|JLARC Report Summary|
284. Review of the Virginia Birth-Related Neurological Injury Compensation Program
The Virginia Birth-Related Neurological Injury Compensation Act was passed by the General Assembly in 1987 in response to malpractice insurance availability problems for providers of obstetric services. The program pays for the medical and certain other expenses of children who have severe neurological injuries resulting from the birthing process. It is, therefore, intended as an alternative to the traditional tort system for obtaining compensation for injuries.
Because a number of concerns have been raised about this program during its 15-year existence, the Joint Legislative Audit and Review Commission (JLARC) directed its staff in January 2002 to conduct an evaluation of the program. In the early years, the program built up a large fund, while very few children benefited from the program. In recent years, there has been a substantial increase in the number of children in the program, raising questions about the financial stability of the fund and the viability of the program's continued existence in its present form. Through this review, JLARC staff assessed the program's structure and operations, and examined the extent to which the program has served its intended purpose.
History of the
Birth Injury Program
By the mid-1980s, another medical malpractice crisis was looming, heightening interest in additional tort law changes. The early to mid-1980s saw increasing medical malpractice lawsuits, increasing malpractice insurance premiums, and decreasing insurance availability. This situation led to a "crisis" in obstetrics, in which physicians were reportedly eliminating obstetrical care from their practices. Rural areas of Virginia were reported to be particularly affected by this situation, with some counties having no obstetrical services available. Several changes in tort law were subsequently enacted, including the Virginia Birth-Related Neurological Injury Compensation Act. This act established a unique framework, separate from the court system, for addressing one of the most severe and costly types of medical injuries - birth injuries. Virginia was the first state in the nation to develop a birth injury compensation plan completely removed from the tort system. The only other state to enact a birth injury program is Florida.
Purpose of the
Virginia Birth-Related Neurological Injury Compensation Act
To be eligible for
the program, an infant must meet the definition in the act for a birth-related
neurological injury, and the obstetrical services must have been performed
by a physician or at a hospital that specifically participates in the
birth injury program. The program was designed as a "no-fault"
system of compensation, and therefore, decisions regarding acceptance
into the program are not based on a finding of malpractice.
By delivering a baby
in a participating hospital and/or through a participating physician,
the baby's family automatically waives the right to bring a medical malpractice
lawsuit against the participating physician or hospital if the baby incurs
a birth injury that meets the definition in the Code. The program was
also intended to completely restructure the way injured infants are compensated
for their injuries by eliminating the lump sum awards common in malpractice
awards and instead, providing payment on a reimbursement basis, after
collateral sources are used.
Around the same time as the medical malpractice crisis, the State was experiencing a problem regarding obstetric care for indigent women. To help alleviate this problem, language was included in the birth injury act to require doctors, as a requirement for participation in the program, to work with the Commissioner of Health in developing a program to provide obstetrical care to indigent women and to subsequently participate in its implementation.
Structure of the
Birth Injury Program
Responsibilities. There are three main entities involved in the
birth injury program and fund. The Workers' Compensation Commission (WCC)
conducts hearings and determines eligibility for claimants who seek entry
into the program. The State Corporation Commission (SCC) has certain financial
responsibilities vis-à-vis the fund. The birth injury board of
directors administers the program and the fund.
As of October 2002, 75 children have been accepted into the program. The
children in the program currently range in age from one to 14 years old.
By definition, all of the children in the program have severe physical
and cognitive disabilities rendering them incapable of independently performing
the basic activities of daily living.
Section 38.2-5009 of the Code of Virginia identifies three broad
categories of benefits that the program is to provide. First, it states
that compensation will be provided for all "medically necessary and
reasonable expenses of medical and hospital, rehabilitative, residential
and custodial care and
service, special equipment or facilities, and related travel," except
those for which the claimant has already received reimbursement either
under the laws of another government entity or the policy of another private
insurance program. Second, it provides payment (in regular installments)
for loss of earnings from the age of 18 until 65. Third, it allows for
reimbursement of "reasonable expenses incurred in connection with
the filing of a claim . . . including reasonable attorney fees."
Although the program was established in 1987, the first payment to a claimant was not made until 1992. Since then, almost $25.3 million in program assets have been distributed (Chart: Total Actual Claimant Expenses) for claimant expenses through June 2002. (The program spent an additional $7.2 million to purchase trust homes that remain assets of the program but are used by claimants for the duration of their lives. The trust home benefit was eliminated in January 2000.) On average, the dollar value of claimants' benefits per year since 1992 is approximately $62,000 (not including the value of the trust homes).
Funding the Birth Injury Program. The birth injury program is funded primarily through assessments on four sources. These sources are: participating physicians, participating hospitals, non-participating physicians, and liability insurers. Currently, the sources are assessed at the maximum levels allowed by law. As of July 2002, there were 500 participating physicians and 27 participating hospitals in the program. As of June 30, 2002, the fund was valued at $83.6 million.
Impact of the Birth
Injury Program Is Mixed
While this short-term
impact is clear, the program's long-term impact is less clear. It appears
that the program has had mixed success in meeting all of its objectives.
Compares Favorably to Virginia's Capped Tort System for Birth-Injured
Overall, it appears that the benefits offered by the program are generally
more advantageous to birth-injured children than a medical malpractice
award in Virginia. In addition to serving more birth-injured children
than the tort system, the program provides benefits that exceed the medical
malpractice cap for the typical child. There are also major disadvantages
to the families, however, including the inability of mothers to receive
compensation for injuries caused by their physician during the birthing
process. In addition, the program does not always meet the unique needs
of individual children.
The Birth Injury
Program Benefits Physicians, Hospitals, and Malpractice Insurers.
Virginia's significant changes to the tort system (notably the malpractice
award cap), along with a relatively low malpractice claims record, made
the State an attractive market for medical malpractice insurance companies
in the 1990s. It appears that the birth injury program played a role in
creating this situation both by minimizing claims for severely birth-injured
children and by helping to keep intact the medical malpractice award cap.
As a result, ob/gyns in Virginia were able to obtain malpractice insurance
at lower rates than their counterparts in many other states. To a lesser
extent all physicians benefited from the lower level of indemnity incurred
by malpractice insurers. Although malpractice premiums have increased
significantly in the past few years, this does not negate the fact that
the malpractice cap and birth injury program appear to have had a positive
effect on claims costs and subsequent malpractice premiums.
At the same time,
the birth injury program has directly benefited some participating physicians
because they avoided medical malpractice lawsuits. Others have benefited
from insurance discounts for participation that exceed the assessment
paid for participating in the program. In other words, they benefit financially
simply by participating in the program.
from Program Are Less Clear. In the 1980s, ob/gyns were reportedly
leaving the practice of obstetrics because of the rising malpractice insurance
premiums and risk of lawsuits that they faced. Staff of the Medical Society
of Virginia noted that a number of rural areas, in particular, had no
obstetrics coverage. The rationale for the birth injury program was that
by stabilizing medical malpractice premiums for obstetric providers and
reducing their exposure to lawsuits, they would decide to continue practicing
obstetrics in the State.
Definitive data are
not available on the level of obstetric services throughout Virginia over
time. However, review of available information suggests that while the
program does help stabilize malpractice premiums, the program's existence
does not appear to have a significant impact on the availability of obstetric
services in the State.
Further, it appears
that the annual program assessments are more than the potential awards
and associated expenses of the tort system for addressing severe birth
injuries, given Virginia's medical malpractice award cap. Total assessments
for physicians, hospitals, and insurers in 2002 were almost $15.2 million.
In contrast, JLARC staff estimated that potential tort system awards and
expenses for severe birth injury cases were about $10.8 million - $4.3
million less than the birth injury program assessments.
Finally, the impact of the program on obstetric services to indigent women is unclear. As directed in the birth injury act, the Department of Health implemented plans in 1988 for ensuring indigent women had access to obstetric services. However, there is no indication that the plans have ever been updated or are currently in effect. Data from the Department of Medical Assistance Services suggests a generally increasing level of obstetric coverage for women with Medicaid coverage. However, this trend does not appear to be related to the provisions of the birth injury act, given that no action has been taken since the late 1980s regarding the birth injury act's indigent care provisions.
The Birth Injury
Fund Is Actuarially Unsound, Although There Is No Threat of Short-Term
While forecasts by
the actuary point toward an $88 million unfunded liability at the end
of 2002, there appears to be no serious threat of a short-term deficit.
In fact, according to the actuary, the current fund balance should be
sufficient to meet claimant expenses for at least the next 25 years, provided
current assessments are maintained. Nevertheless, this projection does
not guarantee lifetime support for all current claimants, or for those
born but not yet in the program.
The fund's current
condition has resulted from a chain reaction of events, some of which
were unavoidable. In the early years of the program, the actuary had little
or no data on actual claimant expenses and other basic program parameters
on which to base its analyses. In hindsight, the parameters it chose to
use underestimated the true cost to provide lifetime care to the birth
injured children in the program. Only since 2001 has the actuary based
its analyses on actual program expenses. The adjustments made to account
for the claimant data indicate that the true cost to care for these children
is more than double what was originally estimated. Because estimated costs
were thought to be so much lower, the perception was that the fund had
more than enough money to provide lifetime care for the children.
In addition, JLARC
staff identified two main problems with the board's oversight of the fund.
First, the board did not sufficiently scrutinize the actuarial assumptions
and reports. Second, it failed to recognize an imbalance between fund
income and expenses, and make appropriate financial decisions accordingly
(Chart: Assessment Income vs. Total
Actual Expenses). Historically, it appears that the board has been
reactive rather than proactive regarding the conclusions of the actuarial
reports. This management approach has negatively affected the fund's income
In retrospect, it
appears that to have funded the lifetime care for these children in an
actuarially sound manner would have required that all of the possible
assessment sources - participating physicians, participating hospitals,
non-participating physicians, and liability insurers - be assessed for
the duration of the program's existence. However, the current funding
structure outlined in the birth injury act would not have allowed for
maximum assessments, given the earlier actuarial findings that the fund
(1). The General Assembly may wish to consider amending the Code
of Virginia to eliminate the sentence in §38.2-5016(F), which
states, "The board shall also have the power to reduce for a stated
period of time the annual participating physi cian assessment described
in subsection A of §38.2-5020 and the annual participating hospital
assessment described in subsection C of §38.2-5020 after the State
Corporation Commission determines the Fund is actuarially sound in conjunction
with actuarial investigations conducted pursuant to §38.2-5021."
Recommendation (2). The board of directors should conduct annual evaluations of the actuarial assumptions, and communicate any concerns identified to the State Corporation Commission. To the extent that the program is unable to conduct such an investigation in-house, it should seek assistance from an independent consulting firm.
Options for the
Future of the Birth Injury Program
There are three primary options that could be pursued depending on the primary goals sought to be attained through the birth injury program:
The body of this report
explores the advantages and disadvantages of each approach.
These options suggest the difficult policy choices that must be made by the General Assembly regarding the future of the birth injury program. Two of these options result in the continuation of the program. If the General Assembly wishes to continue the program, then significant improvements will be needed. The remainder of this summary outlines the findings and recommendations related to program eligibility and administration that would need to be addressed. The improvements recommended will help to ensure that the program is successful in serving birth-injured children as intended by the General Assembly.
Changes to the Definition of Program Eligibility Are Needed
(3). The General Assembly may wish to consider amending §38.2-5001
of the Code of Virginia to permit families of infants who die within
180 days of birth the option to file suit against a participating physician
and/or hospital rather than require applications to the Virginia Birth-Related
Neurological Injury Compensation Program.
Recommendation (4). The General Assembly may wish to consider amending §38.2-5001 of the Code of Virginia by replacing the language, "immediate post delivery period" with the more specific language, "within one hour of delivery."
Needed to the Eligibility Determination Process
Role in the Eligibility Hearings Should Be Eliminated. While there
is no evidence that the program has inappropriately attempted to exclude
cases from the program thus far, its involvement in the eligibility process
increases the contentiousness of the proceedings and represents a conflict
of interest. Therefore, the program should be removed from the eligibility
(5). The General Assembly may wish to consider amending §38.2-5004(D)
of the Code of Virginia to eliminate the requirement that the Virginia
Birth-Related Neurological Injury Compensation Program file a response
to petitions and specifically state that the program shall not be a party
to any hearing before the Workers' Compensation Commission.
Medical Panel Reviews
Need to Be Strengthened. JLARC staff found that the medical panel
reviews are not working as originally envisioned. However, with some modifications,
it appears that the medical panels are still the appropriate mechanism
for obtaining expert opinions in these cases and that many of these problems
can be resolved through increased communication between the WCC and the
(6). The General Assembly may wish to consider amending the Code
of Virginia to require that the Workers' Compensation Commission and
the medical panels meet on a yearly basis to discuss the eligibility process
and any improvements that may be needed.
(7). The Workers' Compensation Commission should provide copies of
all birth injury opinions to members of the medical panels.
(8). The medical panels should develop a review form, in consultation
with the Workers' Compensation Commission, that addresses each aspect
of the eligibility definition. This form should be completed by the panels
in each case they review for the Workers' Compensation Commission.
(9). The deans of the medical schools should develop a plan to include
both obstetrical and pediatric specialists who can evaluate whether applicants
meet the entire definition in the Virginia Birth-Related Neurological
Injury Compensation Act.
(10). The General Assembly may wish to consider amending §38.2-5008(B)
of the Code of Virginia to change the filing deadline for the medical
panels from "at least ten days prior to the date set for hearing"
to "30 days from the date the petition was filed at the Workers'
Compensation Commission." The Workers' Compensation Commission should
clearly communicate the deadline for the medical panel reports in all
cases that are sent to the medical panels for review.
(11). The General Assembly may wish to consider amending §38.2-5008
of the Code of Virginia to require the Workers' Compensation Commission
to forward a copy of the medical panel report to all petitioners.
(12). The Workers' Compensation Commission should begin to incorporate
Eastern Virginia Medical School into the medical panel review process.
(13). The Workers' Compensation Commission should assign cases to
the medical panels for review on a continuous rotation basis instead of
alternating on a three-year cycle.
Could Be Made to Assist Families Who Petition for Entry Into the Program.
JLARC staff found that some improvements could be made to better assist
families during the application process. For example, to make the process
more user-friendly for parents, the program could develop a hand-out that
explains the hearing process in lay terms, including all deadlines and
parties to the process. To encourage better record-keeping and the appropriate
release of medical records, cases in which the fetal monitoring strips
are withheld or lost should be given a rebuttable presumption that they
showed fetal distress. This may result in some children being accepted
into the program that would ordinarily be denied. To partially address
this added cost, the WCC should be given the discretion to fine hospitals
if they withhold a patient's records and the child is accepted into the
program. Finally, the WCC should be given discretion to award reasonable
attorney fees for all cases, regardless of whether or not the child is
admitted into the program, to increase claimant access to legal representation
during the process.
(14). The Virginia Birth-Related Neurological Injury Compensation
Program should develop an easy-to-understand hand-out that explains all
aspects of the petition process. The program should also develop an application
form for claimants who wish to apply to the program. Both documents should
be sent to anyone who inquires about applying to the program. These documents
should also be included on the program's website.
(15). The General Assembly may wish to remove §38.2-5004(A)(i)
and §38.2-5004(A)(j) of the Code of Virginia in order to streamline
the process for submitting a petition to the Workers' Compensation Commission.
(16). The General Assembly may wish to amend §38.2-5004 of the
Code of Virginia to specify that hospitals are required to release
all medical records, including fetal monitoring strips, to patients that
plan to submit a petition to the Virginia Birth-Related Neurological Injury
(17). The General Assembly may wish to amend §38.2-5004 of the
Code of Virginia to specify that claimants will have the rebuttable
presumption of fetal distress in the event that fetal monitoring strips
are not provided by the hospital.
(18). The General Assembly may wish to amend §38.2-5004 of the
Code of Virginia to specify that the Workers' Compensation Commission
has the authority to require hospitals to pay a fine to the Virginia Birth-Related
Neurological Injury Compensation Program in the event that a child whose
records are withheld or lost is accepted into the program. This fine should
not exceed the hospital's current participation assessment or the amount
of the assessment if the hospital had participated.
(19). The General Assembly may wish to consider granting the Workers'
Compensation Commission discretion to award reasonable attorney fees and
expenses for cases filed in good faith, regardless of whether a child
is accepted into the Virginia Birth-Related Neurological Injury Compensation
Hearings Should Remain at the Workers' Compensation Commission.
The eligibility process at the WCC appears to be quite efficient. In addition,
reversals of WCC decisions have been rare. Although the WCC should be
more stringent in its enforcement of deadlines, it appears that the WCC
has done an adequate job of handling the birth injury cases overall. Given
the WCC's performance, there appears to be no need to change the venue
for hearing birth injury cases.
Recommendation (20). The Workers' Compensation Commission should enforce all deadlines for the birth injury cases.
Physicians and Hospitals Should Be More Rigorous
(21). As part of their reviews of birth injury petitions, the Board
of Medicine and Virginia Department of Health should routinely interview
the claimant families on the events surrounding the births.
(22). The Board of Medicine and Virginia Department of Health should
routinely notify each claimant family concerning the outcome of the respective
Recommendation (23). The Workers' Compensation Commission should develop a plan for ensuring that all birth injury petitions, whether directly submitted by families of birth-injured children or transferred by the circuit court, are submitted to the Board of Medicine and Virginia Department of Health for review.
Process Needed for Obstetric Patients
To ensure that participating
doctors and hospitals provide information about the program to their patients
before they receive services, participating obstetrical providers should
be mandated by the act to obtain informed consent regarding program participation
from all obstetrical patients under their care. Given that past strategies
of notifying obstetrical patients have been weak, the program should also
pursue other ways of identifying children who may qualify for the program.
(24). The Virginia Birth-Related Neurological Injury Compensation
Program should revise the current brochure to better explain the patients'
rights and limitations under the program, especially the "exclusive
(25). The General Assembly may wish to amend the Code of Virginia
to eliminate the exclusive remedy provision for participating physicians
and hospitals that fail to obtain informed consent of obstetrical patients,
except for cases in which the patient has an emergency medical condition
or when such notice is not practicable.
Recommendation (26). The Virginia Birth-Related Neurological Injury Compensation Program should develop a strategy for informing pediatricians and other health care providers that come into contact with disabled children about the program so that they can make potential referrals and distribute program brochures.
Benefits Have Not
While it is understandable
that in the early years of the program it would have been difficult to
anticipate many of the types of benefits that families would request,
the program now has 15 years of experience from which to draw in establishing
program policies. Although the program cannot account for every possible
request that may be reasonable, it should now be in a position to develop
a set of comprehensive guidelines regarding benefits. Developing, maintaining,
and implementing an updated and complete set of benefit guidelines would
reduce the likelihood of inconsistent policy interpretation in benefit
decision-making, which in turn would help to increase the credibility
of program staff and board decisions among claimants requesting benefits.
In addition, a number
of specific issues vis-à-vis program benefits need to be addressed.
Although the current housing renovation policy appears to be fair for
homeowners and is a comparable benefit to that which could be obtained
through a medical malpractice award, it does not address the needs of
non-homeowners. Further, the program needs a consistent policy regarding
the payment of primary health insurance premiums for claimants. The program
also needs to re-examine its policies related to nursing care to ensure
that its guidelines do not contribute to problems in obtaining reliable
nursing care. In addition, the program should begin planning for the lost
wage benefit. And finally, a codified process for appealing benefit decisions
(27). The Virginia Birth-Related Neurological Injury Compensation
Program should develop an updated and comprehensive set of program guidelines.
These guidelines should be provided to all families currently in the program
and should also be posted on the program's website.
(28). The Virginia Birth-Related Neurological Injury Compensation
Program should develop a policy to address handicapped accessible housing
for children of non-homeowners.
(29). The General Assembly may wish to clarify §38.2-5009(A)(1)
of the Code of Virginia to explicitly state that claimants in the
Virginia Birth-Related Neurological Injury Compensation Program should
receive reasonable accommodations for handicap accessible housing, not
to include the purchase of a house.
Recommendation (30). The General Assembly may wish to consider amending the Code of Virginia to require claimants in the Virginia Birth-Related Neurological Injury Compensation Program to purchase private health insurance, or for cases in which a claimant cannot afford to pay private health insurance premiums, to allow the program to purchase private insurance for them.
(31). The Virginia Birth-Related Neurological Injury Compensation
Program should develop a consistent policy for payment of private health
insurance premiums for those families who cannot afford or do not have
access to their own health insurance.
(32). The Virginia Birth-Related Neurological Injury Compensation
Program should begin planning for management of the lost wage benefit
for children who attain 18 years of age. In part, the program should consider
reimbursing families for setting up special needs trusts for all children
in the program to ensure eligibility for Medicaid and disability benefits.
Recommendation (33). The General Assembly may wish to consider amending the Code of Virginia to specify that claimants in the Virginia Birth-Related Neurological Injury Compensation Program may appeal benefit decisions by the program to the Workers' Compensation Commission.
The Program Would
Benefit from More Accountability
Recommendation (34). The General Assembly may wish to amend the Code of Virginia to require that the program be subject to the Freedom of Information Act, the Public Procurement Act, and the Administrative Process Act or another public rulemaking process. The Code of Virginia should also be amended so that the program is required to receive an annual audit by a CPA. Finally, the Code of Virginia should be amended so that the Office of the Attorney General is required to provide legal representation for the program.
Generally Appear Adequate
(35). The Virginia Birth-Related Neurological Injury Compensation
Program should follow existing procedures related to communication more
closely to ensure that families in the program are aware of all program
policies. The program should also follow through with the existing plan
to hold group meetings across the State and obtain input from families
on how they can improve communication and service provision. Finally,
the program should improve its web site by including more features to
help families access information needed to obtain benefits.
(36). The Virginia Birth-Related Neurological Injury Compensation
Program should provide itemized reimbursement statements to families.
Recommendation (37). The Virginia Birth-Related Neurological Injury Compensation Program should explore options to better address the needs of families in transporting their children.
Structure and Role
of the Birth Injury Board Should Be Modified
(38). The General Assembly may wish to consider amending the Code
of Virginia to require the birth injury board of directors to obtain
advice on the fund's investment strategy, including the asset allocations
for its equities and fixed income portfolios, from the Chief Investment
Officer of the Virginia Retirement System on a semi-annual basis.
(39). The Birth-Related Neurological Injury Compensation Board should
direct the fund manager to supply an annual explanation of expected returns
on the equities and fixed income portfolios.
(40). The Birth-Related Neurological Injury Compensation Board should
take steps to minimize its involvement in routine benefit decisions to
allow for more focus on its fiduciary responsibilities. At a minimum,
the board should set as a high priority the revision of the program's
Recommendation (41). The General Assembly may wish to consider amending the Code of Virginia to change the non-participating physician representative on the Birth-Related Neurological Injury Compensation Board to a citizen representative. In addition, the General Assembly may wish to consider requiring the appointment of two citizen representatives with a background in the disabled community, and two citizen representatives with a minimum of five years of professional investment experience. The General Assembly may also wish to consider specifying in the Code of Virginia that persons who have practiced as physicians or who have been representatives of the health care industry or the insurance industry may not be appointed to the board as citizen members.
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