The History of Taxes, in One Mega-Rich Family
David Rockefeller has just passed away.

You may have already heard that news. You may have not. America’s major media outlets haven’t treated Rockefeller’s death — at age 101 — as a top-of-the-news story.

How things change. Once upon a time, any breaking news that involved a Rockefeller almost automatically qualified as news not to be missed. And for good reason.

A century ago, David Rockefeller’s granddad, John D. Rockefeller, ranked as America’s richest man. No other fortune in the United States — or the world — came even close in size to his.
Old John D. passed away in 1937 at age 97. Newspapers treated his death as a mega big deal. Front-page headlines everywhere. Editorial pages filled with reflections on his long and lucrative life.
One of those reflections came from America’s most noted 20th-century pundit, columnist Walter Lippmann. The nation, Lippmann observed, would likely never see a fortune as grand as Rockefeller’s ever again. John D. had “lived long enough to see the methods by which such a fortune can be accumulated outlawed by public opinion, forbidden by statute, and prevented by the tax laws.”

In the United States, Lippmann added, “sentiment has turned wholly against the private accumulation of so much wealth.”

John D. Rockefeller raged mightily against that public sentiment over his life’s last decades. He fiercely denounced, for instance, the drive to enact a federal income tax.
“When a man has accumulated a sum of money within the law,” old John D. intoned, “the people no longer have any right to share in the earnings resulting from the accumulation.”
The people felt otherwise. A federal income tax became the law of the land in 1913. That tax would go on to whittle down the fortune John D. later left his six grandchildren.
The most celebrated of those six, longtime New York governor Nelson Rockefeller, would end up feeling intensely embarrassed about his diminished financial status, as one Washington insider discovered in 1974.
That insider, a veteran lobbyist by the name of Tom Korologos, vetted Nelson Rockefeller to be then-President Gerald Ford’s vice president.
“I’ve got something to worry about,” Korologos remembers Nelson grimacing. The former governor, Korologos soon learned, didn’t want to publicly reveal his personal financial picture.
“His concern,” the vetter explained, “was that when it became public, he wasn’t going to be as rich as everybody thought he was.”
What had happened to the fabled Rockefeller family fortune? Taxes.
Beginning in the early 1940s and lasting into the 1960s, the federal tax rate on individual income over $200,000 annually hovered around 90 percent.
And many states also had their own progressive taxes. In New York, the state tax rate on top-bracket income stood at 15.375 percent.
Deep pockets could, of course, deduct their state taxes off their federal taxable income. But those deductions didn’t change the basic bottom line: The extravagantly rich, in mid-20th century America, were losing their capacity to be extravagant.
Nelson Rockefeller passed away in 1979, just before the Reagan Revolution began undoing the progressive tax system that had so shaved his net worth. His younger brother David, a banker, lived on to prosper in the rich-people-friendly political environment the Reagan years ushered in.

Where Nelson watched his wealth shrink, David saw his wealth soar. At his death, Forbes magazine put David’s net worth at $3.3 billion, the world’s 604th largest fortune.
What would John D. Rockefeller think about how his last grandchild’s life turned out? He might be a tad disappointed that his flesh and blood no longer ranked as the richest of the world’s rich. But he’d probably be overjoyed that in America the rich still rule.
At least for now.
Sam Pizzigati, an Institute for Policy Studies associate fellow, co-edits Inequality.org. His latest book is The Rich Don’t Always Win. Distributed by and republished with kind permission of OtherWords.org.

The devastating rebuttal demolishing the corporate spin and half-truths by insurance companies

“This time period where we have no cap on injuries, which we heard testimony would drive doctors away from Oregon, would shorten the supply, would devastate the medical industry, we had a 23% increase in 33 out of 36 counties and a 47% increase statewide. “

Sen. Prozanski: Thank you. Questions? Senator Manning first, then Senator Dembrow.

Sen. Manning: Thank you, Mr. Chair. Thank you for your testimony. I think that you bring up some great points in terms of the value for the insurance company. I have a couple of questions. I think that what this bill provides is more, is broader than just the medical industry.

I am hearing testimony that affects victims of sexual abuse. This is outside of the medical issues that you are focused on at this time. I’d look at this Bill in a broader sense. Injuries, say for example, if [someone] had sustained an injury that prevented him from moving forward with his lifestyle and there was a cap of $500,000, look at the value of his life right now. We don’t know what those people that have been injured on the job or wherever place may have eventually turned into, what their contributions were.

This is a little bit bigger than just the industry concerning insurance. I know a lot of great physicians out there, doctors. As a matter of fact, I had a surgeon that did a wonderful job on my back. I never thought about any kind of repercussions or coming back to claim. It seems to me that there’s a suggestion that, if the cap is raised, then all of a sudden there’s going to be a rush to sue doctors or medical providers. I don’t believe that’s true.

Jim Dorigan: That has been the case and that’s what the studies that our actuaries were saying. I actually lived through the 1999, when the Lakin versus Senco Products knocked out the cap in Oregon. What happened to us is that we had a 30% increase in claims against physicians. Automatically, our reserves went up by 60%, because we had reserved retroactively and this has a retroactive clause. We had to reserve retroactively for cases that were now worth more money. Premiums for physicians just about doubled. Three carriers left the state. It’s a very real cause of problems for medical providers when there are no caps.

Sen. Manning: Okay, then my question is, what prompted that? Was it medical error or was it medical malfeasance? What caused that all of a sudden that you’re treating patients and stuff and then they decide that they’re going to file a claim against the medical profession? I don’t understand that.

Jim Dorigan: What happened, actually, our statistics on cases that we’d successfully defended did not change. We still had 80% of the cases, plus, in court, we were winning, but more cases were being brought, because there was a bigger target. The plaintiffs’ bar more aggressively sought out and filed cases, because there was a bigger pot of gold at the end of the rainbow. That’s what this will create.

Sen. Manning: I think that there are some opportunities here that we need to actually look at the insurance industry and what they’re doing in association with this. I’m still finding this hard to believe that all of a sudden …. The doctors and medical providers that I know are very professional. I know a lot of people have great relationships with them.

Like I said, my vision of this, my broader view of this, this is just more. This is not just dealing with the medical industry. This is dealing with on-the-job harassment. It’s much broader. I’ll be interested in finding out if there might be some language that could be tweaked to be specific. Should it have to go to trial and that the medical provider, in your case, is found not liable, I don’t understand why we would have any issues with this.

If it’s the fear that we might have something based off of some data, I don’t know. I’m a researcher myself, so I know that you have to be able to replicate any type of study. I’m not sure, and I think there might be some other things, but my view of this bill is much broader than just medical industry. I think that it’s worth looking into from my perspective. If there is some specific language that you feel that would be adequate to add to this, then I think that this would be a great opportunity to do so. Thank you, Mr. Chair.

Sen. Prozanski: All right. Senator Dembrow?

Sen. Dembrow: All right, thanks, Mr. Chair. For the actuary, I found the trends that you pointed out very interesting, but I’m wondering, that was based on data that has been collected over a period of time, do we have access to the raw numbers that underlie those studies? Could that be provided to the Committee?

Susan Forray: The publicly-available data that I referred to comes from the National Practitioner Data Bank. That would be, of course, available to anyone.

Sen. Dembrow:  Could you steer us towards that?

Susan Forray: Sure, I can definitely direct that towards you. The data that was relied upon specific to Oregon provided by the coverage providers in Oregon, that would of course be proprietary to those providers, but certainly if you have questions on the analysis in particular, I’m happy to talk about that in more detail.

Sen. Dembrow: Okay. With respect to the increase in the claim amounts as the cap was lifted, couldn’t we look at that as what’s happened is, for a period of time, those caps were artificially being restrained? Then, when the cap was raised, it went up to its normal level, based on the needs of the people bringing the action.

Jim Dorigan: The reality is the needs of the people bringing the action are limited. Their recovery is limited by the insurance policies available. In the majority of physicians in Oregon, 50% carry a $1 million policy limit. The balance of the 50% carry limits of $2, $3 or $5 million. The reality is that the value of these suits and the amount plead in the suits exceeds available policy limits and assets for the physician.

These high demands in these cases serve more as a motivation or a reason to settle cases. Senator Manning, you mentioned about the insurance companies behind these, the company I work for is owned by our policy holders, so we’re a reciprocal, which is similar to a mutual. Two out of the three companies in the state are companies that healthcare providers have set up to make sure that they have access to this critical insurance product. That’s my motivation or my bias, is the physicians.

Sen. Dembrow: All right, thanks, Mr. Chair. We heard one of the previous individuals giving testimony that she felt that her pain and suffering that she’s undergone since some very traumatic experiences that she had were worth more than $500,000, that she’s been experiencing pain and suffering and debilitating effects on her life. Presumably, a jury might agree with her on that, right?

Jim Dorigan: But not impacted, again, by this case, I believe. If that happened, her damages and case were filed when there was no cap on damages. We could actually see what was the result of her case, but-

Sen. Dembrow: Okay, but let’s imagine that the Oregonians today-

Jim Dorigan: If it was covered under the Oregon Tort Claims Act, it would be limited by things we’re not talking about here.

Sen. Dembrow: Yeah, but let’s imagine that that were to happen now. Are you asserting that her pain and suffering isn’t worth a million dollars? That she has an experience, that much level of pain, and suffering, and debilitation in her life?

Jim Dorigan: I have difficulty evaluating what her damages are. I would say, from a public policy standpoint, if you look at the costs of unlimited damage across the board and the damage that it can have to access to healthcare, I think it’s a public policy issue. It’s reasonable to limit damage amounts.

Sen. Dembrow: I think, and just finally, we’re coming to understand the broad ramifications of trauma that individuals like that are experiencing. It seems to me that we, as a society, need to recognize that and not be putting artificial barriers in place that make it even harder for people to cope with that trauma. That’s just an editorial comment.

Jim Dorigan: We’ve talked about the victims of drunk drivers. The reality is that their compensation would not be changed, because you look at the insurance limits that are out there. If you look at any of your policies, I’m sure that none of you have liability limits that exceed a million dollars and even lower limits for those less responsible people in the community.

Although the damages may be there, where the real lottery is, is if you’re injured by somebody that has the assets or the high enough limits that you can potentially recover.

Sen. Prozanski: All right. I have just a couple questions, but clarification. I just want to make sure. Jim, I just want to go over. At the beginning in your testimony, you talked about 19 states. I think you said “western states”?

Jim Dorigan: Yes.

Sen. Prozanski: Could you just give us, not right this moment, if you could provide to us those 19 states so we can see that? I’m assuming-

Jim Dorigan: As part of my testimony, I put charts that have a chart for both bodily injury and wrongful death by state. You can look at those.

Sen. Prozanski: All right. Do you have it for beyond the 19 states or just the 19?

Jim Dorigan: I do. I could put that together, but we tried to look more at the West Coast.

Sen. Prozanski: I understand that. That’s the part I guess I’m kind of scratching my head, because you also then used an example about what happened in Florida. Knowing that’s not on the West Coast, I was just interested that all of sudden now we’re looking at the East Coast.

Jim Dorigan: The only reason I put Florida in, Senator, is that we are the largest insurer of physicians in Florida. I have the available data when the cap was knocked down. I got that from my counterpart that operates in Florida.

Sen. Prozanski: Okay, but that would be great if we can have all the states. The last thing, I guess, is just kind of a statement. This part of where you said, “A pot of gold at the end of the rainbow,” insinuating that … I guess I’m not sure exactly what you mean, but my take on that is that someone was injured somehow, somewhere, whether it was medical, whether it was non-medical. I guess it seemed like, in the context that I heard you saying it, that this was only coming forward because of the plaintiffs’ bar. Is that where we’re at as to your perspective on this?

Jim Dorigan: From my perspective is that when there is a larger chance for recovery and a potential for unlimited damages, there will be more cases. Those cases will be more difficult to resolve because of the potential for unlimited recovery.

Sen. Prozanski: The analysis, then, is the lower the cap is, the less chance that someone’s going to be seeking some type of, I don’t want to say restitution, relief from injuries that they received, whether it’s in the medical area or a non-medical event?

Jim Dorigan: I would say that if we all evaluate cases that are brought against physicians, cases where it’s within the standard of care, but the injury is severe, in other words a sick person becomes more sick, I think that there is an added motivation to pursue litigation in that case and with a potential recovery. Whereas, if the recoveries are limited, we may not see that particular case filed.

Sen. Prozanski: Okay. Is it your understanding that, whatever we do with this Bill or any future Bill regarding wrongful death, that the Senate Bill 483 that we did pass is not going to be impacted, that we’ll still have that framework to allow for those open, frank discussions to try to reach resolutions without having litigation?

Jim Dorigan: I think we’re all actively pursuing the Early Discussion and Resolution. We’ve invested quite a bit to educate our healthcare providers across the state on how to institute those discussions.

Sen. Prozanski: All right. I’m going to ask counsel if maybe we can put a note for it. I’d like to, at some point, have a review about where we’re at, because I don’t think we had that scheduled for this session. It seems to me that it’d be appropriate, because I had a lot of hope. I’ve heard a lot of support, but now I’m wondering if it’s actually being utilized. Senator Linthicum?

Sen. Linthicum: Thank you, Mr. Chair. In terms of following-up with the Chair, what he was asking about, you made a statement with regard to eliminating a cap and doubling one cap and eliminating the others would directly impact supply, and with regard to supply, supply in rural areas in particular, as those are hardest hit.

Then, the other item that was somewhat alluded to, and I’m not sure if you mentioned it, was negatively impact supply of physicians in medical services and positively impact a need for litigation, et cetera. Is that a correct assessment? That actually may have come from one of the other respondents. If you’d care to respond?

Kevin Reavis: In terms of supply, yes. In terms of if Oregon is not an attractive place to raise a family and provide care in the community because of the defensive nature based on malpractice premiums, physicians will seek to practice in another state that’s more friendly. That’s basically the entirety on the supply side and obviously then it directly impacts access.

Jim Dorigan: One of the access issues we saw in 1999 going into the early 2000s is that neurosurgeons discontinued doing pediatric care. We were at one point in the state when there were two neurosurgeons that would do pediatric care and there was a lot of life flights up to OHSU.

Sen. Linthicum: Just a follow-on, for the record, I’d like to note that the Deputy Political Director of Oregon Trial Lawyers Association submitted several items that are in the testimony list. In terms of that demand and supply issue, we see that showing up in who’s testifying this morning.
Sen. Prozanski: I understand there was no one else that signed up, so the last individuals I have is Melissa Erlbaum, Kimberly McCullough. I’m going to have those two come up. Then, I have Betsy Earls and Arthur Towers.

Melissa Erlbaum: Okay. My name is Melissa Erlbaum and I am the Executive Director for Clackamas Women’s Services. I’ve submitted written testimony, so in the interest of time, I’ll just recap real quickly what we do as an organization and then read the important component of the testimony.

We’ve been in service for over 30 years serving survivors of domestic violence, sexual assault, elder abuse, and trafficking in Clackamas County throughout the state of Oregon. That is why I am interested in being here in support of this Senate Bill 487.

We know that service requests are growing and the need is great for survivors, especially as we begin to understand the complexity of trauma. We are a proud member of the Restore Justice for Survivors Coalition, because we see firsthand how imperative it is for the women and children that we serve, as well as for those who suffer silently, to know that they have support and their abusers will be held accountable for their actions through the criminal and civil justice systems.

It is empowering for victims to know that a jury of 12 Oregonians just like them will hear the facts of the case and determine an outcome impartially. Sadly, we often see cases where responsible actions by businesses, institutions, organizations could have been taken to prevent the violent acts against our clients. Such responses negatively impact and effectively create additional barriers to the pursuit of safety and justice for these folks.

Consequently, when groups turn a blind eye, refuse to act, or fail to implement policies to protect us, they should be held accountable. The tragic story of Betty demonstrates this. Betty was a 73-year-old, when she was transported by ambulance to a hospital for heart surgery. While in the back of the ambulance, she was sexually assaulted by the EMT who was serving her.

This wasn’t the first incident. There had been 35 complaints to the company about this employee. Instead of pulling from services and investigating, the company continued to allow him to be alone with female patients. The assaulter was later sentenced to five years in prison and the company was found negligent for doing nothing to protect the other female patients.

As a result of this case and the five cases of his other victims, the emergency response company made changes to the ambulance design. There is no longer a wall between the driver and the EMT patient area, enabling the driver to have an unobstructed view of the back of the ambulance.

For us, this is a very clear example of positive policy change coming from holding institutions accountable and demanding better and safer systems. As this story and countless others attest, survivors deserve justice. We can no longer afford to sit idly by and allow abuses to take place without accountability. I hope you will join our desire to restore justice by supporting Senate Bill 487. Thank you.

Sen. Prozanski: Thank you. Kimberly?

Kimberly McCullough.: Chair Prozanski, members of the Committee, my name is Kimberly McCullough. I’m here from the ACLU of Oregon. I’m here to provide a slightly different frame for this issue, which is that this is really a basic civil rights and civil liberties issue. The right to a jury trial is something that was crucially important to both our nation and our states’ founders, as we find it both in the Federal Constitution and in the Oregon Constitution.

In fact, when Oregon voters fought to have citizen initiatives in the early 1900s, one of those first initiatives was to strengthen the power of juries and that passed overwhelmingly. If an Oregonian has a traumatic life-changing event, they have a constitutional right to hold the negligent party accountable for those actions. When we put one-size-fits-all caps, that really undermines the judicial branch as a pillar of our democracy.

You, as legislators, have a opportunity right now, I think, to really restore the rights of the wrongs in the Court’s recent Horton decision, which, essentially, what it did is it said that Oregonians have a right to a jury trial, but not to the decision that the jury makes, which really just makes it procedural and not meaningful.

It really makes little sense that we entrust juries with decisions about criminal justice matters and convict people and imprison them based on what a jury decides and yet we don’t entrust juries with those same types of decisions about the impact of lifelong injuries.

Just to summarize, one-size-fits-all justice, really, it goes against our basic civil rights and liberties. It allows an across the board cap to be placed on the value of someone’s life and the dramatic changes that folks go through because of someone else’s negligence. For those reasons, we urge your support of this bill.

Sen. Prozanski: Thank you. Any questions? Ladies, thank you very much. Our last two speakers/ presenters will be Betsy Earls and Arthur Towers. I think, for balance, Betsy, I’m going to ask you to go first.

Betsy Earls: Thank you, Mr. Chair, members of the Committee. For the record, Betsy Earls, representing Associated Oregon Industries and Oregon Business Association. As I think we’ve discussed in this Committee before, AOI and OBA are in the process of merging, so our policy positions are the same for all intents and purposes.

AOI and OBA are appearing before you today in opposition to Senate Bill 487. It’s our position that Senate Bill 487 goes too far at a time when cost and access issues continue to increase for healthcare and when stability in the healthcare system is so uncertain.

That’s an important point, but I wanted to, as the first speaker tried to do or did do, put a little bit of a different frame on this bill for you from the standpoint of the business community. Oregon has long balanced the needs of plaintiffs for a full and fair recovery in Oregon against the needs of the business community for predictability.

I think you see that attempt at balance in the economic damages awards that are allowed in Oregon, which are unlimited. That includes, as you know, past and future medical costs, lost wages, potential lifetime earnings, any other conceivable lost, almost. Those are all fully recoverable and we think that that’s a fair approach to Oregon’s liability system.

That’s balanced against the needs of the business community for some predictability through limiting or capping non-economic damages, pain and suffering damages. For a while, after Lakin, obviously those were uncapped, and the Horton decision has put a cap on those again. We support that cap and feel that it is a important step to reinforcing the predictability of what organizations or Oregon corporations can expect in terms of Oregon’s liability system.

As you’ve heard before just this morning, a majority of western states do cap their non-economic damages at $500,000 or below, so this state is in good company if we continue to remain at the cap that Horton placed on us. I think the last thing I want to point out to you is, and it’s of particular concern to the business community and goes directly to the issue of predictability, is the retroactive nature of this bill.

The bill applies increased damages cap retroactively to causes of action that arose before the effective date of the bill. This is really problematic for the business community, not only in terms of litigation decisions that were made before the Bill passed, if it does pass, but also in terms of settlement decisions and other calculations that are made in the course of going through litigation and those conversations with the plaintiffs. Again, we support the balance that Oregon currently has struck between the needs of plaintiffs and the business community for predictability, while also fully recovering damages. We urge you to oppose Senate Bill 487.

Sen. Prozanski: Thank you. Arthur?

Arthur Towers: Chair Prozanski, members of the Committee, I am extremely proud to be the Political Director for Oregon Trial Lawyers Association. My name’s Arthur Towers. I wanted to address a number of the issues that have been raised today. I think I only have two new ones to raise.

First of all, in May of 2000, voters spoke loudly and clearly on this issue. The issue before you today in terms of whether or not there should be caps on compensation for injuries was put to voters. Voters, by about a 70 to 30 margin, it was victorious in every county, said, “No, injuries should not be capped.” The people that you’ve heard from today should not have their compensation capped.

A second thing that was raised had to do with punitive damages that Mr. Dorigan spoke about. It’s important to remember about punitive damages that 70% of the punitive damages go to the state in one form or another, but the victim is taxed on the full hundred percent, so the remaining 30% will often go in the form of taxes. When it comes to the punitive damages, the survivor of the negligence often receives $0 out of the punitive damages.

Now, I want to go to unpacking some of the information that was provided. I felt bad for the opponents of this who didn’t seem to be able to have the opportunity to advance to coordinate their testimony, so I wanted to pass out some information here.

Mr. Dorigan provided some new information today, or at least new for me, where he said that there’s 79 physicians that are currently in litigation and there’s an additional, I guess, 79 injury cases, as I understood it, 10 death cases. Those are two to three years worth of cases. If that’s been an increase of 30%, because the caps were not in effect, that means that it went from about 60 to 79 on the injury cases and about seven to 10 on the wrongful death cases.

As you understand, what we’re talking about with the injury cases is going back to the system that’s been in place for the last 17 years. Those cases will be treated just the same as they would be in April of 2016, just before the May 5th Court decision.

In the wrongful death cases, again, if we’re talking about these 10 wrongful death cases being $500,000 a piece, if that’s what the verdict is going to be, stick with me here for a second, the current cap is $500,000, so 10 outstanding cases, which again the other witness from Milliman testified as two to three years worth, 10 cases would be $5 million, 10 times $500,000.

Now, we talking about 10 cases times one million, which is a astronomical jump from $5 million to $9 million. Given this enormity of the healthcare industry, it makes a huge difference in the lives of those grieving families. Five million to nine million in the healthcare industry? That’s a rounding error.

For the last 17 years — Senate Bill 487 would go back to that system that’s been in place from 1999, until 2016 in injury cases. We have the ability to look at what happened to physicians, the supply of physicians that Senator Linthicum was concerned about, over those 17 years.

The information that we put forth is from the Oregon Medical Board, so the state studied this issue and came up with the statistics. You can see on the front page of my testimony that, in 2000, just after the cap went into place, we had 7,848 licensed doctors in Oregon. In 2015, we had 12,447 licensed doctors in Oregon, an increase of 47%, while the population was rising by 18%.

Now, I am sensitive to the issue of availability of doctors in rural Oregon. If you look at that bottom paragraph of the first page, the statistics from the Oregon Medical Board from 2004, forward, which is what we can put our hands on, the number of doctors in 33 of the 36 counties increased by more than 23% over that time period, 2004 to 2015.

This time period where we have no cap on injuries, which we heard testimony would drive doctors away from Oregon, would shorten the supply, would devastate the medical industry, we had a 23% increase in 33 out of 36 counties and a 47% increase statewide. Coos County only had a 16% increase, but Lake County and Sherman County lost. I don’t want to minimize that, but there’s those two counties.

The one place where we weren’t able to directly rebut the numbers was around OB/GYNs in rural Oregon. Again, I don’t want to minimize that either, but if you looked at the demographics of Oregon, the Portland metropolitan area has become a magnet for young people, women of child-bearing age, in a way that Sherman County and Lake County and some of these other counties have not been.

That’s unfortunate, but again, if you’re considering where to set up medical practice, especially for that population, you got to go to where the business is, I would argue. That would make more business sense from the physician’s perspective.

The other point that was raised that I wanted to address was around Chair Prozanski’s questions regarding the Early Dispute Resolution Program. Remember that that program was put into place when there were no caps on injuries. It should not be severely impacted or impacted at all by going back to the system that was in place when the EDR program was established.

The next point that I’d like to make is that we talked about pots of gold at the end of the rainbow and we talked about winning the lottery. I would submit to you that many of the witnesses that you heard from in support of this bill don’t feel like they’re at the end of the rainbow. They don’t feel like they won the lottery. I found that language disserving.

I also want to talk about the malpractice issue for just a minute. According to a New England Journal of Medicine study in 2016, one-third of all medical malpractice cases are linked to 1% of the physicians. I would submit that there’s a better way to solve that problem, that’s on page two of the testimony, than limiting the rights of people who survived serious medical errors.
It was testified that all the medical bills are covered by economic damages. I want to set the record straight on that issue as well. The medical bills that are covered in the economic damages are those that can be proven at the time of the jury decision. What that means is that there’s a certain percentage.

A large number of paraplegics get bladder infections and you can predict the number of bladder infections over the course of a life, however, the unlucky one or two out of a hundred will get sepsis. We’ve had people that our members have fought for who’ve had sepsis, where they ended up in the emergency room at OHSU in intensive care I guess for several months because of the infection caused by the injury. It couldn’t be proven at the time of the trial, but the medical bill was there nonetheless. The non-economic compensation covered some of that cost. I have a hard time explaining that issue, hopefully I did it in a clear fashion.

Ms. Earls, among others, testified about what they term “retroactivity.” What they’re proposing is that there would be one set of rules for cases that happened before May 5th of 2016, when the Supreme Court issued its ruling, a second set of rules for cases between May 5th and the effective date of the Bill, and then a third set of rules after the effective date of the Bill.

For the number of cases that we’re talking about here, it feels like that would be a difficult set of circumstances to have three sets of rules for open cases. I want to close my remarks by bringing this back to the sort of thing that we ought to be thinking about.

This week and the last week, Victor Pierce had a case that he was involved in deciding. Mr. Pierce has spent 22 years working on the assembly line at DaimlerChrysler. His goal was to work there for about 30 years and then retire. He put in 22 years and over the last years of his career there, he started to be subjected to unspeakable acts of harassment on the job. There was racist graffiti, there were racist comments. There were nooses hung in his work place. There were nooses tied to the back of pickup trucks to indicate to Mr. Pierce, as an African-American, that that’s what they wanted to do.

Daimler told him at different points, “You’re imagining some of this stuff,” or if it wasn’t imagination, they’d catch people and not properly punish them. It turned out there were more than a dozen workers impacted by this. There’s this systematic pattern of racial harassment that is utterly disgusting in 2017 in Oregon, 2017 in America.

Mr. Pierce had the courage to take his case to trial, wasn’t sure if he would be able to get a fair trial as an African-American man, but told his story to the jury. They heard the Daimler side of the story and they heard his side of the story. They rendered a decision that these acts were despicable and that Mr. Pierce was due $750,000 in compensation.

Unless Senate Bill 487 passes, Mr. Pierce is likely to see his compensation reduced by more than 30%. I’m really, really privileged to be part of the 25 or so member coalition to restore justice for survivors, really proud to be fighting for the people that you’ve heard from today, really proud to be part of that team. I hope that you join me by voting yes on Senate Bill 487. Thank you.

Sen. Prozanski: All right, questions for anyone on the panel? Senator Thatcher first.

Sen. Thatcher: Art, you were talking about economic damages not necessarily being properly reimbursed because you only get what you can prove at the time, I guess based on probabilities of certain things, outcomes. Is there any way to quantify how much? Okay, so a person receives economic damages that are provable, but then later, a bunch of other economic damages essentially occur. I’m just wondering if there’s a range of what that difference is between what’s received and what is actual?

Arthur Towers: Chair Prozanski, Vice Chair Thatcher, I’m not positive the answer to your question. I bet if I looked at my phone, I’d have 40 texts telling me what the answer is. I think that the point that I would make is that it would go to Ms. Earls’ testimony. I think that the business community seeking the predictability would be very upset about having to go back and do over as new … Oh, I’m sorry. Is that not …

Sen. Thatcher: I’m not asking for later coming back, I’m just wondering how much, if there’s some sort of estimate out there that most people, when they receive economic damages, actually receive 20% less than what actually happened? I just don’t know. I don’t know if there’s any information like that out there.

Arthur Towers: Senator Prozanski, Chair Thatcher, I’m sorry I misunderstood your question. Yeah, I do not know the answer to that, but I will see if I can find out.

Sen. Prozanski: Any other questions? Senator Dembrow.

Sen. Dembrow: Thanks, Mr. Chair. Betsy, you haven’t seen the packet that Arthur provided us with, but he offers a set of charts that compare Oregon’s average premium rates in a number of disciplines, as opposed to states that don’t have caps, such as ours. It suggests that Oregon is not out of line in any way in terms of our premium amounts relative to states that don’t have caps or at least caps at our level.

I’m wondering, do you have a sense, just from the business association perspective? Do we have higher than average caps? Is that what is the sense of the industry? I assume that those comparisons were done before the Horton decision. Just wondering. I know you haven’t seen this, but if you could just let me know what the sense within the industry is of, is Oregon an outlier in terms of our premium amounts?

Betsy Earls: Maybe we could let you know.

Sen. Prozanski: All right. The only thing I was going to ask, Betsy, in your testimony, you did make the statement, “Senate Bill 487 goes too far.” Can you just explain what you mean by that, in the sense that there’s an alternative that the business community would like to put on the table, or just status quo is what we should stay with?

Betsy Earls: Mr. Chair, thank you for the question. I really do believe and AOI believes that the balance that the legislature has struck and that the Court recently upheld is an appropriate balance to cover the needs of victims, as well as the business community, and provide a stable business climate looking forward for businesses that are thinking about coming to Oregon. It’s one of the things they look at, liability costs and potential liability and the liability system. We would like to be able to continue to put that balance out there as one reasonably attractive piece of the state business climate picture.

Sen. Prozanski: Yeah, okay. I just want to make sure, if you had an alternative, I was going to say maybe we should have a little work group. All right.

Arthur Towers: Chair Prozanski, I don’t mean to take up more of the Committee’s time, but I will, just to say that the business communities, for the last 17 years, had periods of great growth, periods of decline based on the national economy and a variety of other factors. I would say that the 17 years, which almost coincides with the 17 years I’ve lived in Oregon, that the economy here has mushroomed. Thank you very much.

Sen. Prozanski: All right. With that, I want to thank everyone that came forward today and gave us their testimony.

Recent Oregon Supreme Court guts jury system, puts corporate profits over people

Sen. Prozanski: Good morning, everyone. We’ll go ahead and get started. I’ll call to order the Senate Committee on Judiciary. Thanks for everyone that’s here. Today, we’re going to do a very quick work session for a possible introduction of Committee bill measures and also we will be doing our public hearing on Senate Bill 487. With that, I’m going to go ahead and open up the work session for possible introduction of Committee measures. Senator Linthicum?

Sen. Prozanski: We’ll close the work session and we’re now going to go ahead and start with our public hearing on Senate Bill 487. First, let’s get the summary, and then I’m going to be bringing up Representative Lininger and then I think we are going to the panels after that. Ann, if you’d want to come on up?

Rep. Lininger: Chair Prozanski, members of the Committee, today you have Senate Bill 487 before you. This increases the cap on wrongful death damage awards from 500,000 to a million dollars and it removes the statutory cap on other causes of action. It sets the annual adjustment to the wrongful death cap on changes to the consumer price index, declares emergency, effective on passage.

Sen. Prozanski: All right, thank you. Representative Lininger, thank you for being here.

Rep. Lininger: Thank you, Chair Prozanski, and members of the Committee. I’m Ann Lininger. I’m the State Representative for House District 38, in southwest Portland. I’m proud to be here today in support of Senate Bill 487. This morning, as I was getting up, I was reading the newspaper and I saw an article in The Washington Post about an employer that has hundreds of women employees who have come forward with assertions of sexual assault, sexual harassment, and essentially a culture of sexual predation at the employment place. It’s all around the country, this employer.

It really made me think. We have some significant problems of sexual abuse, other kinds of abuse of vulnerable people. For those of us who have experienced sexual assault or sexual harassment, it’s a profound harm that has effects that go on long after any physical effects have happened. That’s true also for people who have suffered child sexual abuse, elder abuse, catastrophic injury of other types.

This bill, Senate Bill 487, brings forward some important tools to help deal with it. You’re going to hear from some other witnesses today who can speak powerfully and on a personal level to the kinds of harms that this bill will help people find justice in response to.

I’m going to tell you first a couple things about the bill and turn it over to other witnesses and other experts. The bill does three things. It restores the ability of a jury to award – in response to abuse, catastrophic injury claims – an amount of non-economic damages that the jury thinks is appropriate.

In a Oregon Supreme Court decision in May of 2016, a decision was made to impose an artificial $500,000 cap on the ability of surviving plaintiffs, injured people, to obtain non-economic damages. The bill would walk that back to the position of law that existed for 17 years prior to that time, that worked well, in which a jury could award an amount of damages that it deemed appropriate for people who had suffered catastrophic injury.

The bill does a second thing. It raises to $1 million the non-economic damages that are available to a family in the event of wrongful death.

These are the surviving family members when someone has wrongfully died at the fault of someone else. Last year, there was a bill that would have raised that level to $1.5 million. I actually opposed that bill, and I’m here today in support of this bill, which has the provision that would raise it to one million.

In the last iteration, we heard a lot of feedback from people who said, “Gosh, if it were only $1 million, that would be an appropriate level that would impose an appropriate amount of pressure on wrongdoers, but $1.5 million is too high.” Here we are today, the proponents adjusted their request from $1.5 to $1 million.

In fact, if you paid for inflation the level that it’s currently at, a $500,000 cap for non-economic damages in wrongful death, if you had paid that for inflation, the amount today would actually be above one million, modestly. In my view, a $1 million cap at this point is absolutely appropriate and reflects the kind of negotiation and compromise that is the hallmark of the legislative process.

Finally, this bill would establish the same rules going forward for all open cases. With that, I want to reiterate that I think it addresses the profound need to put pressure on wrongdoers to compensate surviving victims of harm and to compensate the families of people who have passed away because of wrongdoers’ harm. I think it reflects some good back and forth between proponents and opponents. I look forward to your opportunity to consider and discuss this bill. Thank you.

Sen. Prozanski: Thank you. Any questions for the Representative? Ann, thank you very much for being here. The Chair’s prerogative, what I’m going to do is there’s a number of people who want to give testimony today. I’m going to call people up in panels. I’m going to break it up, because we have a number of individuals that are in the proponent side.

What I’m going to do is I’ll bring up two panels separately, the proponents. Then, the opponents, I want to bring them in so we can have a mix, and then we’ll pick up some more that are listed at this point as proponents. With that in mind, let me go ahead and call up the first panel, will be Bob Joondeph, Sherry Stock, and Max Woodbury. If you would please come forward. We need to probably help Max with the chair. Bob, are you going to start off?

Bob Joondeph:  I’ll start off this morning.

Sen. Prozanski: Okay.

Bob Joondeph:  Thank you. Senator Prozanski, members of the Committee, my name is Bob Joondeph. I’m the Executive Director of Disability Rights Oregon. I’m here this morning to speak in favor of Senate Bill 487. Our support comes from our experience. I’ve worked at Disability Rights Oregon for over 30 years now. During that time, we’ve served thousands of people who have disabilities. Those disabilities can arise at birth or as the result of disease or injury or natural progressive types of genetic disorders over time.

One of the things that almost invariably occurs when a disability arises within a family is an enormous amount of stress and an enormous amount of a change of life. What we say is that everyone has an opportunity to become a member of the disability community through an injury or a disease or some other occurrence.

When that happens, it not only affects the individual, but it affects their entire family. We have seen countless instances in which families are broken, parents divorce with the added burdens of a child or a spouse become too great for that family to sustain itself. We see countless instances of depression, anxiety that come with the added burdens that might be associated with the disability.

I’m here to say that people with disabilities can lead very productive lives in which they are able to achieve just the same things that we all do, but the challenges of having mobility impairment or having a sensory impairment or a brain injury or a developed mental disability, particularly a severe mental illness, are difficult to handle. They’re real. They have a real effect upon people.

When that injury or disability occurs as a result of the wrongdoing of another person, these are true, tangible injuries, profound injuries, that are oftentimes not compensated through direct damages in a legal case. That is why we are here to support Senate Bill 487, to give people the chance, really, to be more successful in their lives and to overcome the difficulties that they encounter. Thank you.

Sen. Prozanski: Thank you. Who’d like to go next?

Sherry Stock: I will. Hi, Senator Prozanski, and members of the Judiciary Committee. My name is Sherry Stock. I am the Executive Director of the Brain Injury Alliance of Oregon. I’ve been there for 16 years. I’m also the parent of a child that was severely injured by a drunk driver, geez, 50 years ago, so that’ll give you my age. He’s at about an 18-month-old level. The drunk driver had no insurance, so there was no recourse. What we did is we sued the insurance company for covering him, even though he had, I think it was only $15,000 at the time, that didn’t even do a thing for Mark.

I’m here obviously in support of Senate Bill 487 and to talk to you about traumatic brain injury and what the effects can be. Most of the people that I deal with after a brain injury, there are some kids, but most of them are adults that may be in an automobile accident, maybe an assault, maybe a work injury.

When you have a brain injury, that might not affect your intelligence, but it might affect how you interact and work and the abilities that you have. It might look that you’re fine, but you might never be able to return to work. One of our survivors is an attorney that was a passenger in a car rollover accident. Actually, they hit a pothole and they went flying. This was a few years ago. She’s never been able to return to work. She struggles to keep a home now and keep things going. The max that she got at the time was $30,000 and that’s all there was.

There was another man, some of you might know, Max Conrad, but Max was playing football, walked out on the field, sustained a concussion. He stayed home, severe headaches, nausea. There was a football game the next Friday. The coach made him come in, sent him back to play, and told him to, “Suck it up, take it for the team.”

He was knocked out again, this time for seven months in a coma. His dad actually does documentaries for HBO, so kind of had the incredible future before him and he’s now at about a second grade level. Because there was a $200,000 cap, he’s living on actually Oregon Health Plan and welfare.

There’s a lot of different things. Brain injury affects more than 1.3 million people, but more than that, over 80% of all returning veterans have a brain injury. Almost 87% of everyone in prison has a brain injury. The homeless is about the same amount, about 87% of homeless are people with a brain injury. It’s a very serious issue. It’s important, when something happens to someone, that you have the resources there and that they’re covered. Once again, we’re in support of Senate Bill 487. Thank you.

Sen. Prozanski: Thank you very much. Max?

Max Woodbury: Hi, Chair Prozanski, Committee. My name is Max Woodbury. I’m here to support the bill as well, to restore justice for injured Oregonians. 20 years ago, I was working at a Superfund cleanup site as a fuel geologist. I was working above an underground walkway about a dozen feet above ground and working on a work platform.

I wasn’t presented with any sufficient fall protection. There could have been a railing, there could have been some sort of harnessing device, but there wasn’t. I fell on August 12th, 1996, straight onto my head. It was only a dozen feet, but fortunately enough for me, I had my hardhat on. The force of my fall straight onto my head went straight to my neck and fractured cervical [vertebrae], the third through the seventh.

I am considered a C6 quadriplegic. A lot of people see me in a manual wheelchair and assume that I’m a paraplegic. That is not the case. I don’t have full function of my fingers, my triceps. I don’t have function below my shoulders. A lot of people see me in a wheelchair and assume that, “Wow, he can’t walk.” While that is the case, that is relatively the easy part of being a quadriplegic.
Every morning, I have to do a morning routine, which can take me up to three to four hours. I can’t go to the restroom by myself independently, like everyone else just normally. Because of that work environment and that negligence, I have to deal with this every day.

Another thing that a lot of people don’t think about when you think about someone who’s a quadriplegic or a paraplegic or paralyzed is reproductive function or sexual function. Those are things that were taken away from me. After 20 years, I’ve had the fortune to at least find a woman that I love and have kids. I feel lucky for that. There’s a lot of paralyzed people that are not so fortunate.

The dream of going out in this beautiful Oregon wilderness and going on a hike with my kids doesn’t happen. I can go on a nature walk, but I can’t spend more than a few minutes out on a accessible trail. There’s a lot of things like that. Just being able to do the diapers of my children is something that I can’t help with as a father. I’m here to say that having just a $500,000 cap for just any sort of injury doesn’t really encapsulate the experiences of all of us. I’m here to support that and restore justice for injured Oregonians. Thank you.

Sen. Prozanski: Thank you very much for your testimony, Max. Any question for anyone on the panel? Thank you all very much for coming forward, and telling your story, Max. Our next panel’s going to include, I believe it’s John Anderson, Brenda Tracy, and Klarissa Oh.

John Anderson: I’ll start off this morning. Chair Prozanski and members of the Committee, my name is John Anderson. I’m representing sexual abuse victims. I’m here today to urge the support of this Bill that holds organizations that choose to turn a blind eye to sex abuse predators, to sweep it under the rug and move the problem somewhere else, accountable.

When I was a young 14-year-old Boy Scout in Portland, until I was almost 16-years-old, I was sexually abused by my scoutmaster. Once the abuse was found out, I thought everything would be taken care of, but that was far from the truth. Nothing was ever done.

I believed for 40 years that, somehow, it was my fault. Even to this day, I’m still struggling to tell myself that I have done enough to make up for my own perceived fault. It was not my fault at all. I was a child, not the 55-year-old man that sits in front of you, but a 14, 15-year-old child, like your own kids, grandkids, or children you see in middle school. It was the scoutmaster’s fault. He was the adult and purposely chose to have sex with a child.

Then, for years, I thought the Boy Scouts would never let something like this happen. They are considered a moral institution, protecting and teaching children. Upon a chance meeting with a friend that I had from the same troop, I found out that he was also abused. I had thought it was just me that had been abused in this troop.

In talking with him, I come to find out that the Boy Scouts had known that this scoutmaster was a pedophile and he had already abused kids in another troop down in California. Once they found out about the abuse in California, they moved him up here to Portland. In the same troop that I was, he abused around 15 or more boys, including, at the time, my 12-year-old brother, who had hid it from everyone, until I came forward, only about eight years ago.

The Boy Scouts, just like the Catholic Church, knew the sex abuse of children was going on. They allowed so many childrens’ lives to be forever changed and turned upside down. They had perversion files on these pedophiles and simply moved them from state to state or club to club. One of these files was only created years after my abuse, when the same scoutmaster tried to start another troop in Portland.

It is only because of cases like mine and those of so many other men who bravely stood up do institutions make change. The fact that sex abuse is morally wrong didn’t facilitate any changes in the organizations, not until there were financial consequences or they were forced by the courts did the organizations make needed changes to protect the children. I urge you to restore power to our juries and to hold these institutions accountable. Thank you.

Sen. Prozanski: Thank you. Ladies, who would like to go next?

Klarissa Oh: Chair Prozanski, Vice Chair Thatcher, and members of the Committee, my name is Klarissa Oh. I am one of the founders of Oregon Abuse Survivors In Service, OAASIS. I am currently serving as their education director. I am here today in strong support of SB 487.

I am honored to join the panel of supporters of this bill, especially the courageous, graceful survivors, who are sharing their experiences of abuse and strength. Thank you for shining light on this abuse, which so often flourishes in the shadows. Thank you for listening and considering this important legislation.

OAASIS is building a movement that empowers communities to prevent child sexual abuse and to help survivors live full, healthy, even joyful lives. We are working towards a future where all people experience a loving childhood free of abuse and trauma and all people who have been sexually abused are supported to heal.

SB 487 is important to us, because it insures that people who are sexually abused as children can finally hold the people who abuse them accountable, as well as the negligent institutions that knowingly looked the other way and allowed offenders access to vulnerable children.

We just heard John Anderson’s moving testimony. John shared about the abuse he experienced by a Boy Scout troop leader and the negligent, dangerous response from the Boy Scouts. As he said, John’s abuser had been a known problem in the San Francisco area, but instead of being held accountable, the Boy Scouts transferred him to Portland, where he abused more than 10 other boys in the mid-1970s.

By turning a blind eye, the scouts allowed this troop leader and other known abusers to continue to work unsupervised with children, allowing offenders to sexually abuse more children. The Boy Scouts did not fix this situation, John’s courage and civil cases did.

Through John’s civil case and others like this, the real facts and flaws in the reporting system were uncovered. He forced institutional change to put the focus where it should have been all along, on protecting children. As we saw in John’s case, oftentimes the only way to get powerful, trusted institutions and corporations to change their ways is to hold them accountable through the civil justice system.

SB 487 will restore the powers of juries to hear the facts of the case and determine case-by-case justice, instead of applying a one-size-fits-all limit on what a jury can determine is fair and just. There is no one-size-fits-all experience of child sexual abuse. The emotional and psychological pain of child sexual abuse don’t appear on X-rays like a broken bone, but the impact can be just as fracturing to survivors’ long-term health.

The pain of child sexual abuse is real and intensely felt. Victims of child sexual abuse are far more likely to attempt suicide, turn to alcohol, illegal drugs to numb their pain from the abuse. Survivors can live full, healthy, and joyful lives, but have more barriers to overcome than children who are safe from that abuse.

There is also no one-size-fits-all process that survivors go through on their paths towards healing. In the eight years since I’ve helped found OAASIS, I’ve walked along countless survivors who were sexually abused as children, helping survivors to live more fully. They can heal, but the healing process extends over a lifetime.

I ask you to stand with me and countless victims of child sexual abuse to ensure they receive justice on a case by case basis. There should never be an arbitrary one-size-fits-all value placed on a survivor’s quality of life. Survivors deserve their day in court. Please join me in supporting Senate Bill 487.

Sen. Prozanski: Thank you. Brenda?

Brenda Tracy:    Good morning, Chair Prozanski, and members of the Committee. My name is Brenda Tracy. I am honored to be here today with these other survivors in support of Bill 487. I am a survivor of child sexual abuse. I am also the survivor of a gang-rape by four college football players that happened in 1998.

Just over two years ago, I came forward with my story in the Oregonian and since have fought diligently for survivors like myself. As you see, it never gets easier. I always keep thinking I’m going to come here one day, because I’ve been before you several times, and I keep thinking it’s going to get easier. I keep thinking that I’m not going to cry and I’m not going to get overwhelmed with these feelings when I hear other survivors come forward and I share my own story. As you see, one of the non-economic things that happens to us is that it never gets easier.

Since 1998 and my gang-rape, I have suffered. I have dealt with depression, I have dealt with a borderline eating disorder. I have dealt with suicidal ideation. I spent 16 years wanting to die. I don’t know if people really understand what it’s like to be in a body that has been brutally raped and degraded and defiled by another human being. It is difficult and it is torture to live and exist inside that body.

For 16 years, every day I struggled with wanting to die, being unable to kill myself, because I had two boys, my children. I was a single mother. One of the consequences of that, and I’m embarrassed to admit this, is that I was not the best parent I could have been to my children. I actually resented my children, because they were the reason I had to live. Because of that, I yelled a lot. I was easily frustrated and irritated with them. I was not the mother that I should have been to them.

I have since had to apologize to them. I didn’t even tell my oldest son what happened to me until he was 17 and that was only after he had dropped out of school. He had began to do drugs and alcohol and he attempted to commit suicide himself by smashing his car into a telephone pole.

It was only then, when I was faced with his possible death, that I disclosed what had happened to me. That’s how much shame I was wrapped in by what had happened to me, that it took my own son possibly dying for me to speak my truth. The idea that we would place a $500,000 price tag on my life, my son’s life, and our experience is appalling to me. It hurts to feel that that is the worth of my life, and my experience, and my family’s experience, and other survivors’ experience.

We deserve our time before a jury to say what we need to say and to let others decide what that damage should mean. I don’t want that price tag on me and I don’t want any other survivor to have that price tag. I would ask that you do restore justice for survivors.

The other thing I want to address is that I have spent the last two years traveling the country, speaking at different colleges about my experience. I have been to about 23 of them now in about seven months. This price tag will be seen by those universities. Universities are already not dealing with this issue. They are already sweeping these cases under rug.

Every day on my social media timelines, I hear about rape on college campuses. In Texas, one of the most egregious cases we’ve heard of is a lawsuit that alleges 53 rapes by 31 football players over four years at Baylor University. This is happening all over our country. If we decide that the cap is $500,000, what incentive is there for universities to do better? There is none. They will look at me and they will look at other survivors and they will say, “We can afford that. We can afford that price tag.”

Because of our reputation and because of our desire to not be exposed and to not deal with this issue, they will continue to sweep it under the rug. We will be hurting survivors. We will be supporting colleges to continue to do what they’ve been doing for decades, which is to ignore this issue and allow lives to be ruined.

I can’t support that and I know that that will happen. I’ve seen that. I’ve talked to so many survivors. I would just ask that you restore justice for survivors. I ask that you would take this very seriously. I thank you for the time that you’ve allowed for me to share my story, just thank you.

Sen. Prozanski: Thank you, Brenda. Questions for anyone on the panel? Thank you all very much for coming forward and telling your story. We really appreciate hearing from you directly. Thank you.

Sen. Prozanski: I’m going to go ahead and call up a panel, Jim Dorigan, Susan Forray, Kevin, is it Reavis?

Kevin Reavis: Reavis.

Jim Dorigan: I can start out. Chairman Prozanski and members of the State Judiciary Committee, thank you very much for allowing us to testify here today. My name is Jim Dorigan. I’m Senior Vice President and Regional Operating Officer for the Doctors Company, which insures over 2,600 Oregon physicians.

This is a major issue for healthcare providers in that the availability and affordability of insurance provides access to care for patients in the state of Oregon. This bill being proposed doubles the cap on non-economic damages for wrongful death and eliminates non-economic damage cap for bodily injury cases in Oregon.

We heard a lot of very sad and touching stories today from victims and injured parties, but the reality is many of those cases we heard about today would not be impacted under the current law by limiting damages. For example, they talked about damage in the university system on rape cases. The universities are already covered under the Oregon State Tort Claims Act, so they would not be impacted.

A number of these cases involved criminal conduct and involved perpetrators of crimes that would not have assets or insurance coverage to provide these large limits of liability potentially caused by the damages. Also, the economic damages are important. Economic damages in these cases cover all of the healthcare cost, future medical cost, lost wages, the cost to replace any services.

We’re talking about trying to make somebody whole through this. The non-economic damages are the pain and suffering and they’re very hard to quantify. As you can see with how sympathetic these cases are, especially for healthcare providers, that the non-economic damages have an extreme level of unpredictability and can really drive up the cost of any of these cases.

The other issue that hasn’t been addressed is punitive damages, which are designed to punish people for their actions in criminal and in the system. Unlimited punitive damages are also available in these type of cases. We’re looking at limiting damages in cases.

I provided testimony, but we look at what our states around the country do. In the West Coast, in the 19 western states, 16 of 19 states have bodily injury limitations of $500,000 or less. On the wrongful death cases, 13 of 19 states have limitations on non-economic damages to $500,000.

Oregon doctors currently pay more for professional liability than California doctors. California, since 1986, has had a $250,000 cap on non-economic damage awards. If we look around our surrounding states, as I said, 16 of 19 states cap damages at $500,000 or less. We’re not an outlier, looking at this.

Medical professional liability rates or malpractice insurance rates for rural providers in Oregon are not affordable at this point. The legislature has addressed that. They subsidized premiums for doctors practicing in rural areas. The majority of cases against healthcare providers are driven by bad outcomes, not bad medicine.

Over 80% of these cases that are brought against healthcare providers are closed without an indemnity payment, either in the course of investigation or after a trial. Over 85% of cases against healthcare providers at the trial court level are won by the defendant or the doctor.

Putting in the unlimited damages or non-economic or a million dollars of non-economic damages, it will create costlier litigation for healthcare providers. It will drive up the cost of healthcare and will drive up the cost for insurance. In Florida, after a cap was struck down by the Florida courts, the number of cases against Florida healthcare providers increased by 23%.

Two sessions ago, we worked with the Senate and Senate Bill 483 was passed Early Discussion and Resolution. We have a vehicle to resolve cases without using litigation and we’re just starting to see the effects of that. We’re hoping that that will continue to benefit injured parties and healthcare providers. The healthcare system is under great financial pressure and even more so with the ACA Act in peril.

Access to healthcare is critical to rural Oregonians and for underserved populations statewide. Another important thing about this Bill, it will be retroactive for all wrongful death and bodily injury cases, therefore, any of the cases pending now have the potential for unlimited damages. We’re currently defending 79 physicians in litigation and 10 of those cases are wrongful death cases, so it could have huge economic impact for both us and the healthcare providers involved.

I urge you to vote no on Senate Bill 487 to preserve and promote access to healthcare for all Oregonians. Oregon’s caps on non-economic damages ensures that injured patients receive fair compensation, while preserving access to healthcare for reducing costs for doctors, nurses, healthcare providers, and helping them serve the most vulnerable populations. Thank you very much.

Sen. Prozanski: Thank you. Who’d like to go next?

Susan Forray: Good morning, Senator Prozanski, other members of the Committee. I’m Susan Forray. I am a Principal and Consulting Actuary with Milliman. I specialize in medical liability coverage. A part of that practice includes estimating costs associated with legislation such as this.

I was asked by the Oregon Liability Reform Coalition to take a look at the legislation and estimate the costs specific to wrongful death claims. As I submitted with my testimony, we did an analysis based on Oregon medical liability claims data. We were provided with closed claim data by the three largest writers of professional liability coverage in Oregon.

We received, as part of this data, over 15,000 claims for medical liability over a 15-plus year period. Based on this data, our analysis indicated that, if the cap on non-economic damages for wrongful death claims were to be increased from 500,000 to one million, that the average indemnity payment on those wrongful death claims would increase by approximately 20%.

In addition, analysis indicates that there would be, as Mr. Dorigan mentioned, additional claims filed. We estimated the cost associated with those additional claims as an additional 15%. Combining these two, we believe that we would see an increase in cost on wrongful death claims of close to 40%. Now, the other thing I would like to talk about is, as I mentioned, that was based on Oregon claims data going back as far as 15 years.

Okay, you can see here the chart that I’m about to talk about. In 1999, as you know, the courts in Oregon overturned the cap on bodily injury damages. The data that you see here on the screen, this is publicly-available data, it’s based on claims submitted to the National Practitioner Data Bank for individual medical providers in Oregon.

You can see that in the years leading up to 1999, when that cap on non-economic damages was in place, the average indemnity payment on the medical liability claim in Oregon was approaching $200,000. In 1999, that cap was overruled by the court, at which point in time the severity increased, what we call the severity, the average indemnity payment increased beginning the following year, approached close to $300,000, so roughly a 60% increase in average indemnity payments.

This is a chart that I have used in other states to make a similar point. It happens to be Oregon in this case, so I think it is certainly very relevant here, but I think it’s been illustrated for other states as well who’ve looked at this issue.

The same data source allows us to look at the number of claims that are filed against individual providers and paid on behalf of those providers. If we normalize for the number of claims, both in Oregon and countrywide, if we normalize back to 1999, again, the year of the cap overturn, which you’ll see if you look at the green line, the green line is the countrywide frequency. What we call “frequency” is the number of claims relative to the number of physician providers. You can see that green line began to fall starting around the 2002 time period.

After the cap on damages was overturned in Oregon, we actually saw an increase in the number of claims against providers following the overturn of the cap. Certainly I’ve seen the same thing in other states, where caps on damages have been either increased or overturned. We see that here. The resulting increase in Oregon was about 30% greater than what we were seeing around the rest of the country at the same time.

Lastly, there were, I would say, about seven states in the 2003 to 2005 time period that implemented non-economic caps on damages. That was a time period where there was a lot of discussion nationwide about this issue. Again, here we’ve normalized back to 2001, the orange line that you see here is all states other than those seven. You can see there has been a falling number of claims relative to the number of providers since that time.

What’s interesting is that, for those seven states that implemented caps on damages, there’s a noticeable decrease in the claim frequency a couple of years following the implementation of the cap on damages. Now, the reason it follows by a couple of years is this is based on claims paid, so of course it takes some time for there to be an event and for that event to be reported and eventually resolved two to three years later. That’s why we see this two to three-year lag here.

I think it is very noticeable that the implementation of caps on damages hasn’t increased on the number of claims that are filed, the associated costs, and of course, the overturn of caps on damages, as we saw looking back in Oregon 18 years, has an impact on the number of claims, as well increasing that number of paid claims.

Lastly, I’d like to refer to some research that’s been done by others in the area of access to healthcare. Others have alluded to this issue as well. This is a study from the Journal of the American Medical Association, “The adoption of direct malpractice reform has led to greater growth and the overall supply of physicians.”

It’s not just opinion or talk, if you will, that there isn’t impact on access to healthcare. This has been supported by studies in very reputable publications, again, such as the Journal of the American Medical Association. Evidence clearly indicates an increase in physicians in high-risk specialties after the adoption of non-economic damage caps. Malpractice insurance premiums are a significant deterrent for surgeons. In addition, caps on malpractice damage awards attract surgeons to areas.

The supply of obstetrician/gynecologists decreased by 8% in the three years following premium increases in 1999. As a member of this industry, I can tell you I’ve heard several stories about patients in rural areas who had to drive, some patients a couple of hours, to get to their obstetrician, because an obstetrician that perhaps formally practiced in that area simply couldn’t afford the liability premium combined with the lower income of working in a rural area.

Lastly, caps appear to increase the supply of frontier rural specialist physicians by 10 to 12%. This is very much an issue, in particular for rural areas, access to healthcare in rural areas, as well as access to healthcare among specialist physicians in particular. Thank you.

Sen. Prozanski: All right, thank you. Kevin?

Kevin Reavis: Thank you. Chair Prozanski, members of the Committee, my name is Dr. Kevin Reavis. I’m the incoming President of the Oregon Medical Association. I’m a practicing general surgeon. I focus on the esophagus, stomach, and bariatric related diseases at the Oregon Clinic and I’m a clinical associate professor at OHSU.

Thank you for the opportunity to testify on State Senate Bill 487. We submitted written testimony for the record, for which I’d like to highlight the main points. I’d like to dovetail the previous presentation as well with a physician’s perspective on the issue at hand.

First, I want to stress that I want my physicians to understand firsthand the loss of a loved one and what it means to the family of their patient. We’re doctors. We’re at the bedside with grieving families day or night and we believe the remedy of both economic and non-economic damages should be available to the family.

Senate Bill 487 eliminates existing legislative cap on non-economic damages in injury cases and doubles the cap in wrongful death cases, effectively disregarding the new legal roadmap established in the case of Horton versus OHSU last year. This case reaffirmed the legislature’s constitutional role in establishing reasonable safeguards around damage awards in our court system.

The elimination of non-economic caps and doubling the wrongful death cap will disrupt Oregon’s currently stable malpractice insurance environment. Doubling the wrongful death cap will increase medical liability costs and, by that, increasing the monetary award for subjective non-monetary losses will result in liability insurance premium increases, we know that.

With little recourse to modify or negotiate these rates, providers are basically forced to accept the rates instead and find other areas of their practice that have to be cut, such as personnel, less services, less clinical operating hours, basically being less available for those in need. This directly affects patient care and their ability to access comprehensive care where they live.

Now, elimination of non-economic damage cap in injury cases will lead to increased healthcare cost, as we just heard. Maintaining a reasonable cap on non-economic damages, while allowing for unlimited economic damages, ensures the healthcare spending is appropriated to patients and not expended on unpredictable jury decisions or in the form of significantly higher liability premiums.

We believe that the legislature should consider the financial challenges to the entire healthcare system in Oregon and use the tools that its been given to safeguard the system from runaway costs. Now, Senate Bill 487, while very well-intended, has several unintended consequences. Both doubling a cap and eliminating a cap will hurt healthcare accesses, as we heard.

When considering moving to our state, healthcare providers seek out states where the physicians practice less defensive medicine and have lower insurance premium costs. Now, Senate Bill 487 jeopardizes Oregon’s competitiveness, especially compared to states such as California and others neighboring in the western United States.

As we know, the Rural Medical Liability Reimbursement Program, which ensures that Oregonians have access to the broadest possible range of specialty physicians by incentivizing rural practice, would also be jeopardized through increased costs. History has shown us that medical liability insurance costs have had a detrimental impact on the availability and affordability of healthcare services in rural areas.

Without the subsidies offered by the Rural Medical Liability Reimbursement Program, specialists, often obstetricians, pediatricians, neurologists, as referred to, are often forced to leave rural practice, because the cost of the insurance combined with overhead essentially clips their ability to earn a living.

This means that rural Oregonians who need this high-risk specialty care find themselves without access to critical care and either must forego care, risk their health, or seek services miles away from their home. Thank you, and I’d be glad to respond to questions from the Committee.

(Continued in next issue.)

Next week: The devastating rebuttal to the corporate lobbyist’s spin against the jury system

Filing Taxes Could Be Free and Simple. But H&R Block and Intuit Are Still Lobbying Against It.

Jessica Huseman, propublica.org

Here’s how preparing your taxes could work: You sit down, review a prefilled filing from the government. If it’s accurate, you sign it. If it’s not, you fix it or ignore it altogether and prepare your return yourself. It’s your choice. You might not have to pay for an accountant, or fiddle for hours with complex software. It could all be over in minutes.

It’s already like that in parts of Europe. And it would not be particularly difficult to give U.S. taxpayers the same option. After all, the government already gets earnings information from employers.

But as ProPublica has detailed again and again, Intuit — the makers of TurboTax — and H&R Block have lobbied for years to derail any move toward such a system. And they continued in 2016.
Intuit spent more than $2 million lobbying last year, much of it spent on legislation that would permanently bar the government from offering taxpayers prefilled returns. H&R Block spent $3 million, also directing some of their efforts towards the bill. Among the 60 co-sponsors of the bipartisan bill: then congressman and now Health and Human Services Secretary Tom Price.

The bill, called the Free File Act of 2016, looks on the surface to be consumer-friendly. It makes permanent a public-private partnership in which 13 private tax preparation companies — called the “Free File Alliance” —have offered free online tax filings to lower- and middle-income families. The Free File Alliance include both Intuit and H&R Block.

But the legislation would also permanently bar the IRS from offering its own free alternative.
Intuit has repeatedly warned investors about the prospect of government-prepared returns. “We anticipate that governmental encroachment at both the federal and state levels may present a continued competitive threat to our business for the foreseeable future,” Intuit said in its latest corporate filings.

Sen. Elizabeth Warren, D-Mass., offered a bill last year that would have actually allowed the government to start offering prefill tax returns. While Intuit did not lobby against Warren’s bill — presumably because the legislation had little chance of success — tax giant H&R Block did. (H&R Block did not respond to a request for comment.)

Neither Warren’s bill nor the Free File Act made it out of committee.

Very few of those eligible for the industry’s no-charge filing program actually use it, perhaps because the system is confusing and pushes people toward paid products.

While the Free File Alliance says 70 percent of U.S. taxpayers can use the service, less than 2 percent of all individual tax returns were filed through the program in last year, according to a National Taxpayer Advocate’s report to Congress.

“Let’s call the so-called Free File Alliance what it really is — a front for tax prep companies who use it as a gateway to sell expensive products no one would even need if we’d just made it easier for people to pay their taxes,” said Warren in a statement to ProPublica. Warren’s office put out a report on the issue last year that repeatedly cited our coverage.

In an emailed statement the Free File Alliance’s executive director, Tim Hugo, said that the alliance does not automatically push paid products to those that use the Free File program but the taxpayer does “have the option of ‘opting in’ to receive additional information and offers from the tax preparation company they have selected.”

He said that the lack of awareness of the program is “unfortunate,” and placed blame on the IRS. While the tax agency previously had a large budget to advertise the Free File program, “today that budget is $0, making it difficult to reach the general public,” he said.

In response to Warren’s bill, the Free File Alliance warned in press release that allowing the IRS to prep returns would create “a tremendous and potentially harmful conflict of interest for the American people by enshrining the roles of tax preparer, tax collector, tax auditor and tax enforcer in one entity.”

Hugo is also a state legislator in Virginia, which canceled its own cost-free system of tax filing in 2010 and replaced it with a “Free File” bill connecting taxpayers to private companies. Hugo serves on the committee that greenlighted the legislation. Hugo said he saw no conflict of interest here, as the Free File program he represents is federal, not state, and he recused himself from voting in the committee and on the floor.

Joseph Bankman, a law professor in tax law at Stanford Law School said arguments about government overreach are false. Participation is voluntary and actually gives taxpayers the upper hand, forcing the government to “show its hand.”

“Now you know what the government knows,” Bankman said, who added that there are multiple ways taxpayers could benefit. “If there’s a mistake that goes in your favor, maybe you don’t call attention to it.” Also, everyone would receive the returns — including the millions of Americans who are due tax refunds but don’t get them because they don’t file. In 2012 alone, the IRS said more than 1 million Americans did not receive their refunds — amounting to $950 million — because they did not file.

The authors of the federal Free File bill have repeatedly voiced fears of big-government interference.

Intuit, producer of the top-selling tax software, has opposed letting the government do your taxes for free — even though it could save time and headaches for millions of filers. Read the story.

In an opinion piece for The Daily Caller and on his site, Rep. Peter Roskam, R-Ill., said “making the tax collector also the tax preparer creates an inherent conflict of interest while forcing citizens to relinquish control of their taxes to the government.”

Since the 2008 election cycle, Roskam has taken in more than $32,000 in donations from Intuit’s political action committee and Intuit employees. He received a far smaller amount, $2,500, from H&R Block — all for the 2016 election cycle. Roskam’s office did not return a request for comment.

HHS Secretary Price received only modest donations from Intuit, $3,500 since 2008 — $2,500 of which came six days after the Free File Act of 2016 was announced. He received $2,000 total from H&R Block. (Price’s office did not respond to a request for comment.)

The bill’s Democrat co-author, Ron Kind, from Wisconsin, has taken in more than $29,000 from Intuit and its employees since 2008. He received $3,000 from H&R Block.

In a statement, Kind said he is “open to working with anyone” to find ways for “hardworking Wisconsin families” to file their taxes with ease. “At the same time, I want to make sure that Wisconsinites can access programs, like Free File, that they have come to depend on.”

When asked for details on how many Wisconsinites actually rely on the program, given that few of those who qualify for it actually use it, a spokesperson for Kind did not respond.
 
Republished from ProPublica under Creative Commons license. ProPublica’s mission is “to expose abuses of power and betrayals of the public trust by government, business, and other institutions, using the moral force of investigative journalism to spur reform through the sustained spotlighting of wrongdoing.

There is nothing more important to the future of Oregon and its long-term well being than our response to the looming climate disruption and instability.

That instability is caused — and is still being caused and aggravated today — by humanity’s headlong rush to return billions of tons of carbon-based gases — involving carbon that had been gradually removed from the atmosphere and sequestered underground over the course of aeons — back into the atmosphere in just a few generations (essentially all since 1776).

Our carbon pollution is not just a future threat or concern for future Oregonians. By our failure to take a cold eyed view of the threat, we are causing future suffering on a catastrophic scale.

Sadly, even some of the world’s best informed experts, like Dr. Naomi Oreskes, cannot bear to face what we have done, and they fly around the country peddling a soothing drug in college campus talks, a drug called “Hopium,” in which she simultaneously points out that even though the science is unequivocal (the situation is dire and getting worse), and the political moment is fraught with peril (and outright insanity reigns supreme in Washington), somehow “Solar and Wind” will save us, and that we can all just buy electric cars. 

This issue of OregonPEN includes a clear-eyed analysis of that delusion from OregonPEN favorite Gail Tverberg.

But first, OregonPEN brings readers testimony from an official with the Risky Business Project, a DC-based policy outfit that seeks to have reassuring figures present the business case for carbon pricing in the language of money, the one language everyone in DC knows fluently. Her testimony is taken from the hymnal of the First Church of Markets, which is, alas, unproven at best. The success of the sulfur emissions trading scheme that everyone hangs their hat on — it has been a great success in reducing acid rain downwind of coal-fired power plants, even before the great push to natural gas as the replacement for coal — hinged entirely on the presence of an immediate substitute (low sulfur coal) that required little or no effort to incorporate into the existing system.

But when the existing system — 9/10ths of the energy produced to support 7 billion people — is all based on fossil fuels, for which there is no substitute available at the same scale or even a tenth of the same scale, the going is going to be a lot more rocky.

Still, while there is no realistic hope that carbon pricing will be sufficient to address the problem, that is not to say that carbon pricing is not necessary. Indeed, probably nothing can be done until the price of using fossil fuels incorporates the environmental damage being foisted off on the future.

Testimony to the Joint Oregon Senate and House Environment Committees
 
March 1, 2017
Kate Gordon, Founding Director, Risky Business Project
 
Good afternoon, Chair Dembrow, Chair Helm, and Committee members.
Thank you very much for permitting me to testify today.
 
I am conscious of the fact that I am not a native Oregonian, especially because I truly believe that discussions about the impact of carbon pricing on a state’s economy are profoundly local. However, I have spent the last fifteen years working at the intersection of clean energy and economic development, and the last four years working closely with businesses and investors both in and outside the clean energy arena, including here in Oregon. It is from that business and economic growth perspective that I appear here before you today.
 
I know that growing a successful business and growing a strong state economy have in common the need to capitalize on opportunities and realistically assess risks. Oregon’s new proposed climate legislation for clean energy jobs offers the chance to do both: to better understand and prepare for climate risks, and to take on a leadership role in building a strong, sustainable low­ carbon economy going forward.
 
As the founding director and a lead author of the Risky Business Project – a national initiative focused on quantifying the economic risks of climate change – I have worked with multiple companies and governments on how to best evaluate climate risk to their infrastructure and operations, and how to think clearly about the potential to make smarter and more sustainable investments going forward. That initiative is co-chaired by Mike Bloomberg, Hank Paulson, and Tom Steyer, and includes on its “Risk Committee” three former Secretaries of Treasury, two other former cabinet members, a former Senator, and four former CEOs of major multinational corporations. The group crosses political, geographic, and industry lines, and has been deeply engaged in the work to apply conventional business risk accounting to the issue of climate change. Our work looks at the US as a whole but also specific regions, and includes risk modeling down to the state, local, and even county level for key targeted industries including property, energy demand, and commodity agriculture.
 
I know from our modeling, combined with conversations with Oregon business leaders, that climate change poses clear risks to operations, facilities, supply chains, and markets in this state. These include the physical impacts of climate change-including ocean acidification’s impact on the coastal economy, heat and smog reducing labor productivity, and increased risk of wildfires in forested areas, not to mention the much further-reaching impacts of sea level rise and extreme heat on Oregon businesses’ supply chains outside the state.
 
But there is also a risk in inaction in the face of a changing policy and regulatory landscape on climate change. Right now, multiple jurisdictions including China, Canada, the European Union, and a number of U.S. states are actively putting plans in place, or updating existing plans, to price carbon and curb greenhouse gas emissions. Companies that I work with through the Risky

Business Project are paying attention to these policy changes, and starting to evaluate their investments and capital stock decisions accordingly. Investors, too, are beginning to evaluate companies partly based on their resilience in the face of physical climate risk, and their readiness for policies ranging from carbon pricing to renewable energy standards. Today, 71 of 79 industries in the U.S. economy are materially affected by climate risk, according to the Sustainability Accounting Standards Board—and these industries are paying attention.
 
These companies understand that where there is risk, there is also opportunity—particularly in investments in clean energy technology and smart, resilient infrastructure. When the private sector invests in clean energy and efficiency, deploys low-carbon technologies, and continues to innovate towards a clean energy future, the result is economic growth across industries and regions.
 
Oregon has already seen the positive impact of low-carbon investment. Building new sources of zero- and low-carbon energy; electrifying vehicles; and investing in making buildings, appliances, and manufacturing more energy efficient has saved Oregonians money and created thousands of jobs within the state. Since the first large wind farm was built, companies have invested more than $9.8 billion in renewable energy in Oregon, creating over 5,300 direct jobs and many thousands of jobs created indirectly.
 
But as the Risky Business Project Risk Committee noted in our most recent report, while businesses play a key role in reducing climate risk and helping to slow the march of climate change,  “[T]he private sector, in turn, will take these actions at the necessary speed and scale only if they can do so on the back of a clear and consistent policy and regulatory framework that provides incentives for innovation and deployment of clean energy systems, and helps business adapt to those climate impacts that are inevitable due to past emissions.
 
Key to this policy framework is the need for a clear price on carbon to better internalize the true costs of carbon pollution, and to level the playing field for low-carbon technologies. Setting a carbon price encourages companies across sectors and industries to invest in cost-saving efficiency and local, clean power. These actions trim business costs and reduce vulnerability to energy price volatility as well as to larger climate risks, making these companies more competitive in the national and global marketplace.
 
How each state or jurisdiction decides to design and implement carbon pricing policy is a matter of local discussion and debate. My own personal bias is for a policy that provides for some public investment into areas where the government has traditionally played a supporting role to the market: for instance, into early-stage research and development on the critical low-carbon technologies of the future; into easing the transition to a carbon-regulated world for low-income communities, high-carbon but still important industries; or into training the workforce we will need to fill the high-quality, family-supporting jobs created by clean energy investments.
 
What I do know is that this is not a decision for another day. Right now, in board rooms and legislative offices across Oregon, decisions are being made about investments and business strategies that will affect not just the severity of climate impacts to the state, but also the overall security of the economy here and around the world. Companies are investing right now in physical infrastructure that will last decades. As the state government, you can take the long view and put a stable carbon price in place that allows these companies to make lower-risk, smarter investments into low-carbon technologies, facilities, and energy sources.
 
Now is the time to act by putting in place a strong, clear, and consistent climate policy framework that will allow Oregon to avoid some of the most extreme risks from climate change, but also to reap the rewards of leading the way toward more innovative, robust, and sustainable economic growth.
 
Thank you so much for your time today. I look forward to your questions.

In 2015, renewables made up only 10% of the total world energy production.
Wind and solar together provided for less than 2% of world energy consumption.

By Gail (“Gail the Actuary”) Tverberg

The “Wind and Solar Will Save Us” story is based on a long list of misunderstandings and apples to oranges comparisons. Somehow, people seem to believe that our economy of 7.5 billion people can get along with a very short list of energy supplies. This short list will not include fossil fuels. Some would exclude nuclear, as well. Without these energy types, we find ourselves with a short list of types of energy — what BP calls Hydroelectric, Geobiomass (geothermal, wood, wood waste, and other miscellaneous types; also liquid fuels from plants), Wind, and Solar.

Unfortunately, a transition to such a short list of fuels can’t really work. These are a few of the problems we encounter:

[1] Wind and solar are making extremely slow progress in helping the world move away from fossil fuel dependence.

In 2015, fossil fuels accounted for 86% of the world’s energy consumption, and nuclear added another 4%, based on data from BP Statistical Review of World Energy. Thus, the world’s “preferred fuels” made up only 10% of the total. Wind and solar together accounted for a little less than 2% of world energy consumption.

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Figure 1. World energy consumption based on data from BP 2016 Statistical Review of World Energy.

Our progress in getting away from fossil fuels has not been very fast, either. Going back to 1985, fossil fuels made up 89% of the total, and wind and solar were both insignificant. As indicated above, fossil fuels today comprise 86% of total energy consumption. Thus, in 30 years, we have managed to reduce fossil fuel consumption by 3% (=89% – 86%). Growth in wind and solar contributed 2% of this 3% reduction. At the rate of a 3% reduction every 30 years (or 1% reduction every ten years), it will take 860 years, or until the year 2877 to completely eliminate the use of fossil fuels. And the “improvement” made to date was made with huge subsidies for wind and solar.
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Figure 2. World electricity generation by source based on BP 2016 Statistical Review of World Energy.

The situation is a little less bad when looking at the electricity portion alone (Figure 2). In this case, wind amounts to 3.5% of electricity generated in 2015, and solar amounts to 1.1%, making a total of 4.6%. Fossil fuels account for “only” 66% of the total, so this portion seems to be the place where changes can be made. But replacing all fossil fuels, or all fossil fuels plus nuclear, with preferred fuels seems impossible.

[2] Grid electricity is probably the least sustainable form of energy we have.
If we are to transition to a renewables-based economy, we will need to transition to an electricity-based economy, since most of today’s renewables use electricity. Such an economy will need to depend on the electric grid.

The US electric grid is often called the “World’s Largest Machine.” The American Society of Civil Engineers gives a grade of D+ to America’s energy system. It says,

America relies on an aging electrical grid and pipeline distribution systems, some of which originated in the 1880s. Investment in power transmission has increased since 2005, but ongoing permitting issues, weather events, and limited maintenance have contributed to an increasing number of failures and power interruptions.

Simply maintaining the electric grid is difficult. One author writes about the challenges of replacing aging steel structures holding up power lines. Another writes about the need to replace transformers, before they fail catastrophically and interrupt services. The technology to maintain and repair the transmission lines demands that fossil fuels remain available. For one thing, helicopters are sometimes needed to install or repair transmission lines. Even if repairs are done by truck, oil products are needed to operate the trucks, and to keep the roads in good repair.

Electricity and, in fact, electricity dispensed by an electric grid, is in some sense the high point in our ability to create an energy product that “does more” than fossil fuels. Grid electricity allows electric machines of all types to work. It allows industrial users to create very high temperatures, and to hold them as needed. It allows computerization of processes. It is not surprising that people who are concerned about energy consumption in the future would want to keep heading in the same direction as we have been heading in the past. Unfortunately, this is the expensive, hard-to-maintain direction. Storms often cause electrical outages. We have a never-ending battle trying to keep the system operating.

[3] Our big need for energy is in the winter, when the sun doesn’t shine as much, and we can’t count on the wind blowing.

Clearly, we use a lot of electricity for air conditioning. It is difficult to imagine that air conditioning will be a major energy use for the long-term, however, if we are headed for an energy bottleneck. There is always the possibility of using fans instead, and living with higher indoor temperatures.
In parts of the world where it gets cold, it seems likely that a large share of future energy use will be to heat homes and businesses in winter. To illustrate the kind of seasonality that can result from the use of fuels for heating, Figure 3 shows a chart of US natural gas consumption by month. US natural gas is used for some (but not all) home heating. Natural gas is also used for electricity and industrial uses.

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Figure 3. US natural gas consumption by month, based on US Energy Information Administration.

Clearly, natural gas consumption shows great variability, with peaks in usage during the winter. The challenge is to provide electrical supply that varies in a similar fashion, without using a lot of fossil fuels.

[4] If a family burns coal or natural gas directly for winter heat, but then switches to electric heat that is produced using the same fuel, the cost is likely to be higher. If there is a second change to a higher-cost type of electricity, the cost of heat will be even greater.  

There is a loss of energy when fossil fuels or biomass are burned and transformed into electricity. BP tries to correct for this in its data, by showing the amount of fuel that would need to be burned to produce this amount of electricity, assuming a conversion efficiency of 38%. Thus, the energy amounts shown by BP for nuclear, hydro, wind and solar don’t represent the amount of heat that they could make, if used to heat apartments or to cook food. Instead, they reflect an amount 2.6 times as much (=1/38%), which is the amount of fossil fuels that would need to be burned in order to produce this electricity.

As a result, if a household changes from heat based on burning coal directly, to heat from coal-based electricity, the change tends to be very expensive. The Wall Street Journal reports, Beijing’s Plan for Cleaner Heat Leaves Villagers Cold:

Despite electricity subsidies for residential consumers, villagers interviewed about their state-supplied heaters said their overall costs had risen substantially. Several said it costs around $300 to heat their homes for the winter, compared with about $200 with coal.

The underlying problem is that burning coal in a power plant produces a better, but more expensive, product. If this electricity is used for a process that coal cannot perform directly, such as allowing a new automobile production plant, then this higher cost is easily  absorbed by the economy. But if this higher-cost product simply provides a previously available service (heating) in a more expensive manner, it becomes a difficult cost for the economy to “digest.” It becomes a very expensive fix for China’s smog problem. It should be noted that this change works in the wrong direction from a CO2 perspective, because ultimately, more coal must be burned for heating because of the inefficiency of converting coal to electricity, and then using that electricity for heating.

How about later substituting wind electricity for coal-based electricity? China has a large number of wind turbines in the north of China standing idle.  One problem is the high cost of erecting transmission lines that would transport this electricity to urban centers such as Beijing. Also, if these wind turbines were put in place, existing coal plants would operate fewer hours, causing financial difficulties for these coal generating units. If these companies need subsidies in order to continue paying their ongoing expenses (including payroll and debt repayment), this would create a second additional cost. Electricity prices would need to be higher, to cover these costs as well. A family who had difficulty affording heat with coal-based electricity would have an even greater problem affording wind-based electricity.

Heat for cooking and heat for creating hot water are similar to heat for keeping an apartment warm. It is less expensive (both in energy terms and in cost to the consumer) if coal or natural gas is burned directly to produce the heat, than if electricity is used instead. This again, has to do with the conversion efficiency of turning fossil fuels to electricity.

[5] Low energy prices for the consumer are very important. Unfortunately, many analyses of the benefit of wind or of solar give a misleading impression of their true cost, when added to the electric grid. 

How should the cost of wind and solar be valued? Is it simply the cost of installing the wind turbines or solar panels? Or does it include all of the additional costs that an electricity delivery system must incur, if it is actually to incorporate this intermittent electricity into the electric grid system, and deliver it to customers where it is needed?

The standard answer, probably because it is easiest to compute, is that the cost is simply the cost (or energy cost) of the wind turbines or the solar panels themselves, plus perhaps an inverter. On this basis, wind and solar appear to be quite inexpensive. Many people have come to the conclusion that a transition to wind and solar might be helpful, based on this type of limited analysis.

Unfortunately, the situation is more complicated. Perhaps, the first few wind turbines and solar panels will not disturb the existing electrical grid system very much. But as more and more wind turbines or solar panels are added, there get to be additional costs. These include long distance transmission, electricity storage, and subsidies needed to keep backup electricity-generation in operation. When these costs are included, the actual total installed cost of delivering electricity gets to be far higher than the cost of the solar panels or wind turbines alone would suggest.

Energy researchers talk about the evaluation problem as being a “boundary issue.” What costs really need to be considered, when a decision is made as to whether it makes sense to add wind turbines or solar panels? Several other researchers and I feel that much broader boundaries are needed than are currently being used in most published analyses. We are making plans to write an academic article, explaining that current Energy Return on Energy Invested (EROEI) calculations cannot really be compared to fossil fuel EROEIs, because of boundary issues.

Instead, “Point of Use” EROEIs are needed. For wind and solar, Point of Use EROEIs will vary with the particular application, depending on the extent of the changes required to accommodate wind or solar electricity. In general, they are likely to be far lower than currently published wind and solar EROEIs. In fact, for some applications, they may be less than 1:1.

A related topic is return on human labor. Return on human labor is equivalent to how much a typical worker can afford to buy with his wages. In [4], we saw a situation where the cost of heating a home seems to increase, as a transition is made from (a) burning coal for direct use in heating, to (b) using electricity created by burning coal, to (c) using electricity created by wind turbines. This pattern is eroding the buying power of workers. This direction ultimately leads to collapse; it is not the direction that an economy would generally intentionally follow. If wind and solar are truly to be helpful, they need to be inexpensive enough that they allow workers to buy more, rather than less, with their wages.

[6] If we want heat in the winter, and we are trying to use solar and wind, we need to somehow figure out a way to store electricity from summer to winter. Otherwise, we need to operate a double system at high cost.

Energy storage for electricity is often discussed, but this is generally with the idea of storing relatively small amounts of electricity, for relatively short periods, such as a few hours or few days. If our real need is to store electricity from summer to winter, this will not be nearly long enough.

In theory, it would be possible to greatly overbuild the wind and solar system relative to summer electricity needs, and then build a huge amount of batteries in order to store electricity created during the summer for use in the winter. This approach would no doubt be very expensive. There would likely be considerable energy loss in the stored batteries, besides the cost of the batteries themselves. We would also run the risk of exhausting resources needed for solar panels, wind turbines, and/or batteries.

A much more workable approach would be to burn fossil fuels for heat during the winter, because they can easily be stored. Biomass, such as wood, can also be stored until needed. But it is hard to find enough biomass for the whole world to burn for heating homes and for cooking, without cutting down an excessively large share of the world’s trees. This is a major reason why moving away from fossil fuels is likely to be very difficult.

[7] There are a few countries that use an unusually large share of electricity in their energy mixes today. These countries seem to be special cases that would be hard for other countries to emulate.

Data from BP Statistical Review of World Energy indicates that the following countries have the highest proportion of electricity in their energy mixes.

  • Sweden – 72.7%
  • Norway – 69.5%
  • Finland – 59.9%
  • Switzerland – 57.5%

These are all countries that have low population and a significant hydroelectric supply. I would expect that the hydroelectric power is very inexpensive to produce, especially if the dams were built years ago, and are now fully paid for. Sweden, Finland, and Switzerland also have electricity from nuclear providing about a third of each of their electricity supplies. This nuclear electricity was built long ago, and thus is now paid for as well. The geography of countries may also reduce the use of traffic by cars, thus reducing the portion of gasoline in their energy mixes. It would be difficult for other countries to create equivalently inexpensive large supplies of electricity.
In general, rich countries have higher electricity shares than poorer countries:

  • OECD Total – (Rich countries) – 2015 – 44.5%
  • Non- OECD (Less rich countries) – 2015 – 39.3%

China is an interesting example. Its share of energy use from electricity changed as follows from 1985 to 2015:

  • China – 1985 – 17.5%
  • China – 2015 – 43.6%

In 1985, China seems to have used most of its coal directly, rather than converting it for use as electricity. This was likely not difficult to do, because coal is easy to transport, and it can be used for many heating needs simply by burning it. Later, industrialization allowed for much more use of electricity. This explains the rise in its electricity ratio to 43.6% in 2015, which is almost as high as the rich country ratio of 44.5%. If the electricity ratio rises further, it will likely be because electricity is being put to use in ways where it has less of a cost advantage, or even has a cost disadvantage, such as for heating and cooking.

[8] Hydroelectric power is great for balancing wind and solar, but it is available in limited quantities. It too has intermittency problems, limiting how much it can be counted on. 

If we look at month-to-month hydroelectric generation in the US, we see that it too has intermittency problems. Its high month is May or June, when snow melts and sends hydroelectric output higher. It tends to be low in the fall and winter, so is not very helpful for filling the large gap in needed electricity in the winter.

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Figure 4. US hydroelectric power by month, based on data of the US Energy Information Administration.

It also has a problem with not being very large relative to our energy needs. Figure 5 shows how US hydro, or the combination of hydro plus solar plus wind (hydro+S+W), matches up with current natural gas consumption.
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Figure 5. US natural gas consumption vs hydroelectric power and vs hydro plus wind plus solar (hydro+W+S), based on US Energy Information Administration data.

Of course, the electricity amounts (hydro and hydro+S+W) are “grossed up” amounts, showing how much fossil fuel energy would be required to make those quantities of electricity. If we want to use the electricity for heating homes and offices, or for cooking, then we should compare the heat energy of natural gas with that of hydro and hydro+S+W. In that case, the hydro and hydro+S+W amounts would be lower, amounting to only 38% of the amounts shown.

This example shows how limited our consumption of hydro, solar, and wind is compared to our current consumption of natural gas. If we also want to replace oil and coal, we have an even bigger problem.
[9] If we need to get along without fossil fuels for electricity generation, we would have to depend greatly on hydroelectric power. Hydro tends to have considerable variability from year to year, making it hard to depend on.
Nature varies not just a little, but a lot, from year to year. Hydro looks like a big stable piece of the total in Figures 1 and 2 that might be used for balancing wind and solar’s intermittency, but when a person looks at the year by year data, it is clear that the hydro amounts are quite variable at the country level.

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Figure 6. Electricity generated by hydroelectric for six large European countries based on BP 2016 Statistical Review of World Energy.

In fact, hydroelectric power is even variable for larger groupings, such as the six countries in Figure 6 combined, and some larger countries with higher total hydroelectric generation.
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Figure 7. Hydroelectricity generated by some larger countries, and by the six European countries in Figure 6 combined, based on BP 2016 Statistical Review of World Energy.

What we learn from Figures 6 and 7 is that even if a great deal of long distance transmission is used, hydro will be variable from year to year. In fact, the variability will be greater than shown on these charts, because the quantity of hydro available tends to be highest in the spring, and is often much lower during the rest of the year. (See Figure 4 for US hydro.) So, if a country wants to depend on hydro as its primary source of electricity, that country must set its expectations quite low in terms of what it can really count on.

And, of course, Saudi Arabia and several other Middle Eastern countries don’t have any hydroelectric power at all. Middle Eastern countries tend not to have biomass, either. So if these countries choose to use wind and solar to assist in electrical generation, and want to balance their intermittency with something else, they pretty much need to use something that is locally available, such as natural gas. Other countries with very low amounts of hydro (or none at all) include Algeria, Australia, Bangladesh, Denmark, Netherlands, and South Africa.
These issues provide further reasons why countries will want to continue using fossil fuels, and perhaps nuclear, if they can.

[10] There has been a misunderstanding regarding the nature of our energy problem. Many people believe that we will “run out” of fossil fuels, or that the price of oil and other fuels will rise very high. In fact, our problem seems to be one of affordability: energy prices don’t rise high enough to cover the rising cost of producing electricity and other energy products. Adding wind and solar tends to make the problem of low commodity prices worse.   

Ultimately, consumers can purchase only what their wages will allow them to purchase. Rising debt can help as well, for a while, but this has limits. As a result, lack of wage growth translates to a lack of growth in commodity prices, even if the cost of producing these commodities is rising. This is the opposite of what most people expect; most people have never considered the possibility that peak energy will come from low prices for all types of energy products, including uranium. Thus, we seem to be facing peak energy demand (represented as low prices), arising from a lack of affordability.

We can see the problem in the example of the Beijing family with a rising cost of heating its apartment. Economists would like to think that rising costs translate to rising wages, but this is not the case. If rising costs are the result of diminishing returns (for example, coal is from deeper, thinner coal seams), the impact is similar to growing inefficiency. The inefficient sector needs more workers and more resources, leaving fewer resources and workers for other more efficient sectors. The result is an economy that tends to contract because of growing inefficiency.

If we want to operate a double system, using wind and solar when it is available, and using fossil fuels at other times, the cost will be very high. The problem arises because the fossil fuel system has many fixed costs. For example, coal mines and natural gas companies need to continue to pay interest on their loans, or they will default. Pipelines need to operate 365 days per year, regardless of whether they are actually full. The question is how to get enough funding for this double system.

One pricing system for electricity that doesn’t work well is the “market pricing system” based on each producer’s marginal costs of production. Wind and solar are subsidized, so they tend to have negative marginal costs of production. It is impossible for any other type of electricity producer to compete in this system. It is well known that this system does not produce enough revenue to maintain the whole system.

Sometimes, additional “capacity payments” are auctioned off, to try to fix the problem of inadequate total wholesale electricity prices. If we believe the World Nuclear Organization, even these charges are not enough. Several US nuclear power plants are scheduled for closing, indirectly because this pricing methodology is making older nuclear power plants unprofitable. Natural gas prices have also been too low for producers in recent years. This electricity pricing methodology is one of the reasons for this problem as well, in my opinion.

A different pricing system that works much better in our current situation is the utility pricing system, or “cost plus” pricing. In this system, prices are determined by regulators, based on a review of all necessary costs, including appropriate profit margins for producers. In the case of a double system, it allows prices to be high enough to cover all the needed costs, including the extra long distance transmission lines, plus all of the high fixed costs of fossil fuel and nuclear power plants, operating for fewer hours per year.

Of course, these much higher electricity rates eventually will become unaffordable for the consumer, leading to a cutback in purchases. If enough of these cutbacks in purchases occur, the result will be recession. But at least the electricity system doesn’t fail at an early date because of inadequate profits for its producers.

Conclusion
The possibility of making a transition to an all-renewables system seems virtually impossible, for the reasons I have outlined above. I have outlined many other issues in previous posts:

The topic doesn’t seem to go away, because it is appealing to have a “solution” to what seems to be a predicament with no solution. In a way, wind and solar are like a high-cost placebo. If we give these to the economy, at least people will think we are treating the problem, and maybe our climate problem will get a little better.

Meanwhile, we find more and more real life problems with intermittent renewables. Australia has had a series of blackouts. A several-hour blackout in South Australia was tied partly to the high level of intermittent energy on the grid. The ways of reducing future recurrences appear to be very expensive.

Antonio Turiel has written about the problems that Spain is encountering. Spain added large amounts of wind and solar, but these have not been available during a recent cold spell. It added gas by pipeline from Algeria, but now Algeria has cut back on the amount it is supplying. It has added transmission lines north to France. Now, Turiel is concerned that Spain’s electricity prices will be persistently higher, because he believes that France has not taken sufficient preparations to meet its own electricity needs. If there were little interconnectivity between countries, France’s electricity problems would stay in France, rather than adversely affecting its neighbors. A person begins to wonder: Can transmission lines have an adverse impact on new electricity supply? If a country can hope that “the market” will supply electricity from elsewhere, does that country take adequate steps to provide its own electricity?

In my opinion, the time has come to move away from believing that everything that is called “renewable” is helpful to the system. We now have real information on how expensive wind and solar are, when indirect costs are included. Unfortunately, in the real world, high-cost is ultimately a deal killer, because wages don’t rise at the same time. We need to understand where we really are, not live in a fairy tale world produced by politicians who would like us to believe that the situation is under control.

Originally published by the author at “Our Finite World” and republished in OregonPEN by kind permission.

PictureFor more on this subject: “Closing the Courthouse Door”

Banning Class Actions Will Not Put “America First”
By Paul Bland for Public Justice

If you were one of the many Americans who built a home during the housing construction boom of the mid-1980s, chances are pretty good that your home was built with drywall imported from China.

High demand for inexpensive construction materials, coupled with a short supply of domestic drywall following a series of devastating hurricanes in the Southern United States, led to a surge of imported drywall materials being used in U.S. home construction.

At first, it seemed like the perfect solution. Drywall from China was cheap and plentiful. As it turned out, however, it was also highly toxic: It emits volatile chemicals, stinks like rotten eggs, corrodes wiring, fire alarms and copper piping, and causes a range of serious health problems, including chronic fatigue, insomnia, asthma, coughing and headaches, and sinus difficulties. 

Approximately 60,000 homes built with drywall from China were affected, according to one source. In fact, the problems caused by this imported drywall are so massive and widespread that individual lawsuits could not have even begun to make a dent in the problem. 

Fortunately, many homeowners were able to seek a solution via class action suits that provided much needed financial compensation as well as helping to fix the underlying problem.

In 2013, for example, a drywall manufacturer from China settled a complex series of interrelated class actions on behalf of Gulf Coast residents that provided for complete remediation (down to the studs and back) of approximately 3,000 ruined properties. 

These property owners were essentially compensated for 100% of their losses, as the company agreed to an uncapped remediation fund for homeowners, separate from a different fund for attorney’s fees.

This litigation is a testament to the importance of the class action device. If the individual homeowners had not been able to pool their resources and proceed as a class, only a handful (and certainly not all 3,000 of them) would have been able to achieve such a favorable result.  
And without the class action, they also would have clogged the courts for years with individual cases, forcing one judge after another to relitigate the same issues, review the same evidence, and consider the same defenses. 

In short, class actions were the only procedural approach that made any sense when it came to helping homeowners whose health and safety were jeopardized by this unsafe product.  

Under a new bill from GOP Congressman Bob Goodlatte now making its way through Congress, however, remedies like this would be made virtually impossible. The so-called “Fairness in Class Action Litigation Act” (a misnomer if ever there was one) would wipe away Americans’ ability to take on companies whose defective products put their health and safety at risk.

From dangerous drywall from China, to defective and harmful prescription drugs – and nearly everything in-between – this sweeping legislation would essentially inoculate foreign companies flooding the American market with dangerous products from ever having to answer for their behavior in court. American consumers would be blocked from the courts in favor of boosting corporations’ bottom line.

If the Goodlatte bill becomes law, it would be official U.S. policy to reward wrongdoers at the expense of American consumers. That’s a result that we should all band together to avoid.

While some supporters of the Goodlatte bill deny that it would wipe away nearly all class actions – claiming that civil rights and consumer advocates are crying “wolf” and that the corporate anti-class action bill is actually very mild – their arguments are nonsense on stilts.  Two thoughtful, academic responses written by some of the leading scholars on class actions and civil procedure in courts, Myriam Gilles of Cardozo Law School and Elizabeth Burch of Georgia Law School, prove that the bill really does contain poison pills that would wipe away virtually all class actions filed in the United States. The bill would, for example, slash enforcement against securities fraud, enable pharmaceutical companies to fix prices artificially high, make it easier for employers to pay women less than men, free up payday lenders to ignore rules against deceptive advertising, and on and on.

In an ironic twist that seems impossible anywhere but in the halls of Congress, the lawmakers propping up the Goodlatte bill are the very ones who have turned an “America First” campaign platform into something nearly akin to a religious conviction.

The truth, however, is that Goodlatte’s bill would put American consumers dead last in the battle to take on corporate wrongdoing, even favoring foreign corporations over American citizens. Companies like Takata [defective airbag maker], Volkswagen [diesel engine emissions cheat] and the drywall manufacturers from China have already made it as difficult as possible to take them to court. But now some lawmakers want to permanently seal the deal in favor of big business by making it legally impossible to challenge them in court.

Indeed, the bill is a stark example of government overreach – stipulating when Americans can and cannot have their day in court – and a gift to shady corporations infiltrating the American market with shoddy products. There’s no “fairness” in that, and Congress can’t have it both ways.

There was nothing great about poisonous drywall lining the homes of America, and there’s nothing about shielding the manufacturers of those products from liability that will make America – our homes, our courts or our government – great again.

Republished with kind permission of the authors after first appearing at DailyKos. Co-authored by Public Justice Senior Attorney Leslie A. Brueckner.