Audit Questions Wis. Governor’s Plan to Take $175 Million from Med Mal Fund

Wisconsin Gov. Jim Doyle’s plan to transfer $175 million from the state’s medical malpractice fund to pay for health care programs may be illegal and would put the fund on poor financial footing, state auditors warned last week.

The nonpartisan Legislative Audit Bureau said the transfer also would likely force increases in fees paid into the Injured Patients and Families Compensation Fund by health care providers.

Auditors said the transfer could violate a law that says the fund can be used only to help participating health care providers and malpractice victims.

Meanwhile, the audit also said the Office of the Commissioner of Insurance computer system that administers the fund is aging and ineffective, leading to numerous errors in billing information.

The fund created in 1975 insures some 14,000 Wisconsin doctors and health care providers from medical malpractice claims that exceed $1 million. Their malpractice insurance covers claims that are smaller.

Doyle has proposed the transfer in his two-year budget plan, saying the money should be used for initiatives that include state aid to providers who switch to electronic records systems.

Doyle has defended the transfer, saying electronic records will reduce medical errors, thus benefiting patients and shielding providers from malpractice suits. Other money would pay Medicaid costs and increase provider reimbursement rates.

Republicans in the Legislature have promised to fight the transfer, just as they have defeated two similar Doyle proposals in previous budgets.

The fund has accumulated $737 million in cash and investments as of June 30, 2006, according to the audit. But estimated liabilities of $685 million mean Doyle’s transfer would put the fund in a deficit for accounting purposes, State Auditor Jan Mueller warned lawmakers in a letter.

Doyle spokesman Matt Canter said the governor disagreed with the conclusion.

“There’s excess funds that can be invested to make our health care system safer and more efficient, make health care more affordable and longterm reduce malpractice suits dramatically,” he said.

He said the transfer would be legal despite the 2003 law limiting the fund’s use because “the budget is also law.”

But Mark Grapentine, vice president of the Wisconsin Medical Society, said the audit backs its claims the transfer may be illegal and would jeopardize the fund, which is credited with creating a favorable malpractice environment.

“I think this will highlight the discomfort that people on both sides of the aisle feel about making draconian changes to the fund,” he said.

Grapentine noted the fund’s fees already increased by 25 percent after the state Supreme Court in 2005 struck down a law limiting malpractice damages to $350,000. The typical family physician pays $1,074 this year, while some surgeons pay six times as much.

The court’s decision increased the fund’s estimated liabilities by $173 million, the audit said. The ruling means no damage limits for medical injuries between 1991 and 2006, when Doyle signed into law a new $750,000 cap.

Estimating the fund’s potential liabilities is difficult because claims can be filed years after an incident, the audit said.

Meanwhile, auditors said the fund’s computer system developed in the early 1990s has not been able to accommodate the expanded amount of information it is supposed to track.

The system generates inaccurate error messages, sends noncompliance letters to some providers and adds inappropriate charges to some accounts, the audit said.

Errors are so pervasive that staff members spend 15 to 20 hours per week manually correcting them. Other errors aren’t caught until the fund is contacted by providers.

Auditors also discovered a risk that unauthorized users could access the system. The audit recommends creating a new system and notes Doyle has proposed $600,000 in his budget for that purpose.