It has been eight years since the passage of the legislation establishing the New York State Medical Indemnity Fund (MIF or “the Fund”)—Public Health Law article 29-D, Title 4. That law radically altered actions involving neurologic injuries sustained by children around the time of their birth as a result of medical malpractice. It eliminates the defendants' obligation to pay damages for health care expenses stemming from those injuries, and requires such a plaintiff to be enrolled in the MIF, which is supposed to pay for those expenses. Since we last discussed the MIF in April of 2016, the legislation has undergone significant amendments and judicial interpretation. See Moore & Gaier, New York State Medical Indemnity Experience, NYLJ April 5, 2016, p. 3. Those developments are the subject of this column.

Legislative Background

The MIF statute was amended in combined legislation passed in 2016 and 2017, and again in the 2019 state budget legislation. The 2016 amendments were passed unanimously by the Assembly and the Senate in Chapter 517 of the Laws of 2016, but were the subject of chapter amendments in Chapter 4 of the Laws of 2017. The legislation passed in 2016-17 affected the benefits available to persons enrolled in the Fund, and clarified an ambiguity in the language defining the plaintiffs to whom the MIF applies. The changes effected in the 2019 legislation were primarily procedural in nature, but several of them made important changes to the manner in which plaintiffs are admitted into the MIF.

With respect to benefits, PHL §2999-j [2] was amended in 2016-17 to add a subdivision (c), which precludes regulations prohibiting “qualifying health care costs” on the grounds that the expenditure “may incidentally benefit other members of the household, provided that whether the qualifying health care cost primarily benefits the patient may be considered.” This permits coverage of expenditures for items such as exercise equipment or modifications to a home (Emods) that are needed for the plaintiff but may also benefit other persons who reside in the home.

Similarly, PHL §2999-h [3] was amended to include in the definition of “qualifying health care costs” habilitation, respite and transportation for the purposes of health care related appointments. Adding “habilitation” ensures that therapies, treatment and programs that assist the plaintiff in attaining a better quality of life and greater self-sufficiency will be covered. Adding “respite” protects the rights of parents to have care paid for by the Fund so that they are not required to be full-time care-givers. Transportation for the purposes of health care related appointments speaks for itself—it is an obvious necessity and it had not always been covered by the Fund.

Key Amendment

However, the most important amendment to the benefits provisions of the legislation in 2016-17 was to PHL §2999-j [4], which addresses qualifying health care costs to be paid from the Fund. The original legislation provided that services by private physicians would be calculated on the basis of usual and customary rates, and that all other services would be calculated on the basis of Medicaid reimbursement rates—and if none were available, as defined by the commissioner in regulation. These “other services” that were subject to Medicaid or other rates lower than usual and customary rates included many important expenses incurred in caring for neurologically damaged children—items like therapies, nursing care and custodial care. This section was amended to provide that all qualifying health care costs would be calculated:

on the basis one hundred percent of the usual and customary cost. For the purpose of this section, “usual and customary costs” shall mean the eightieth percentile of all charges for the particular health care service performed by a provider in the same or similar specialty and provided in the same geographical area as reported in a benchmarking database maintained by a nonprofit organization specified by the superintendent of financial services. If no such rates are available qualifying health care costs shall be calculated on the basis of no less than one hundred thirty percent of Medicaid or Medicare rates of reimbursement, whichever is higher. If no such rate exists, costs shall be reimbursed as defined by the commissioner in regulation.

The importance of this change to the children who rely upon the Fund to pay for the health care they require as a result of the medical malpractice cannot be overstated. It was necessary because many parents of children in the MIF found that they were very limited in the number of health care providers willing to treat their child at Medicaid rates. Those parents who could afford to would pay the additional amounts necessary to obtain the care out of their own pockets. Many of these children were forced to forgo the care altogether. This much-needed amendment has significantly improved the ability of children enrolled in the MIF to get the health care they require.

Unfortunately, after this provision passed unanimously in both houses of the Legislature, the chapter amendments of 2017 imposed a sunset provision by which, on Dec. 31, 2019, the rates revert back to what they had been. The recently enacted New York State budget legislation has extended that sunset provision to Dec. 31, 2020. See Chapter 57 of the Laws of 2019. Therefore, in a year and a half the MIF will revert back to providing inadequate reimbursement rates, and again become a source of frustration and angst, for the families of children who rely upon it for critical health care, unless the Legislature takes permanent and decisive action.

Adding Commas to Clarify

The 2016 clarification regarding the applicability of the MIF involved the definition of “birth related neurologic injury” in PHL §2999-h [1]. As originally drafted, that subdivision defined it as “an injury to the brain or spinal cord of a live infant caused by the deprivation of oxygen or mechanical injury occurring in the course of labor, delivery or resuscitation or by other medical services provided or not provided during delivery admission that rendered the infant with a permanent and substantial motor impairment or with a developmental disability … .” As noted in our last column on the MIF, based on that wording the Fund administrator took the position in Matter of K.O. v. Lawsky, 50 Misc.3d 742 (Sup. Ct., Kings Co. 2015), that in order to qualify, an infant plaintiff must be delivered in a hospital and that the child in that case was not covered by the Fund because he was born at home.

The amendment clarified this by adding two commas, so that the pertinent language now states, “'birth related neurologic injury' means an injury to the brain or spinal cord of a live infant caused by the deprivation of oxygen or mechanical injury occurring in the course of labor, delivery or resuscitation, or by other medical services provided or not provided during delivery admission, that rendered the infant with a permanent and substantial motor impairment or with a developmental disability….” By adding commas after the word “resuscitation” and after the word “admission,” the statute now makes clear that it applies to injury occurring during labor, delivery or resuscitation, regardless of where it occurred, and that the limitation to the delivery admission applies only to other medical services that were provided or not provided.

Procedural Amendments

There are also several amendments in the 2019 budget legislation that are procedural in nature, some of which are very important and some less so. For instance, they transferred administration of the Fund from the Department of Financial Services to the Department of Health. The practical impact of this change is not immediately evident.

They also amended PHL §2999-j [11], which, as originally drafted, provided that “[a]ll health care providers shall accept from qualified plaintiff's or persons authorized to act on behalf of such plaintiff's assignments of the right to receive payments from the fund for qualifying health care costs.” The 2019 budget legislation added the following sentence at the end: “Such payments shall constitute payment in full for any services provided to a qualified plaintiff in accordance with this article.” It is not immediately clear what this amendment is intended to accomplish and the legislative history provides no guidance. However, if it is intended to somehow ameliorate the need for reimbursement to be based on usual and customary rates for all health care expenditures, it will not succeed.

We have been down this road. Private nurses, therapists and home aides cannot be forced to work at rates significantly less than those paid by other patients. For roughly the first six years of the Fund's operation, PHL §2999-j [11] did not assist MIF enrollees in obtaining services from providers who refused to accept Medicaid rates. Adding that such payments “constitute payment in full” will do nothing to change that. In short, if the MIF is going to fulfill its obligations to these children and their families, the reasonable reimbursement rates adopted for all services in the 2016-17 amendments need to be made permanent.

The most significant procedural amendments in 2019 involved PHL §2999-h [4] and PHL §2999-j [6] and [7]. These changes, which become effective on Oct. 1, 2019, eliminate the discretion of the Fund administrator in determining who is a “qualified plaintiff” for enrollment in the Fund and leave that determination entirely to the courts. This should resolve a problem that has arisen in several cases over the years. Litigants and the courts would proceed in an action with the understanding that the plaintiff was a “qualified plaintiff” under PHL §2999-h [4], but the Fund administrator would sometimes disagree and deny admission. See, e.g., Matter of K.O. v. Lawsky, supra.

Not only did this create serious problems in those particular cases, it also injected a level of uncertainty in many others. Parties could not necessarily be confident that an action they were litigating or settling as a MIF case would ultimately be received as such. By placing the discretion to make that determination with the court, litigants can proceed with greater certainty as to whether the MIF applies.

The statutory amendments that accomplish this involved several provisions. First, the definition of a “qualified plaintiff” in PHL §2999-h [4] was changed. As originally drafted, it was a plaintiff who either: “(i) has been found by a jury or a court to have sustained a birth-related neurological injury as a result of medical malpractice, or (ii) has sustained a birth-related neurological injury as a result of alleged medical malpractice, and has settled his or her lawsuit or claim therefor.” These requirements remain, but a third, mandatory prong, was added, which provides, “and (iii) has been ordered to be enrolled in the fund by a court in New York State.” PHL §2999-j [6] and [7], both of which addressed payments from the Fund, were also amended.

PHL §2999-j [6](a) and(b) were amended to remove language indicating that the benefits are paid only if the Fund administrator determines that the plaintiff is a qualified plaintiff. PHL §2999-j [7], which specifies the procedure for enrollment in the Fund, was similarly amended to remove language that the Fund administrator must determine that the plaintiff is a qualified plaintiff. Together, these changes effectively leave the Fund administrator with a largely ministerial role in admitting children to the MIF.

Case Law

The significance of these amendments is underscored by two recent Appellate Division decisions addressing Article 78 proceedings brought after the Fund administrator denied admission to plaintiffs who had been found by the courts presiding over the underlying malpractice actions to have birth-related neurological injuries.

In Ifran v. Vullo, 168 A.D.3d 733 (2d Dept. 2019), the Second Department affirmed the Supreme Court's denial of the Fund administrator's motion to dismiss an Article 78 proceeding, but held that the court's determination of the ultimate merits of the proceeding was premature. Although the facts were not discussed in the Appellate Division's decision, the lower court's decision reveals the administrator found that the case did not involve birth related neurologic injury under PHL §2999-h [1] because the injury was from a placental abruption that occurred prior to the onset of labor and the claims of malpractice (failing to perform a timely cesarean section) were from before the labor had started. See 57 Misc.3d 244 (Sup. Ct., Kings Co. 2017).

Justice Marsha L. Steinhardt, who had signed the compromise order settling the malpractice action, granted the petition's application to require that the child be accepted into the Fund. The judge found that PHL §2999-h [1] does not require that the malpractice occurred during labor, delivery, resuscitation or newborn admission, but only that the injury occurred during one of those events or time-frames. Further, noting that “labor is not stagnant but fluid,” and that this child was born hours after the mother began to experience bleeding, the judge found that the injury occurred during the course of labor within the meaning of the statute.

The Appellate Division found that the administrator's motion to dismiss was properly denied because the petition contained sufficient allegations, but that the judge should not have ordered that the petitioner be admitted into the Fund based on the motion papers, since the administrator had not yet filed an answer or an administrative record.

The First Department addressed a similar issue in Matter of B.L. v Lawsky, 171 A.D.3d 401 (1st Dept. 2019). The infant plaintiff in the underlying malpractice action was delivered prematurely at a hospital in Connecticut, and the claims apparently involved the failure of the mother's New York health care providers to take steps necessary to prevent the premature birth. Preliminarily, the Appellate Division found that under PHL §2999-j [6] and [7], the administrator had the authority to determine whether the child was a qualified plaintiff (which will no longer be the case as of Oct. 1 of this year). However, it found that the administrator's determination that she was not qualified was affected by an error of law, and was properly annulled by the Justice Nancy M. Bannon, before whom the Article 78 proceeding was brought.

The administrator had found the child not qualified because the malpractice occurred prenatally, rather than during labor or delivery. However, like the Supreme Court in Ifran, the First Department in Matter of B.L., found that the statute requires only that the injury, not the malpractice, occurred during one of the specified time frames. It also rejected that administrator's “extraterritoriality concerns,” finding that the premature delivery at an out-of-state hospital does not affect eligibility in the MIF. Unlike the Second Department in Ifran, the First Department found no issues warranting that the administrator be given an opportunity to submit an answer, and affirmed the Supreme Court's judgment directing the child's enrollment in the Fund.

The amendments placing the enrollment determinations in the hands of the courts will not eliminate the substantive issues of statutory interpretation regarding whether the plaintiff is qualified, but they should establish a more streamlined and predictable process by which those determinations are made.

The final case that merits discussion is the Third Department's decision in Matter of Anson v. Zucker, 162 A.D.3d 1179 (3d Dept. 2018), and it involves expenses covered by the MIF. This family had an above ground pool and a hot tub that the child had used for therapeutic purposes. As he got bigger, he required a lift to transfer him to each of them, and they applied to the Fund for approval. The application was accompanied by a letter of medical necessity from the child's physician. It initially requested this item as an Emod, but at the suggestion of a third-party administrator was resubmitted as an assistive technology (AT).

An evaluation of the home that was done at the direction of the administrator recommended approval of the request. The administrator nevertheless rejected the request on the ground that the lift was not a qualifying health care cost, and an administrative law judge affirmed, finding that it was neither an Emod nor an AT. The Third Department found this determination arbitrary and capricious. It essentially found that the lift qualified under the applicable regulations as both an AT and an Emod. It further observed that “[m]edical necessity has been conceded, and it is manifest in view of the child's significant functional limitations that a pool lift would be beneficial in promoting his ability to engage in water therapy at home.”

The Appellate Division deserves praise for correcting the administrator's bureaucratic short-sightedness. However, this is precisely the type of concern that we had raised when the MIF was first proposed. The child's family had already successfully litigated to obtain a settlement. Had they received a monetary award for his health care needs, they could have purchased the lift. Instead, to get the same piece of equipment, they had to first apply to the administrator, appeal to an ALJ and then litigate in Supreme Court and the Appellate Division. Perhaps further statutory amendments are needed to prevent such unfair and counterproductive determinations.

Thomas A. Moore is senior partner and Matthew Gaier is a partner of Kramer, Dillof, Livingston & Moore.