Medical Care Availability and Reduction of Error Fund (MCARE)

By Ronni Burkhart , Assistant Executive Director | 3 years ago
Health & Human Services Analysts: Aniam Iqbal - Budget Analyst , Mara Perez - Senior Budget Analyst

Act 13 of 2002 created the Medical Care Availability and Reduction of Error (Mcare) Fund. Mcare succeeded the Medical Professional Liability Catastrophe Loss (CAT) Fund. The CAT fund began to accept coverage and accrue unreserved liabilities in calendar year 1976.

Coverage

Mcare is a special fund within the State Treasury with the primary purpose to ensure reasonable compensation for people injured due to medical negligence. Physicians, hospitals, and other health care providers, as defined by Act 13, are required to have medical professional liability insurance. For 2021, participating health care providers, excluding hospitals, are required to carry medical professional liability insurance, primary coverage, in the amount of $500,000 per occurrence and $1,500,000 per annual aggregate. Hospitals are required to obtain primary coverage in the amount of $500,000 per occurrence and $2,500,000 per annual aggregate.

Mcare funds are used when claims against participating health care providers result in losses or damages being awarded that exceed a provider’s primary coverage. Mcare provides participating health care providers with coverage of $500,000 per occurrence and $1,500,000 per annual aggregate in excess of their primary coverage.

Medical Professional Liability Coverage
Policy Year	Health Care Provider (Excluding Hospitals): Mandatory Primary Coverage - Occurrence / Aggregate Limits	Hospitals: Mandatory Primary Coverage - Occurrence / Aggregate Limits	Mcare Fund Excess - Occurrence / Aggregate Limits
2021	$500,000 / $1,500,000	$500,000 / $2,500,000	$500,000 / $1,500,000

Phase-out

Act 13 provides for the phase-out of Mcare, eventually shifting all medical liability coverage to private providers. Mcare is operated on a pay-as-you-go basis. When court judgements and settlements occur, Mcare makes annual payments to cover the obligations. The governor’s executive budget estimates that $210 million will be disbursed in 2021/22.

Claim payments often occur years after the alleged incident. As a result, even after the shift to private insurance coverage, Mcare will continue to make claims payments for several decades. Providers will still be required to pay annual Mcare assessments to cover Mcare’s liabilities incurred at the time of phase-out. Pennsylvania provider organizations have opposed the phase-out and made their support conditional on a commitment of public funds to pay off Mcare’s unfunded liabilities and to cap annual increases in medical professional liability insurance. According to the Mcare Annual Report for 2020, the estimated unfunded liability was $1.025 billion as of December 31, 2019.

Act 13 provided for the phase-out to begin in 2006, subject to a review and report by the Insurance Commissioner. Thus far, based on statutorily prescribed capacity studies, the commissioner has maintained the aforementioned coverage levels.

Once the Insurance Commissioner finds that additional basic insurance capacity is available, the phase-out of Mcare will begin and the amount of required primary coverage for providers will be increased. A similar exercise will take place three years after the initial phase-out of Mcare. Unless the Insurance Commissioner finds that additional basic insurance coverage capacity is not available, the amount of required primary coverage for providers will again be increased. Corresponding decreases in Mcare coverage will also take place as the required primary coverage is increased during this two-part phase-out. The chart below is for illustration purposes only and depicts what the phase-out would look like if it were to begin in 2022.

Medical Professional Liability Coverage
Policy Year	Health Care Provider (Excluding Hospitals): Mandatory Primary Coverage - Occurrence / Aggregate Limits	Hospitals: Mandatory Primary Coverage - Occurrence / Aggregate Limits	Mcare Fund Excess - Occurrence / Aggregate Limits
2022-2024	$750,000 / $2,250,000	$750,000 / $3,750,000	$250,000 / $750,000
2025	$1,000,000 / $3,000,000	$1,000,000 / $4,500,000	$0 / $0

Assessment

The Mcare Fund receives no General Fund revenue. Mcare is funded by a yearly assessment on the health care providers it serves. The Mcare assessment is a percentage of the Pennsylvania Liability Joint Underwriting Association (JUA) rates as approved by the Pennsylvania Insurance Department. The assessment rate for 2021 remains at 19 percent. The chart below displays the yearly assessment rate for the past ten years.

Assessment Rate by Year
Assessment Year	Assessmet Rate		Assessment Year	Assessmet Rate
2012	22%		2017	19%
2013	25%		2018	19%
2014	19%		2019	19%
2015	12%		2020	19%
2016	17%		2021	19%

 

Private market insurers calculate, bill, collect, and remit the assessment to Mcare for each provider it insures. Self-insured providers perform the same function on their own behalf. The governor’s executive budget estimates that $195 million will be collected in 2021/22.  

Act 13 stated that the assessment shall, in the aggregate, produce an amount sufficient to do all the following:

1. Reimburse the fund for the payment of reported claims which became final during the preceding claims period.
2. Pay expenses of the fund incurred during the preceding claims period.
3. Pay principal and interest on moneys transferred into the fund from the Catastrophic Loss Benefits Continuation Fund.
4. Provide a reserve that shall be 10 percent of the sum of subparagraphs (i), (ii) and (iii).

The governor’s executive budget estimated a beginning cash balance of $66 million for 2021/22. Adding in the estimated assessments of $195 million, a small amount of interest and subtracting estimated disbursements of $210 million, produces an ending balance of $52 million for 2021/22, sufficient funds to cover the 10 percent reserve requirement.