legislative emergency. The House Judiciary Committee passed HB 4 after TMLT promised a medical liability insurance rate reduction if the legislation became law. The House passed HB 4 and the legislation allowing for the constitutional cap amendment. The Senate passed HB 4 with some revisions. A last-minute conference committee came to a compromise on the stacked cap issue. Ultimately, a masterful bill evolved and was passed, including the cornerstone of the bill — the $250,000 non-economic damage cap.
It is important to understand that the cap does not prohibit injured patients from collecting the full amount of past and future medical expenses, lost wages and earning capacity, and lost household services. There is no cap on recovery of the amount of actual economic damages sustained by patients.
Governor Perry understood that the reforms would likely be challenged in the courts for years to come. He also understood that the bill would not deliver its intended effects until it became a reliable long-term protection, which could only be established through constitutional review. Therefore, he took the extraordinary step of pushing for a constitutional amendment that asked voters to affirm the legislatively approved cap.
TMLT and its partners in organized medicine worked tirelessly to educate voters about the need to protect liability reforms. Supporters and opponents spent more than $17 million in the battle over putting limits on medical malpractice awards, making Proposition 12 the most expensive campaign ever on a state constitutional question.
Proposition 12 was placed before the voters on September 13, 2003. The vote to approve Proposition 12 was narrowly successful, passing by a two percent margin. These efforts achieved their intended effect. Immediately after the passage of Proposition 12, TMLT announced a rate reduction of 12 percent, indicating our confidence that, finally, effective reforms had been achieved.
Not surprisingly, the state did not move from crisis to correction overnight. In the time between the passage of House Bill 4 and when it became effective, there was a “rush to the courthouse” to file cases under the old 4590i law. However, TMLT was confident this new beginning would help attract physicians to our state.
After the passage of Proposition 12, new physicians slowly began moving to Texas again. The number of frivolous claims dropped dramatically. Access to care improved, particularly in some of the state’s most under-served areas.
Today, dismissals of non-meritorious cases often occur on a timely basis because of strengthened expert report requirements. Also, cases are more readily evaluated for settlement because the law now clearly defines damage parameters; in many cases, this has eliminated the need to go to trial. Much needed predictability was added to the system.
Twenty years later, the cap on non-economic damages and every other provision of the landmark reforms remain intact. Physicians now spend more time in the exam room and less time in the courtroom. Money that was once used to pay for liability insurance premiums is now used to enhance medical services.
As we approach the 20th anniversary of these landmark reforms, many physicians who began to practice in Texas after 2003 have little frame of reference for the enormity of the crisis or the fight to achieve those reforms. It took pioneers like TMLT’s then executive vice president of claims, Bob Fields, and longtime TMLT lobbyist, Bill Messer, to lead these reforms at the right time.
Today, anywhere in America, when physicians talk about meaningful medical liability reforms, the phrase “like in Texas” is often included in the conversation. It is unfortunate that Texas has lost a great deal of institutional knowledge regarding the tort reform efforts. We can no longer assume legislators remember the reforms of 2003 and why those reforms were so important.
Today, the Texas Senate includes only four senators who cast votes on HB 4, and the Texas House includes only 10 such representatives. Since the passage of HB 4, TMLT’s advocacy team has engaged new legislators on the significance of the 2003 reforms that spurred Texas economic growth. However, the reforms are under constant attack in the courthouse as well as the state house. We see continuous attempts by the lawsuit industry to index the cap and dismantle other liability protections. Given the evolution of politics and society over the last 20 years, we anticipate challenges to existing reforms to increase in frequency and intensity.
TMLT lobbyist Bill Messer recently said, “the tenacity of Speaker of the House Tom Craddick [in 2003] and the political courage of Governor Rick Perry was crucial in gaining the legislative super majority necessary to propose the Proposition 12 Constitutional Amendment. I fear that this provision of the tort reforms may be targeted in 2023 given the erosion of similar ‘caps’ in California.”
We continue to believe that these gold-standard reforms maintain a balance that is fair for injured patients and provide improved access to care for the citizens of Texas. TMLT remains steadfast in its commitment to protect these reforms.
In addition, we rely on our partners in organized medicine — our network of attorneys and our policyholders — to help keep us informed about the legal landscape and the concerns of health care providers. If you have an issue that you feel could be helped or influenced by TMLT’s government relations efforts, please contact our office at 800-580-8658.
Brian Dittmar is the Director of Government Relations in the TMLT Claims Department. He can be reached at brian-dittmar@tmlt.org.