$75 Lawyer Tax: RIP
Senate panel deep-sixes three-year extender, finding no evidence the surcharge has had effect on medical malpractice insurance
By Michael Booth
New Jersey Law Journal
May 24, 2007

The wildly unpopular $75-a-year surcharge on lawyers and physicians to subsidize medical malpractice premiums, due to expire this year, apparently will be allowed a quiet death.

A bill to extend the program for another three years was tabled indefinitely on Thursday when it became clear there were not three votes to clear the five-member Senate Commerce Committee.

In fact, no member was even willing to second a motion to put the bill, S-2653, sponsored by Sen. Joseph Vitale, D-Middlesex, up for a vote.

What killed the measure was an admission by Department of Banking and Insurance legislative liaison David Eber that there is no tangible evidence the surcharges have resulted in a decrease in medical malpractice insurance premiums.

Committee Chairwoman Nia Gill, D-Essex, said she did not believe any legislator could vote on the bill without knowing whether the surcharge was fulfilling its purpose.

"DOBI has an obligation as the regulatory agency . . . in a very sensitive situation to be able to answer questions and address legitimate concerns," said Gill, of Monclair's Gill & Cohen.

Jaimee Gilmartin, DOBI's director of operations and communications, said after the hearing that it is a "misconception" the program was intended to result in lower medical malpractice insurance premiums. Rather, she says, the program was designed to provide a measure of relief from sharp increases in premiums for doctors in high-risk fields.

In exchange for the subsidy, a recipient doctor had to agree to remain in the field, and in the state, for two years. The goal, Gilmartin says, was to ensure that patients would continue to be able to find doctors in these critical areas.

But the State Bar Association, which also testified, insists there is no evidence the Medical Malpractice Liability Insurance Premium Assistance Fund is accomplishing its stated purposes of malpractice premium relief.

The Bar's spokesman, past president Edwin McCreedy, said extending the surcharge for three more years was premature in that the Medical Care Availability Task Force, created by the enabling statute, had yet to issue findings about the fund's performance.

McCreedy, of Cranford's McCreedy & Cox, also argued that it is unfair to tax all the state's lawyers when only a handful do medical malpractice work and that it has never been shown that insurance company premium hikes are prompted by litigation costs, as opposed to investment losses.

McCreedy said after the hearing that while he was gratified the committee decided to not take action on the bill, he thought it unfair to blame DOBI for not providing evidence of linkage between the surcharge and premium reduction.

"I'm not sure it's DOBI's responsibility to have a position on that," McCreedy said. "It's basically just the administrator of the fund."

Vitale's bill would extend until 2010 the collection of the surcharge, enacted in response to complaints by doctors' groups that rising medical malpractice claims, many of them frivolous, were driving up the cost of malpractice insurance.

Vitale said the program deserved to be extended since it has helped keep practitioners in high-risk fields - such as obstetrics, gynecology and pediatrics - from closing or moving to another state.

The fund paid out $13.5 million to 1,255 doctors in 2005 and $15.7 million to 1,272 doctors in 2006.

"This has provided a great service to the state," Vitale said. "I think attorneys understand there's a greater good here."

When Sen. Nicholas Scutari, D-Union, pointed to the lack of a connection between the surcharge and malpractice insurance costs, Vitali replied, "I don't have an answer. But in my view [the surcharge] isn't a burden at all."

McCreedy said at the hearing that while $75 a year is probably not a lot of money for most attorneys, it does affect those who choose to work at lower-paying jobs, such as in community legal services organizations, who must also contend with other mandatory fees.

Sen. Raymond Lesniak, D-Union, who co-sponsored the original bill three years ago, added, "It's not a perfect solution" to high medical malpractice insurance rates "but it is helpful."

But when Lesniak moved the bill for consideration, the committee room was silent for nearly a full minute before it was obvious that no one was going to provide the requisite second.

Vitale said he was unsure if, or when, the bill would be brought up for consideration a second time.

Lesniak had offered amendments that would have exempted legal services attorneys and would have required the task force to issue a report within one to two months.

Before the hearing, the Bar provided the committee with a three-page position paper, stating, "It is fundamentally unfair to continue to tax thousands of lawyers in New Jersey who do not practice in the medical malpractice area to pay for harm caused by negligent doctors." The Bar also questioned whether an insurance crisis exists, saying claims of an overabundance of frivolous lawsuits are "overblown."

The Bar mounted an unsuccessful constitutional challenge to the surcharge. In 2005, a Union County judge found a sufficient rational relationship between the surcharge and the governmental objective sought to be achieved, saying "it was not irrational for the Legislature to conclude that if the State tort liability system is a cause of the current problem and attorneys are desirous of preserving that system as well as playing a role in the reformation of the medical malpractice system, then it is reasonable that they be called upon to help pay for it." The state Supreme Court last year declined to review the dismissal.