Dave Stafford for www.theindianalawyer.com

Proposals to increase the state-imposed $1.25 million cap on damages in medical malpractice cases have some unlikely supporters: Indiana hospitals.

“An ounce of prevention is worth a pound of cure,” said Timothy Kennedy, a Hall Render Killian Heath & Lyman P.C. attorney who represents the Indiana Hospital Association. He said in addition to fundamental fairness, hospitals are concerned about a constitutional challenge that could overturn caps in the 1975 Medical Malpractice Act.

Other health care providers oppose raising the caps, though. They’re worried any increase in costs passed on to doctors could erode access to care.

Kennedy told the Indiana General Assembly Interim Study Committee on Courts and the Judiciary that the hospital association board is concerned a case challenging the caps could persuade the Indiana Supreme Court that there is no longer a “rational basis” for the caps, particularly since 17 years have elapsed since the cap was last increased.

“Does that expose the caps to a successful constitutional challenge?” Kennedy asked. “We’re concerned Indiana caps might not be seen as reasonable.”

The rational basis language underpins the constitutionality of the act as the court determined in the landmark case Johnson v. St. Vincent Hospital, 404 N.E.2d 585 (1980). Numerous cases have since unsuccessfully challenged the cap and the rational basis the court found 35 years ago has held, even in cases where medical damages alone far exceed the $1.25 million statutory limit on total damages.

Under the malpractice act, health care providers’ private insurance liability is capped at $250,000, and any damages in excess of that amount are paid from the Patient Compensation Fund up to the limit. Health care providers pay premiums to sustain the fund administered by the state Department of Insurance.

A proposal to raise the cap to $1.65 million in the last legislative session failed, and committee chairman Sen. Brent Steele, R-Bedford, noted that proposal adjusted the cap to mirror the increase in the Consumer Price Index since the limit was last raised.

“Is $1.65 million your uncompromisable line in the sand?” Steele asked Kennedy. “It’s close,” he replied.

Some argue that increase isn’t adequate because based on the rate of health care inflation, adjusting the $1.25 million cap set in 1999 would result in a current limit of about $2.2 million.

Malpractice plaintiff’s attorney Dan Ladendorf of Ladendorf Law P.C. said the state will have much larger problems if a court case rules caps are unconstitutional. This would undermine the stability of the health care system, but he said caps should be much higher. The current system, he argued, provides stability at the expense of injured patients.

“These are real Hoosiers who suffered real harm because of real negligence,” said Ladendorf, who spoke at the hearing on behalf of the Indiana Trial Lawyers Association. “There have only been two increases in the cap in 40 years.”

Ladendorf said people injured by malpractice exceeding the cap often are left disabled with medical bills they’re unable to pay, costs that end up being borne by taxpayers.

Supreme Court decisions in several states in recent years have struck down caps on medical malpractice as unconstitutional. But Mike Rinebold, director of government relations for the Indiana State Medical Association, noted other states have upheld caps.

Rinebold told the committee the ISMA is opposed to increasing malpractice caps that would affect its 8,000 physician members. “Raising the caps will increase costs for physicians,” he said.

He told the committee the act does more than cap liability for health care providers. “It’s about protecting our health care system as a whole and access to health care services for our patients.”

“Not all physicians can automatically absorb the increase” that would come if the cap was raised, Rinebold said. “It has the potential of being a tipping point.”

In some cases, doctors may choose to go without malpractice coverage if the cap raised private-insurance liability, he said. And the surcharges that providers pay to participate in the Patient Compensation Fund also would increase if the caps rise.

Increasing caps would “jeopardize the Patient Compensation Fund and patients would recover less,” he said.

Department of Insurance general counsel Tina Korty told the committee the fund in 2014 collected $108.2 million in surcharges from health care providers and paid out more than $137 million in a total of 147 claims, the second-highest amount on record. The average payout from the fund was about $648,000.

But a significant number of those claims push the cap. Korty said 41 claims — 28 percent of the total number — were between $975,000 and $1 million, the most the fund can pay. Of those, she said about half involved wrongful death of an adult and 7 percent involved wrongful death of a child.

The fund entered 2015 carrying a balance of just over $108 million — the lowest level in a decade and considerably less than half the balance the fund held five years ago. Korty said the department has the authority to levy supplemental surcharges on providers, but “We hope to never invoke that.”

Dr. Rhonda Sharp, a LaGrange physician, also urged the committee to consider the costs for providers, especially those in private practices who are struggling to continue to meet requirements of the Affordable Care Act.

“Already, there are a lot of changes happening in medicine,” Sharp said. She said she was forced to sell her practice to a group because “I could no longer afford to have someone monitor the changes.”

The committee also briefly broached medical review panels and the statutory limit of $15,000 on claims that can bypass the panels. Steele said this will be the topic of the committee’s next hearing Sept. 24.

Ladendorf told the committee that because of the expense of medical review panels, most attorneys will not pursue malpractice claims unless cases are catastrophic. He said he agreed with a bill Steele introduced last year that would allow claims of up to $187,500 to bypass medical review panels and proceed directly to court.

But Carmel attorney Lara Engelking, whose firm Engelking Law Group LLC represents Indiana health care providers, cautioned against raising the threshold that allows claims to go straight to court without first being evaluated by a medical review panel.

Doing so, she warned, “will open the floodgates for frivolous claims.”•

Dave Stafford for www.theindianalawayer.com

Now that Indianapolis’ pay-to-play slating system that evenly divvied judgeships between Democrats and Republicans has been ruled unconstitutional, it’s up to the General Assembly to figure out how Marion County should select its judges.

Key lawmakers suggested there’s no rush to find a fix, though, because the next Marion Superior judicial election won’t happen until 2018. If legislators follow systems enacted for larger counties such as Lake, Allen and St. Joseph, merit selection could determine future Indianapolis judges, but that’s far from a given.

Sen. Brent Steele, R-Bedford, chairs the Interim Study Committee on Courts and the Judiciary. He said he didn’t expect the 7th Circuit Court of Appeals ruling striking down Marion Superior elections will be discussed in either of the committee’s two remaining 2015 meetings.

Sen. Michael R. Young, an Indianapolis Republican who serves on the Judiciary Committee, said it’s too early to tell whether there will be proposals to revamp the Marion County system in the upcoming session because there’s still time for the decision to be appealed.

The office of Indiana Attorney General Greg Zoeller could not indicate by IL deadline whether the state would appeal the ruling.

“Before anything’s decided, what we’ll do is get together both political parties, the judges involved, and try to discuss it and see what’s fair,” Young said. He isn’t philosophically opposed to merit selection, he

said, but noted, “My personal thought is we try to find a solution within the system we have now, making people’s votes meaningful and keeping the decision with the voters.”

Of Indiana’s 92 counties, 87 select judges through direct, partisan election. While it’s unclear what will replace Marion County’s current system designed to ensure partisan balance, some close to the process say it is unlikely changes will result in Indianapolis voters filling in unrestricted partisan ballots to elect Superior Court judges.

While heavily Democratic Marion County is the largest judicial circuit in the state, it also oversees a unique docket. Superior courts in the state capital handle appeals from state agency actions, and those decisions can have statewide implications. This special situation could prompt lawmakers to fashion a system in which the Legislature has a greater say in judicial appointments.

Geyh

Indiana University Maurer School of Law professor Charles Geyh, an authority on judicial selection, said it’s possible lawmakers could craft a system in which the state Senate or designated body serves in an advise-and-consent role on choosing judges, and he believes that sort of system would withstand constitutional scrutiny. But, he said he couldn’t hazard a guess as to what is likely to replace the system ruled unconstitutional.

Geyh noted the merit selection movement nationally has stalled in recent years, so it’s far from a sure bet lawmakers would enact such a system in Indianapolis. The task for legislators, he said, is finding a system that strikes the proper balance between judicial independence and public accountability.

“Marion County had a thoroughly wonky system for selecting judges,” Geyh said. “It was originally designed to keep the process from getting political. The net effect of trying to make it less politically partisan is the parties basically dictated judgeships and voters had basically nothing to say.”

That’s how the 7th Circuit Court of Appeals saw the system in its Sept. 9 opinion, affirming a ruling by Chief Judge Richard Young of the U.S. District Court for the Southern District of Indiana that the statute was unconstitutional.

“We agree with the district court that the Statute at issue burdens the right to cast a meaningful vote without sufficiently weighty interests to justify such a burden,” the 7th Circuit ruled in Common Cause Indiana v. Individual Members of the Indiana Election Commission, et al., 14-3300.

“We conclude that the precise interests (including partisan balance) put forward by the State do not justify the burden placed on the right to vote for judicial candidates for the Marion Superior Court. Therefore, the Statute violates the First and Fourteenth Amendments,” the panel held.

The election law that was struck down facilitated a system whereby both parties “slated” ballot positions with candidates who made five-figure financial contributions to the parties.

The slating process essentially made the general election pointless, because those candidates who won in primary elections were assured election because of the allocation of a set number of judgeships to each party. For instance, in a year where there was an election to fill 20 judicial positions, voters received ballots in which they could vote for up to 20 candidates, but only 10 Republicans and 10 Democrats were listed on the ballot.

Schumm

Indiana University Robert H. McKinney School of Law professor Joel Schumm said Marion County party chairs spoke to students in his judicial selection course after the 7th Circuit opinion.

While the system was flawed, he said, “There are advantages and disadvantages to every system. We’ll end up with some sort of a system, and it’s not going to be a perfect system.”

Schumm said slating kept a lid on the amount of money judicial candidates had to raise in Marion County, in contrast to judges from other counties who’ve told his class they needed to raise in excess of $60,000 for campaigns. Merit selection has shortcomings, too, he said, noting he’s unaware of any judge at any level in Indiana who’s ever lost a retention vote.

The system in Marion County was so unique, Schumm said, that even election law experts disagree about whether the 7th Circuit opinion was an unusual reach into the conduct of local elections. Nevertheless, he said there could be dangers if the current system is only slightly modified.

“If the goal of this is some sort of partisan balance, the court doesn’t seem to buy that argument,” he said. “I don’t know that that’s going to pass muster.”

Marion County “has a system that’s unique in the country and clearly creates a non-election,” said Ken Falk, legal director of the American Civil Liberties Union of Indiana, which represented Common Cause. “If the right to vote is going to mean anything, it means the right to a meaningful election.”

“There is no more important right in our Constitution than that of exercising a meaningful vote,” Falk said. “We are very pleased that the Court’s decision forcefully reaffirms that right.”

The 7th Circuit agreed with Young’s ruling that the statute was unconstitutional on its face and that Common Cause was entitled to summary judgment. In most cases under the Partisan Balance Statute, I.C. 33-33-49-13, “So long as each candidate votes for himself or herself, as he or she presumably will, actions taken by other voters in the general election are meaningless, as they lack any opportunity to affect the outcome,” wrote Judge Theresa Springmann of the U.S. District Court for the Northern District of Indiana, sitting by designation on the panel.

The panel rejected the state’s argument that races could be contested by independent or minor-party candidates. “It does not alter the fundamental nature of the Statute — to reduce electoral choice and the availability of what would otherwise be contested elections in the interest of preserving partisan balance.” The panel held that the statute also “interferes with the marketplace” by restricting the number of candidates each party may nominate.

The system “could be viewed as ultra-partisan,” according to the panel.

“Such a system creates the perception that a judge is chosen within the primaries, not the general election, and if a judicial candidate’s eventual election is dependent solely on the primary, the candidate’s chances of being elected improve the more he appears to espouse the ideals of the party,” Springmann wrote.

And because judicial candidates are “slated” by parties after making contributions of about $12,000 to $14,000 to the local parties, “the candidate could consider himself indebted to the party. His best chance at winning the election is to earn a spot on the party’s slate of preferred candidates,” Springmann wrote.•