A patient compensation fund (PCF), as the name suggests, helps to ensure reasonable compensation for patients who have been injured due to medical negligence. These funds were legislative responses to the medical malpractice crisis of the 1970s that saw several cascading factors threatening instability in the medical liability market. As state tort laws became more favorable to plaintiffs, plaintiff attorneys recognized the opportunities presented by medical malpractice lawsuits, especially in an environment of increasingly complex medicine.1
These factors contributed to a rapidly diminishing market for providers seeking liability insurance which, at the time, was sold as a separate line by traditional commercial carriers. Out of this crisis came the legislative response of PCFs and new companies specializing in medical malpractice insurance — the industry we now know as medical professional liability insurance.1
The compensation available under a PCF is in excess of underlying coverage obtained by eligible healthcare providers from their liability insurers. The funds also generally limit a provider’s liability to a specific amount. At the time the funds were created, they were seen as an effective way of increasing accessibility to medical malpractice insurance at a reasonable cost.2
Which States Operate Patient Compensation Funds?
Eight states currently operate patient compensation funds (with Florida’s standard PCF being dissolved by December 31, 2023; see note below), many funded by surcharges on the underlying coverage. They vary by state on features such as provider eligibility, coverage details, surcharges, residency requirements, requirements for underlying coverage, and more. Provider participation in these funds also varies by state. It is mostly voluntary in Indiana, Louisiana, Nebraska, and New Mexico, while in Kansas, Pennsylvania, and Wisconsin participation is largely mandatory for most providers.
The table below provides a general state-by-state summary of the key details of these funds.
The information here is for general understanding only. Visit the fund website for specific details about a fund.
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Fund Website |
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Mandatory or Voluntary? |
Voluntary for most entities and individuals practicing in IN (residents and non-residents) |
Mandatory for most healthcare providers practicing in KS (residents and non-residents) |
Voluntary for providers practicing in LA (residents and non-residents) |
Voluntary for providers practicing in NE (residents and non-residents) |
|
Fund Limits* |
Total cap of $1,650,000 for act of malpractice between 6/30/17 and 7/1/19; $1,800,000 thereafter |
Multiple options available |
Total cap on damages is $500,000 (exclusive of medical costs, which are paid by the fund); provider only liable for $100,000 |
$2,250,000 total cap |
|
Coverage Type |
Claims Made or Occurrence |
Claims Made |
Claims Made or Occurrence |
Claims Made or Occurrence based on underlying coverage |
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Does Fund coverage extend outside of the Fund state? |
No |
If KS resident, yes. Coverage is worldwide. |
No |
No |
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Who submits information to the Fund? |
Carrier |
Carrier |
Carrier |
Insured |
|
Fund Website |
Pennsylvania Medical Care Availability and Reduction of Error Fund |
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|
Mandatory or Voluntary? |
Voluntary for covered providers practicing in NM (residents and non-residents) |
Mandatory for most providers practicing in PA (residents and non-residents) |
Mandatory for most providers who practice in WI >240 hrs/yr and most providers who are WI residents but practice in MI; voluntary for other providers |
|
Fund Limits* |
$750,000 total cap for individual providers who belong to the fund, except for medical care and punitive damages; Provider capped at $250,000 |
$500,000/$1,500,000 for individual providers |
No limit. The Fund indemnifies its participants for any amount over $1,000,000 |
|
Coverage Type |
Occurrence |
Underlying coverage may be claims made or occurrence, but MCARE coverage is occurrence only. |
Occurrence |
|
Does Fund coverage extend outside of the Fund state? |
No |
Yes, it follows the physician if they have incidental coverage in another state covered by their PA policy. |
Yes, if the primary practice is in WI. |
|
Who submits information to the Fund? |
Insured |
Carrier |
Carrier |
* Limits are in excess of underlying coverage
Patient Compensation Fund Notes:
- During the 2022 legislative session, a bill was passed pursuant to which Florida’s standard PCF will be dissolved by December 31, 2023. Any remaining money in the fund will be deposited in the state’s General Revenue Fund.
- South Carolina had a PCF; however, effective January 1, 2020, the South Carolina PCF and the South Carolina Medical Malpractice Joint Underwriting Association (JUA) were consolidated into the South Carolina Medical Malpractice Association (SCMMA). As a result, the South Carolina PCF fund is winding down, with the intent for the MMA to evolve into the market of last resort for providers and entities.
Birth Injury Funds
Three states—Florida, New York, and Virginia—have another type of compensation fund focusing on birth-related neurological injuries. These funds and PCFs have elements in common, such as compensation outside the healthcare insurance and malpractice tort system, but function differently than PCFs. Information about the funds here is sourced from the linked websites.
Florida Birth-Related Neurological Injury Compensation Association (NICA)
NICA is a no-fault alternative to medical malpractice litigation. Participating providers are protected from tort action in cases that are accepted into the NICA program. The fund helps “birth-injured children and adults [receive] the care they need while reducing the financial burden on medical providers and families.” A statutory organization, it manages state funds to pay for the lifetime support and care of adults and children born with certain birth-related neurological injuries occurring in a Florida hospital when the obstetrical services were provided by participating providers. Admitted cases are removed from the tort system on a no-fault basis. Families receive an initial lump sum payment and lifetime payments for medically necessary and reasonable expenses for eligible injuries. Provider participation is voluntary for providers practicing in Florida but, generally, all providers are required to inform obstetrical patients of their participation status. Participating physicians and certified nurse midwives (under the supervision of a participating physician) pay an annual assessment. Certain other providers are not required to pay the assessment.
New York Medical Indemnity Fund (MIF)
The New York MIF provides a funding source for certain future health care costs of individuals with birth-related neurological injuries as the result of medical malpractice during a delivery admission. Costs are paid throughout the lifetime of an eligible plaintiff after a court-approved settlement or judgment. The fund generally pays for care in excess of health insurance coverage and other programs (except Medicare and Medicaid) but in lieu of the corresponding portion of a court settlement or judgement. Non-domestic providers are eligible for reimbursement of covered expenses under the fund.
Virginia Birth-Related Neurological Injury Compensation Program
For admitted children born with serious birth-related neurological injuries, this fund covers their care including “medically necessary expenses such as medical expenses, hospital expenses, rehabilitation expenses, in-home nursing care” and other costs. Benefits are provided to children with a qualifying birth-injury who were delivered by a participating provider (physician/midwife) or at a participating hospital. Children admitted into the program are not eligible for compensation from a medical malpractice lawsuit. The program is funded without general state funds by through fees paid by participating providers and hospitals as well as assessments on liability insurance carriers operating in Virginia and non-participating physicians practicing in Virginia. Except those receiving an exemption, all physicians practicing in Virginia (regardless of specialty) are required to participate in the fund or pay the non-participating assessment and are obligated to inform obstetrical patients of their participation status.
References
1. Susan Beach, Eric R. Anderson. “MPL Association—A Rich History of Supporting Insurers and Medical Professionals.” Inside Medical Liability. First Quarter 2022.
2. Elizabeth D. Schrero. “Patient Compensation Funds: Legislative Responses to the Medical Malpractice Crisis.” American Journal of Law & Medicine. 1979 Summer;5(2):175-95.
