Wisconsin doctors sue to stop "raid" on state's medical liability fund

Wisconsin physicians are challenging what they call an illegal $200 million plunder of the state's medical liability compensation fund to balance the state budget and pay for health care initiatives.

The Wisconsin Medical Society sued the state on Oct. 29, just days after Gov. Jim Doyle signed a two-year budget that transfers money from the Injured Patients and Families Compensation Fund to finance Medicaid programs and expand assistance to uninsured families. The state is set to withdraw $71.5 million from the fund in 2007-08 and $128.5 million in 2008-09.

Most doctors, hospitals and other health care professionals are required to pay into the pool, which covers medical liability claims above their minimum $1 million policy coverage. The compensation fund was established in 1975 to help make medical liability insurance affordable, and physicians credit it with stabilizing Wisconsin's medical liability climate.

Dipping into the fund amounts to an unlawful tax on doctors and a breach of fiduciary duty to the physicians and patients it was created to protect, the medical society said in its lawsuit. Doctors want the governor to put the money back where it belongs and are asking the court to permanently block the transfer, which siphons off nearly a quarter of the fund's assets -- which were $737 million as of June 30, 2006, according to a March 2007 state audit.

"This fund is to compensate patients and their families who've suffered from medical negligence -- not to put a Band-Aid on the state's fiscal problems," said WMS CEO and Executive Vice President Susan L. Turney, MD.

If the money isn't returned, not only will coverage be jeopardized for injured patients, but so will access to care, she said. The transfer likely will destabilize the fund and result in higher fees for doctors, said Dr. Turney, who sits on the compensation fund's board of governors but has temporarily recused herself because of the lawsuit.

With approximately 12,000 physicians participating in the fund as of Dec. 31, 2006, the medical society estimates that the transfer could cost Wisconsin's doctors more than $16,000 each to fill the budget hole.

But Gov. Doyle's office defends the move. It says the account has plenty of money to spare to help make health care more affordable and accessible for residents.

"The fund was created by the Legislature, and changes to the fund can be made by the Legislature," said Carla Vigue, spokeswoman for the governor. "The transfer was something carefully considered by the governor and the legislators after looking at the fund and health care needs in the state."

It's not the first time Gov. Doyle has targeted the fund.

He proposed a $179.4 million withdrawal in his 2005 biennial budget and a $200 million transfer in his 2003 plan. Wisconsin's Joint Committee on Finance rejected both plans. But this year, in an 8-8 vote, it failed to garner the nine votes required to overturn it.

A sign of things to come?

Meanwhile, doctors are worried that a transfer could happen again. "It becomes a big cookie jar to pay the bills and would be tremendously problematic for physicians," said Mark Grapentine, WMS senior vice president of government relations.

According to the doctors' lawsuit, taking money out of the fund violates a 2003 state law -- one passed under Doyle's watch. It says the fund is an "irrevocable trust for the sole benefit of health care providers participating in the fund and proper claimants. Monies in the fund may not be used for any other purpose of the state."

Doctors claim the removal violates their contract with the fund, which was set up to provide them with extra liability coverage in exchange for fee payments.

A March 2007 audit by Wisconsin's Legislative Audit Bureau also raised financial concerns.

At the time of the audit, the governor had proposed removing $175 million. Weighing an estimated $685 million in outstanding liabilities against the fund's $737.4 million balance as of June 30, 2006, the bureau said the transfer would put the account in deficit.

Grapentine said the fund also remains vulnerable to claims still going through the courts.

In early conversations with state officials, the medical society discussed the potential for assisting the governor with money from the fund in exchange for statutory guarantees that it would continue to cover injured patients and families, Dr. Turney said. Doctors also wanted to help avoid a proposed hospital tax to finance the health care programs.

When those protections never materialized and the transfer remained in the budget, the medical society turned to legal action as a last resort, she said.

But some safeguards are in place, said Eric Schutt, chief of staff for state Rep. Kitty Rhoades, co-chair of the Joint Committee on Finance, who supported the transfer.

Schutt said half of the $200 million taken from the compensation pool would be backed up by the state's general fund if necessary. On paper, it appears as if that money never left the account and should not be factored into fee changes, he said. "We did our best to keep that money there so claims would not run short and to protect doctors from higher assessments."

Schutt declined to comment on the legality of the transfer. "That's for a court to decide."

But state lawmakers are considering a possible constitutional amendment to protect the fund in the future, he said.