A state court ruled Thursday that Pennsylvania has mishandled a fund to help physicians pay malpractice premiums and ordered the state to transfer hundreds of millions of dollars out of its general fund to resolve a pair of lawsuits.
Commonwealth Court ruled 4-1 in favor of the state's hospitals and physicians, which had argued the state should not have been able to divert surplus money from a program known as MCare to help solve its budget problems.
At issue was how the state handled malpractice abatements from 2003 to 2007.
The MCare program is funded by an assessment on health care providers above and beyond their normal medical malpractice insurance. The fund is used to pay claims against medical providers for losses or damages that exceed their basic insurance coverage.
In 2003, the state agreed to help doctors deal with skyrocketing malpractice premiums by giving them abatements on their MCare payments.
In October, the state drained $808 million from two MCare accounts to help resolve a multibillion-dollar budget shortfall, one of the judges said. The court ruled that left the fund with less ability to meet its future obligations.
"Providers in the future, therefore, will pay increased assessments, meaning that any abatements they have received were actually only mere payment deferrals, rather than abatements," Judge Johnny J. Butler wrote in one of the opinions.
The plaintiffs in one or both of the lawsuits included the Hospital & Healthsystem Association of Pennsylvania, the Pennsylvania Medical Society, Geisinger Health System and specific hospitals and doctors.
Scot Chadwick, the Pennsylvania Medical Society's vice president for governmental affairs, said that although $808 million was diverted from the MCare-related accounts and was the total amount cited in a dissenting opinion, the lawsuits put into dispute a total of $566 million to $716 million.
Hospital & Healthsystem Association of Pennsylvania senior vice president Jim Redmond said the group was delighted with the court's rulings. He noted the MCare program maintains an unfunded liability of about $1.6 billion that needs to be addressed.
"Our position has always been to use those moneys to help retire the MCare fund and get the commonwealth out of the medical-liability insurance business," Redmond said.
He said the amount of money involved "has implications on the commonwealth's budget. And we'd want to work with the Legislature and administration to work that out in some way."
Gov. Ed Rendell said the state plans to appeal the decision and was confident it would be overturned. He noted that doctors received billions in relief over the five-year period.
"The Legislature has the absolute right to do whatever it wants with that money," Rendell said. "We created the MCare fund and we can end it."
Judge Dan Pellegrini, in a lone dissent, warned of the consequences of the ruling.
"The 2009-10 Pennsylvania budget is out of balance, and the doctors of this commonwealth are eligible to receive an $808 million windfall from taxes imposed on ordinary citizens of the commonwealth which is not needed to provide subsidies for the doctors' malpractice assessments," he wrote.
Pellegrini also said the majority was overstepping the bounds of its authority.
"Judicial intervention in the legislative process is not warranted because it goes to the core question of the budgeting process, making the enforcement of any order problematic," he said.