State Snags $20 Million from UConn Malpractice Fund

State Snags $20 Million from UConn Malpractice Fund
May 19, 2011

The University of Connecticut Health Center malpractice account is underfunded with only enough money to cover one-third of the estimated claims against the state-owned hospital.

Two years ago, this underfunding would have been illegal. The state required the health center to deposit money in the account on an actuarial basis.

But the state needed money to balance the 2010 and 2011 budgets, so it passed a law taking $10 million from the account for each budget year, a total reduction of $20 million.

Drop from $25M to $700K
Before the change, the malpractice fund – also known as the John Dempsey Hospital Insurance Fund – held $25 million. After paying $4.3 in claims, the fund was left with only $700,000, according to a letter to the appropriations committee from Cato Laurencin, dean of the medical school.

Laurencin said the health center would deposit $3.8 million during the 2010 fiscal year to pay current claims, but would need a deficiency appropriation from the state to pay settlements above that amount.

“The Health Center did not propose nor did it support the transfer of these funds,” said health center spokesman Chris DeFrancesco.

The “sweep” of the malpractice fund was part of a budget signed by former Gov. M. Jodi Rell (R). Her successor, Gov. Dannel Malloy (D), has opposed similar methods.

“Gov. Malloy isn’t proposing to take more money out of these funds, or cut off revenue to the funds,” said Juliet Manalan, press secretary for Malloy. “He thinks it is a bad idea to have swept these funds in the first place, and wouldn’t consider it because it is only one-time revenue – a type of budget gimmick that the governor refuses to use to balance the state’s budget.”

Connecticut paid the UConn Health Center $250 million, combined, in 2010 and 2011. It paid UConn $466 million over the same period.

Bid to End Fund
Given the reduced balance, the health center proposed legislation to eliminate the fund and have the state cover malpractice claims as they arose.

“To do otherwise essentially would have required the Health Center to pay twice – first for having established the reserve and then again when paying a settlement with new operating funds because the reserves were transferred to the state’s general fund,” DeFrancesco said.

Rather than eliminate the fund, the legislature passed a second law to remove the requirement that the fund have an actuarial basis.

Among others, the health center is facing a $2 million claim from the 2009 incident when a patient at an affiliated fertility clinic was implanted with another woman’s embryo.

 “We recognize that as a result of the 2009 sweep of the malpractice fund, the state’s general fund may be called upon in a malpractice claim, so we think it should be appropriately funded going forward by the UConn Health Center,” Manalan said.

The health center laid bare the financial challenges it faces in the $100 million grant application it filed with the federal government. The grant went to the Ohio State University instead.

Rell and the legislature also swept other funds, including the Clean Energy Fund and the operating accounts of UConn and the state university system.

Zachary Janowski (zach@yankeeinstitute.org) is an investigative reporter for the Yankee Institute for Public Policy, Connecticut’s free-market think tank. Used with permission from Raising Hale, a media project of the Yankee Institute.