Supreme Court rules malpractice fund raid unconstitutional

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The Wisconsin Supreme Court ruled Tuesday that the budgetary raid on the Injured Patients and Families Compensation Fund was unconstitutional and the state must now pay back $200 million plus interest.

In its 5-2 decision, the court overturned a Dane County Circuit Court ruling that upheld the fund sweep as part of the 2007-09 state budget.

In its ruling, the Supreme Court remanded the case back to Dane County Circuit Court with directions that $200 million, along with lost earnings and interest, be repaid.

“The Court’s decision reaffirms our position that the fund’s assets are not general revenue,” said WMS General Counsel Ruth M. Heitz in a statement. “These dollars are held in a trust that may only be used for the benefit of injured patients, their families and contributing health care professionals.”

Justice David Prosser wrote that, “health care providers have a constitutionally protected property interest in the fund.”

The fund, set up in 1975, is designed to pay judgments above and beyond the state of Wisconsin’s $1 million limit on the amount of malpractice insurance health providers must carry.

As recently as three years ago, the fund contained almost $95 million. But two raids of the fund by Michael L. Morgan, secretary of the Department of Administration, cleaned out $200 million from the fund. At the end of the 2009 fiscal year, the fund had a balance of negative $109 million.

Starting in 2007, Morgan made transfers of $71.5 million and $128.5 million to the newly created Medical Assistant Trust Fund (MATF), to help cover costs of Medicaid, prescription drug care for seniors and health insurance for families and children through the Badger Care Plus program.

Morgan was sued in 2007 by the Wisconsin Medical Society, which said that he had no right to take money from the fund because it was funded by contributions from health practitioners, not general taxpayer funds.

WMS appealed a Dane County Circuit Court decision upholding the raid, and in December, the Court of Appeals issued a certification requesting that the Supreme Court accept the case.

Case: 2009AP728 Wisconsin Medical Society, Inc., et al. v. Michael L. Morgan

Jack Zemlicka can be reached at [email protected].