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Pennsylvania Commission On The Medical Care Availability And Reduction Of Error (MCare) Fund Submits Final Report

The Pennsylvania Commission on the MCare Fund submitted its final report November 16, 2006. The Commission, created by statute on December 22, 2005, “for the purpose of reviewing and making recommendations regarding appropriate and effective methods to address any future unfunded liabilities of the MCare Fund.” 40 P.S. §5103.1(b), began meeting April 12, 2006. In their report, the Commission identified two continuing problems confronting the MCare Fund: the rising costs of insurance for healthcare providers and unfunded liabilities.

The MCare Fund, created by Act 13 in 2002, replaced the Medical Professional Liability Catastrophe Loss Fund (“CAT Fund”). Coverage requirements for healthcare providers have varied since 1976 when the CAT Fund was created. Under current Act 13 requirements, hospitals are required to have minimum total coverage of $1 million per incident and $4 million in aggregate coverage per year. The first $500,000 per incident and $2.5 million of the annual aggregate for hospitals are the primary layer, and the coverage above the primary layer is the MCare layer. Non-hospital providers are required to have minimum total coverage of $1 million per incident and $3 million in aggregate per year; the first $500,000 per incident and $1.5 million of the annual aggregate for non-hospitals are the primary layer, and coverage above the primary layer is the MCare layer. Providers are responsible for a portion of this amount by maintaining primary coverage, either through private insurance or by self-insuring. Either way, a significant cost is added to the operational budget(s) of Pennsylvania healthcare providers.

In response to these rising costs, Act 44 established the Health Care Provider Retention Program. Commonly called the “Abatement Program,” and the first of its kind in the nation, Act 44 authorizes abatements to help defray the rising costs of malpractice insurance. Funding for the Abatement Program is achieved through a tax on cigarettes and contribution from the Auto CAT Fund. The Abatement Program currently has $830 million at its disposal. This sum is expected to grow to $1 billion by the end of 2007. Health care providers participating in the Abatement Program receive an abatement in exchange for the promise to continue practicing in Pennsylvania for two years.

The Commission determined that its task was to suggest policy to enable continuation of the Abatement Program and address the payment of Unfunded Liabilities, currently estimated to be $2.33 billion. To complete this task, PricewaterhouseCoopers created more than 150 hypothetical financial scenarios. These scenarios were based on actual data provide by healthcare providers (related to claims and costs). The following policy recommendations were based on the most economically feasible scenarios:

    • Continue the Abatement Program until the MCare Fund is phased out. Following the phase-out the commission predicts that the absence of MCare assessments will reduce provider costs.

    • Continue funding the Abatement Program through public sources (i.e. the cigarette tax and contribution from the Auto CAT fund).

    • Continue to use funds already available to the Abatement Program and phase-out the Abatement Program in conjunction with the projected elimination of the MCare coverage layer.

    • Any excess money from public sources should be used to decrease the cost of provider insurance through the year 2025.

    • Money from public sources should be used to limit the yearly percentage increase of coverage costs.

    • Any surplus money remaining from public sources should be used to support programs which promote healthcare in the Commonwealth.

    • Promote quality to decrease the number of claims made and thereby decrease costs. Borrow money as necessary.

    • Arrange for reserves to pay any claims remaining against the MCare Fund after 2025.


The Commission’s report is available by clicking here: Report


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