Doctors' coverage: It's a bare market

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Doctors' coverage: It's a bare market

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By Emma Silverman

The Wall Street Journal

February 1, 2004

With medical malpractice insurance premiums climbing steeply, a growing number

of physicians are taking a radical step: They're canceling their coverage

altogether.

Going bare, as it is known, or " self-insuring, " means that doctors, rather than

insurance companies, are responsible for legal fees and any judgments or

settlements if they're sued. For patients it means potentially less money if

their doctor botches the job.

Many of the physicians going bare so far practice in Florida, which consistently

has some of the highest malpractice insurance rates in the nation and is known

for its activist doctors. More than 5 percent of Florida's roughly 47,700 active

medical doctors don't have malpractice insurance coverage, up from 4 percent a

year ago, according to Florida Department of Health statistics.

In Miami-Dade County, nearly 20 percent of the county's 6,360 active medical

doctors are bare. The phenomenon is most common in high-risk specialties such as

neurosurgery and obstetrics, but even primary-care physicians are forgoing

insurance.

As premiums edge beyond the reach of physicians in other states, doctors are

studying, and in some cases adopting, the option. As a result, some in the

medical profession expect the phenomenon to continue to spread.

Many of the doctors dropping the insurance are sheltering assets in

sophisticated trusts or partnerships, safely out of reach for legal judgments

down the road. In Florida, doctors know that assets such as their homes and

annuities are protected by state law from creditors, one reason why so many

doctors in the state are accepting the risk of no coverage.

Nobody knows for sure how many doctors are bare nationwide. The American Medical

Association has changed its policy to reflect the growing number of uninsured

physicians, especially from Florida. In the past, the doctors' group recommended

that physicians carry sufficient malpractice insurance to protect themselves and

their patients. But in December 2002, AMA policy makers voted to cut the

recommendation and leave the decision to doctors.

Mark Macumber, a family practitioner in Berwyn, Ill., dropped his coverage last

spring, after his premium climbed to $40,000 from about $11,000 the year before.

With $130,000 in medical school loans and a big mortgage to pay, Macumber

decided the coverage wasn't worth it. Without an insurance policy, he lost his

hospital privileges and isn't part of an HMO network anymore. Instead, he

started a low-cost health care clinic that targets uninsured patients at $40 a

visit.

When Macumber decided to go bare, he sent a letter to his patients letting them

know. Most stuck with him. " It didn't change my opinion of him, nor did it

change the way he practices medicine as far as I'm concerned, " says Rex Morioka,

a longtime patient. All his patients must sign a form stating they are aware of

the doctor's uninsured status, a common practice among uninsured physicians.

Macumber's form doesn't waive his patients' right to sue.

Going bare isn't limited to doctors. A number of nursing homes and hospitals

also have dropped liability coverage because of high premiums. In Arkansas, for

instance, more than 100 nursing homes, out of 237 in the state, had no liability

insurance as of June 2003, according to the Arkansas Health Care Association. If

a nursing home carries no insurance, injured residents might not be able to

collect sufficient compensation, patient advocates say.

What happens when patients sue a doctor without insurance? Patients often settle

for less and do so more quickly because a doctor can file for bankruptcy, says

Marc Singer, of Singer Xenos Wealth Management in Coral Gables, which advises

doctors on how to protect their assets. Singer advises his clients first to hire

a bankruptcy attorney, rather than a defense attorney, if they are sued. " What

plaintiff's attorneys fear most in a lawsuit is bankruptcy, " he says.

That's what happened in one such case, a dispute over a 1992 gall bladder

surgery performed by a Florida surgeon, Alan Goldenberg. The patient, Shirley

Sawczak, filed suit against him in Broward County for malpractice. Goldenberg

had no malpractice insurance and filed for Chapter 7 bankruptcy the same day the

jury was to begin its deliberations in the suit.

Sawczak won a judgment for more than $4 million against the surgeon. While

Goldenberg had nearly $3.8 million in assets, almost all of his money was held

in his house, retirement accounts and other assets -- assets exempt from

creditors under Florida law. The case reached the Supreme Court of Florida,

which ruled that Goldenberg's annuities also were protected under Florida law.

Ultimately, the $4 million judgment was discharged, meaning that Goldenberg was

off the hook. Sawczak received nothing, according to her attorney.

Most states don't actually make doctors carry malpractice insurance. But

hospitals and managed-care organizations often have insurance requirements,

which makes going bare impractical for many physicians.

Florida law allows doctors to practice without liability insurance as long as

they are financially responsible for as much as $250,000 of any judgment against

them. If they fail to pay within 30 days of a judgment, they can lose their

license. The state's laws also require doctors to post a notice in their waiting

room or give a statement to patients saying they are uninsured. For patients in

other states, medical licensing agencies generally track whether doctors have

malpractice insurance, but the easiest way for a patient to find out for sure is

to ask the doctor directly.

Lee Vastola, a North Palm Beach internist and gastroenterologist, gave up

his malpractice insurance two years ago, after his annual premium rose to

$60,000 for only $250,000 in coverage from $12,000 for $1 million in coverage

the year before. He has gone a step further than most physicians who go bare, by

requiring his patients to sign a waiver promising not to sue him or his

professional corporation for any reason.

All but one of his 10,000 patients have signed the waiver, although some

potential new patients have refused and been turned away, he says. Whether the

waiver is enforceable hasn't been tested in court.

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