What is the Mcare Fund?
The Mcare Fund is a medical liability coverage fund run by the state of Pennsylvania. Currently, physicians are required to have $500,000 in primary liability coverage plus $500,000 in excess coverage above that. They can get the first $500,000 layer either in the private market or through the Joint Underwriting Association (JUA). They get the second layer from the Mcare Fund.
Will it be around forever?
Pennsylvania law mandates that the Mcare Fund will be eventually retired in two steps. The Insurance Commissioner determines whether each step is implemented, based upon a review of whether the private market can bear increased primary limits.
In the first step, Mcare coverage would be stepped down to $250,000, pushing the level of primary insurance to $750,000. When the commissioner implements the second step, physicians would be required to have $1 million in primary coverage and no Mcare coverage.
Currently, it appears that there will be
no change in limits in 2012. The Insurance Department must re-examine the issue in two years.
How does the Mcare Fund work?
Unlike a traditional insurer, the Mcare Fund is a pay-as-you-go operation, and it does not reserve for future claims. It simply charges physicians, hospitals, and other participating providers an annual assessment to pay current claims and operating expenses.
What is the unfunded liability?
As we described above, according to the Mcare retirement plan in the law, physicians eventually will purchase all of their mandated medical liability coverage privately or through the JUA.
This is where the unfunded liability comes in. Even after physicians no longer obtain coverage from the Mcare Fund, there will be claims to pay because some suits won’t have been settled yet and others won’t even have been filed yet. The money to pay these claims is the unfunded liability.
The current unfunded liability is estimated to be $1.7 billion.
Who will pay off the unfunded liability?
Currently, there is no plan in place to pay off the unfunded liability. It could fall to physicians to pay it off—even those who weren’t practicing in the state when the Mcare Fund was in place. It would be like asking those physicians to pay a mortgage on a house that they never owned.
What is the Health Care Provider Retention Account (HCPRA)?
The assessments of physicians and certain other participating Mcare providers were abated from 2003-2007. When the abatement program was established, the legislature also provided for 25 cents per pack of the cigarette tax to be deposited in the HCPRA to pay for the cost of abatements.
However, the administration failed to transfer sufficient money from HCPRA to Mcare to cover the full cost of the abatements. The Medical Society and The Hospital and Healthsystem Association (HAP) have filed legal actions seeking to have the state cover this shortfall.