Medical Liability Reform Bill Seeks Cap on Damages

May 10, 2011

A bill that would institute a $250,000 cap on non-economic medical liability damages in states without caps was approved by a House committee this week. Trial lawyer groups have been heavily lobbying Republicans in the House against the legislation.

A bill that would institute a $250,000 cap on non-economic medical liability damages in states without caps was approved by the House of Representatives Energy and Commerce Committee this week. The legislation would also impose a three-year statute of limitations for malpractice claims, with certain exceptions, from the date of discovery of an injury.

The Help Efficient, Accessible, Low-Cost Timely Healthcare (HEALTH) Act already had been approved by the Judiciary Committee, but it needed the approval of the House Committee before it could move for a vote on the House floor. The House panel voted 30-20 to approve the measure, though Democratic lawmakers and a handful of House Republicans raised concerns on constitutional grounds. The legislation may go before the full House for vote by Memorial Day.

According to a Congressional Budget Office review of the bill, in addition to the $250,000 cap on non-economic liability damages, the legislation would:

• Impose a cap on awards for punitive damages that would be the larger of $250,000, or twice the economic damages, and restrictions on when punitive damages may be awarded;

• Replacement of joint-and-several liability with a fair-share rule, under which a defendant in a lawsuit would be liable only for the percentage of the final award that was equal to his or her share of responsibility for the injury;

• Sliding-scale limits on the contingency fees that lawyers can charge; and

• A safe harbor from punitive damages for products that meet applicable U.S. Food and Drug Administration safety requirements.

Though the bill would impose a cap on damages in states without caps, state laws that already provide for higher or lower damage caps on non-economic damages would not be pre-empted if the legislation is passed.

The CBO estimates that those changes would lower costs for healthcare both directly and indirectly -- by lowering premiums for medical liability insurance and by reducing the use of healthcare services prescribed by providers when faced with less pressure from potential malpractice suits.

The CBO also forecast that the bill would increase revenues because it would result in lower subsidies for health insurance. In total, CBO and the staff of the Joint Committee on Taxation estimate that enacting the legislation would increase federal revenues by about $6 billion over the next decade.

The CBO report found that federal direct spending for Medicare, Medicaid, the government's share of premiums for annuitants under the Federal Employees Health Benefits (FEHB) program, and other federal health benefits programs would be reduced as a result of the legislation. CBO estimated that direct spending would decline by almost $34 billion over the 2011-2021 period, and that it would reduce federal deficits by almost $10 billion over the 2011-2016 period and by about $40 billion over the next decade.

According to the American Medical Association (AMA), nine out of 10 surgeons aged 55 and older have been sued, and the average cost for a physician to go to court on a medical liability claim is $140,000 -- whether or not the defendant wins the case. The Department of Health and Human Services estimates that $70 billion to $126 billion in medical liability costs are passed on to patients every year.

"Evidence shows the same reforms in HEALTH Act are working in states such as California and Texas to stabilize the medical liability system by striking a reasonable balance between the needs of patients who have been harmed and the needs of millions of Americans who need affordable, accessible medical care," AMA President Cecil B. Wilson, MD, said in a statement.

Information and opinion website PointofLaw.com notes that trial lawyer groups have been heavily lobbying Republicans in the House against the legislation. The American Association for Justice has paid the D.C. lobbying firm Patton Boggs LLP $130,000 for the quarter, and the firm of Forscey and Stinson $50,000 to specifically target the bill.