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107th Congress                                            Rept. 107-693
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================



 
HELP EFFICIENT, ACCESSIBLE, LOW COST, TIMELY HEALTHCARE (HEALTH) ACT OF 
                                  2002

                                _______
                                

 September 25, 2002.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

 Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 4600]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 4600) to improve patient access to health care 
services and provide improved medical care by reducing the 
excessive burden the liability system places on the health care 
delivery system, having considered the same, reports favorably 
thereon with an amendment and recommends that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     7
Background and Need for the Legislation..........................    16
Hearings.........................................................    56
Committee Consideration..........................................    56
Vote of the Committee............................................    56
Committee Oversight Findings.....................................    60
Performance Goals and Objectives.................................    60
New Budget Authority and Tax Expenditures........................    60
Congressional Budget Office Cost Estimate........................    60
Constitutional Authority Statement...............................    68
Section-by-Section Analysis and Discussion.......................    68
Markup Transcript................................................    72
Dissenting Views.................................................   165
    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Help Efficient, Accessible, Low-
cost, Timely Healthcare (HEALTH) Act of 2002''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--
            (1) Effect on health care access and costs.--Congress finds 
        that our current civil justice system is adversely affecting 
        patient access to health care services, better patient care, 
        and cost-efficient health care, in that the health care 
        liability system is a costly and ineffective mechanism for 
        resolving claims of health care liability and compensating 
        injured patients, and is a deterrent to the sharing of 
        information among health care professionals which impedes 
        efforts to improve patient safety and quality of care.
            (2) Effect on interstate commerce.--Congress finds that the 
        health care and insurance industries are industries affecting 
        interstate commerce and the health care liability litigation 
        systems existing throughout the United States are activities 
        that affect interstate commerce by contributing to the high 
        costs of health care and premiums for health care liability 
        insurance purchased by health care system providers.
            (3) Effect on federal spending.--Congress finds that the 
        health care liability litigation systems existing throughout 
        the United States have a significant effect on the amount, 
        distribution, and use of Federal funds because of--
                    (A) the large number of individuals who receive 
                health care benefits under programs operated or 
                financed by the Federal Government;
                    (B) the large number of individuals who benefit 
                because of the exclusion from Federal taxes of the 
                amounts spent to provide them with health insurance 
                benefits; and
                    (C) the large number of health care providers who 
                provide items or services for which the Federal 
                Government makes payments.
    (b) Purpose.--It is the purpose of this Act to implement 
reasonable, comprehensive, and effective health care liability reforms 
designed to--
            (1) improve the availability of health care services in 
        cases in which health care liability actions have been shown to 
        be a factor in the decreased availability of services;
            (2) reduce the incidence of ``defensive medicine'' and 
        lower the cost of health care liability insurance, all of which 
        contribute to the escalation of health care costs;
            (3) ensure that persons with meritorious health care injury 
        claims receive fair and adequate compensation, including 
        reasonable noneconomic damages;
            (4) improve the fairness and cost-effectiveness of our 
        current health care liability system to resolve disputes over, 
        and provide compensation for, health care liability by reducing 
        uncertainty in the amount of compensation provided to injured 
        individuals; and
            (5) provide an increased sharing of information in the 
        health care system which will reduce unintended injury and 
        improve patient care.

SEC. 3. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS.

    A health care lawsuit may be commenced no later than 3 years after 
the date of injury or 1 year after the claimant discovers, or through 
the use of reasonable diligence should have discovered, the injury, 
whichever occurs first. In no event shall the time for commencement of 
a health care lawsuit exceed 3 years, except that in the case of an 
alleged injury sustained by a minor before the age of 6, a health care 
lawsuit may be commenced by or on behalf of the minor until the later 
of 3 years from the date of injury, or the date on which the minor 
attains the age of 8.

SEC. 4. COMPENSATING PATIENT INJURY.

    (a) Unlimited Amount of Damages for Actual Economic Losses in 
Health Care Lawsuits.--In any health care lawsuit, the full amount of a 
claimant's economic loss may be fully recovered without limitation.
    (b) Additional Noneconomic Damages.--In any health care lawsuit, 
the amount of noneconomic damages recovered may be as much as $250,000, 
regardless of the number of parties against whom the action is brought 
or the number of separate claims or actions brought with respect to the 
same occurrence.
    (c) No Discount of Award for Noneconomic Damages.--In any health 
care lawsuit, an award for future noneconomic damages shall not be 
discounted to present value. The jury shall not be informed about the 
maximum award for noneconomic damages. An award for noneconomic damages 
in excess of $250,000 shall be reduced either before the entry of 
judgment, or by amendment of the judgment after entry of judgment, and 
such reduction shall be made before accounting for any other reduction 
in damages required by law. If separate awards are rendered for past 
and future noneconomic damages and the combined awards exceed $250,000, 
the future noneconomic damages shall be reduced first.
    (d) Fair Share Rule.--In any health care lawsuit, each party shall 
be liable for that party's several share of any damages only and not 
for the share of any other person. Each party shall be liable only for 
the amount of damages allocated to such party in direct proportion to 
such party's percentage of responsibility. A separate judgment shall be 
rendered against each such party for the amount allocated to such 
party. For purposes of this section, the trier of fact shall determine 
the proportion of responsibility of each party for the claimant's harm.

SEC. 5. MAXIMIZING PATIENT RECOVERY.

    (a) Court Supervision of Share of Damages Actually Paid to 
Claimants.--In any health care lawsuit, the court shall supervise the 
arrangements for payment of damages to protect against conflicts of 
interest that may have the effect of reducing the amount of damages 
awarded that are actually paid to claimants. In particular, in any 
health care lawsuit in which the attorney for a party claims a 
financial stake in the outcome by virtue of a contingent fee, the court 
shall have the power to restrict the payment of a claimant's damage 
recovery to such attorney, and to redirect such damages to the claimant 
based upon the interests of justice and principles of equity. In no 
event shall the total of all contingent fees for representing all 
claimants in a health care lawsuit exceed the following limits:
            (1) 40 percent of the first $50,000 recovered by the 
        claimant(s).
            (2) 33\1/3\ percent of the next $50,000 recovered by the 
        claimant(s).
            (3) 25 percent of the next $500,000 recovered by the 
        claimant(s).
            (4) 15 percent of any amount by which the recovery by the 
        claimant(s) is in excess of $600,000.
    (b) Applicability.--The limitations in this section shall apply 
whether the recovery is by judgment, settlement, mediation, 
arbitration, or any other form of alternative dispute resolution. In a 
health care lawsuit involving a minor or incompetent person, a court 
retains the authority to authorize or approve a fee that is less than 
the maximum permitted under this section.

SEC. 6. ADDITIONAL HEALTH BENEFITS.

    In any health care lawsuit, any party may introduce evidence of 
collateral source benefits. If a party elects to introduce such 
evidence, any opposing party may introduce evidence of any amount paid 
or contributed or reasonably likely to be paid or contributed in the 
future by or on behalf of the opposing party to secure the right to 
such collateral source benefits. No provider of collateral source 
benefits shall recover any amount against the claimant or receive any 
lien or credit against the claimant's recovery or be equitably or 
legally subrogated to the right of the claimant in a health care 
lawsuit. This section shall apply to any health care lawsuit that is 
settled as well as a health care lawsuit that is resolved by a fact 
finder.

SEC. 7. PUNITIVE DAMAGES.

    (a) In General.--Punitive damages may, if otherwise permitted by 
applicable State or Federal law, be awarded against any person in a 
health care lawsuit only if it is proven by clear and convincing 
evidence that such person acted with malicious intent to injure the 
claimant, or that such person deliberately failed to avoid unnecessary 
injury that such person knew the claimant was substantially certain to 
suffer. In any health care lawsuit where no judgment for compensatory 
damages is rendered against such person, no punitive damages may be 
awarded with respect to the claim in such lawsuit. No demand for 
punitive damages shall be included in a health care lawsuit as 
initially filed. A court may allow a claimant to file an amended 
pleading for punitive damages only upon a motion by the claimant and 
after a finding by the court, upon review of supporting and opposing 
affidavits or after a hearing, after weighing the evidence, that the 
claimant has established by a substantial probability that the claimant 
will prevail on the claim for punitive damages. At the request of any 
party in a health care lawsuit, the trier of fact shall consider in a 
separate proceeding--
            (1) whether punitive damages are to be awarded and the 
        amount of such award; and
            (2) the amount of punitive damages following a 
        determination of punitive liability.
If a separate proceeding is requested, evidence relevant only to the 
claim for punitive damages, as determined by applicable State law, 
shall be inadmissible in any proceeding to determine whether 
compensatory damages are to be awarded.
    (b) Determining Amount of Punitive Damages.--
            (1) Factors considered.--In determining the amount of 
        punitive damages, the trier of fact shall consider only the 
        following:
                    (A) the severity of the harm caused by the conduct 
                of such party;
                    (B) the duration of the conduct or any concealment 
                of it by such party;
                    (C) the profitability of the conduct to such party;
                    (D) the number of products sold or medical 
                procedures rendered for compensation, as the case may 
                be, by such party, of the kind causing the harm 
                complained of by the claimant;
                    (E) any criminal penalties imposed on such party, 
                as a result of the conduct complained of by the 
                claimant; and
                    (F) the amount of any civil fines assessed against 
                such party as a result of the conduct complained of by 
                the claimant.
            (2) Maximum award.--The amount of punitive damages awarded 
        in a health care lawsuit may be up to as much as two times the 
        amount of economic damages awarded or $250,000, whichever is 
        greater. The jury shall not be informed of this limitation.
    (c) No Civil Monetary Penalties for Products That Comply With FDA 
Standards.--
            (1) In general.--No punitive damages may be awarded against 
        the manufacturer or distributor of a medical product based on a 
        claim that such product caused the claimant's harm where--
                    (A)(i) such medical product was subject to 
                premarket approval or clearance by the Food and Drug 
                Administration with respect to the safety of the 
                formulation or performance of the aspect of such 
                medical product which caused the claimant's harm or the 
                adequacy of the packaging or labeling of such medical 
                product; and
                    (ii) such medical product was so approved or 
                cleared; or
                    (B) such medical product is generally recognized 
                among qualified experts as safe and effective pursuant 
                to conditions established by the Food and Drug 
                Administration and applicable Food and Drug 
                Administration regulations, including without 
                limitation those related to packaging and labeling.
            (2) Liability of health care providers.--A health care 
        provider who prescribes a drug or device (including blood 
        products) approved by the Food and Drug Administration shall 
        not be named as a party to a product liability lawsuit 
        involving such drug or device and shall not be liable to a 
        claimant in a class action lawsuit against the manufacturer, 
        distributor, or product seller of such drug or device.
            (3) Packaging.--In a health care lawsuit for harm which is 
        alleged to relate to the adequacy of the packaging or labeling 
        of a drug which is required to have tamper-resistant packaging 
        under regulations of the Secretary of Health and Human Services 
        (including labeling regulations related to such packaging), the 
        manufacturer or product seller of the drug shall not be held 
        liable for punitive damages unless such packaging or labeling 
        is found by the trier of fact by clear and convincing evidence 
        to be substantially out of compliance with such regulations.
            (4) Exception.--Paragraph (1) shall not apply in any health 
        care lawsuit in which--
                    (A) a person, before or after premarket approval or 
                clearance of such medical product, knowingly 
                misrepresented to or withheld from the Food and Drug 
                Administration information that is required to be 
                submitted under the Federal Food, Drug, and Cosmetic 
                Act (21 U.S.C. 301 et seq.) or section 351 of the 
                Public Health Service Act (42 U.S.C. 262) that is 
                material and is causally related to the harm which the 
                claimant allegedly suffered; or
                    (B) a person made an illegal payment to an official 
                of the Food and Drug Administration for the purpose of 
                either securing or maintaining approval or clearance of 
                such medical product.

SEC. 8. AUTHORIZATION OF PAYMENT OF FUTURE DAMAGES TO CLAIMANTS IN 
                    HEALTH CARE LAWSUITS.

    (a) In General.--In any health care lawsuit, if an award of future 
damages, without reduction to present value, equaling or exceeding 
$50,000 is made against a party with sufficient insurance or other 
assets to fund a periodic payment of such a judgment, the court shall, 
at the request of any party, enter a judgment ordering that the future 
damages be paid by periodic payments in accordance with the Uniform 
Periodic Payment of Judgments Act promulgated by the National 
Conference of Commissioners on Uniform State Laws.
    (b) Applicability.--This section applies to all actions which have 
not been first set for trial or retrial before the effective date of 
this Act.

SEC. 9. DEFINITIONS.

    In this Act:
            (1) Alternative dispute resolution system; adr.--The term 
        ``alternative dispute resolution system'' or ``ADR'' means a 
        system that provides for the resolution of health care lawsuits 
        in a manner other than through a civil action brought in a 
        State or Federal court.
            (2) Claimant.--The term ``claimant'' means any person who 
        brings a health care lawsuit, including a person who asserts or 
        claims a right to legal or equitable contribution, indemnity or 
        subrogation, arising out of a health care liability claim or 
        action, and any person on whose behalf such a claim is asserted 
        or such an action is brought, whether deceased, incompetent, or 
        a minor.
            (3) Collateral source benefits.--The term ``collateral 
        source benefits'' means any amount paid or reasonably likely to 
        be paid in the future to or on behalf of the claimant, or any 
        service, product or other benefit provided or reasonably likely 
        to be provided in the future to or on behalf of the claimant, 
        as a result of the injury or wrongful death, pursuant to--
                    (A) any State or Federal health, sickness, income-
                disability, accident, or workers' compensation law;
                    (B) any health, sickness, income-disability, or 
                accident insurance that provides health benefits or 
                income-disability coverage;
                    (C) any contract or agreement of any group, 
                organization, partnership, or corporation to provide, 
                pay for, or reimburse the cost of medical, hospital, 
                dental, or income disability benefits; and
                    (D) any other publicly or privately funded program.
            (4) Compensatory damages.--The term ``compensatory 
        damages'' means objectively verifiable monetary losses incurred 
        as a result of the provision of, use of, or payment for (or 
        failure to provide, use, or pay for) health care services or 
        medical products, such as past and future medical expenses, 
        loss of past and future earnings, cost of obtaining domestic 
        services, loss of employment, and loss of business or 
        employment opportunities, damages for physical and emotional 
        pain, suffering, inconvenience, physical impairment, mental 
        anguish, disfigurement, loss of enjoyment of life, loss of 
        society and companionship, loss of consortium (other than loss 
        of domestic service), hedonic damages, injury to reputation, 
        and all other nonpecuniary losses of any kind or nature. The 
        term ``compensatory damages'' includes economic damages and 
        noneconomic damages, as such terms are defined in this section.
            (5) Contingent fee.--The term ``contingent fee'' includes 
        all compensation to any person or persons which is payable only 
        if a recovery is effected on behalf of one or more claimants.
            (6) Economic damages.--The term ``economic damages'' means 
        objectively verifiable monetary losses incurred as a result of 
        the provision of, use of, or payment for (or failure to 
        provide, use, or pay for) health care services or medical 
        products, such as past and future medical expenses, loss of 
        past and future earnings, cost of obtaining domestic services, 
        loss of employment, and loss of business or employment 
        opportunities.
            (7) Health care lawsuit.--The term ``health care lawsuit'' 
        means any health care liability claim concerning the provision 
        of health care goods or services affecting interstate commerce, 
        or any health care liability action concerning the provision of 
        health care goods or services affecting interstate commerce, 
        brought in a State or Federal court or pursuant to an 
        alternative dispute resolution system, against a health care 
        provider, a health care organization, or the manufacturer, 
        distributor, supplier, marketer, promoter, or seller of a 
        medical product, regardless of the theory of liability on which 
        the claim is based, or the number of claimants, plaintiffs, 
        defendants, or other parties, or the number of claims or causes 
        of action, in which the claimant alleges a health care 
        liability claim.
            (8) Health care liability action.--The term ``health care 
        liability action'' means a civil action brought in a State or 
        Federal Court or pursuant to an alternative dispute resolution 
        system, against a health care provider, a health care 
        organization, or the manufacturer, distributor, supplier, 
        marketer, promoter, or seller of a medical product, regardless 
        of the theory of liability on which the claim is based, or the 
        number of plaintiffs, defendants, or other parties, or the 
        number of causes of action, in which the claimant alleges a 
        health care liability claim.
            (9) Health care liability claim.--The term ``health care 
        liability claim'' means a demand by any person, whether or not 
        pursuant to ADR, against a health care provider, health care 
        organization, or the manufacturer, distributor, supplier, 
        marketer, promoter, or seller of a medical product, including, 
        but not limited to, third-party claims, cross-claims, counter-
        claims, or contribution claims, which are based upon the 
        provision of, use of, or payment for (or the failure to 
        provide, use, or pay for) health care services or medical 
        products, regardless of the theory of liability on which the 
        claim is based, or the number of plaintiffs, defendants, or 
        other parties, or the number of causes of action.
            (10) Health care organization.--The term ``health care 
        organization'' means any person or entity which is obligated to 
        provide or pay for health benefits under any health plan, 
        including any person or entity acting under a contract or 
        arrangement with a health care organization to provide or 
        administer any health benefit.
            (11) Health care provider.--The term ``health care 
        provider'' means any person or entity required by State or 
        Federal laws or regulations to be licensed, registered, or 
        certified to provide health care services, and being either so 
        licensed, registered, or certified, or exempted from such 
        requirement by other statute or regulation.
            (12) Health care goods or services.--The term ``health care 
        goods or services'' means any goods or services provided by a 
        health care organization, provider, or by any individual 
        working under the supervision of a health care provider, that 
        relates to the diagnosis, prevention, or treatment of any human 
        disease or impairment, or the assessment of the health of human 
        beings.
            (13) Malicious intent to injure.--The term ``malicious 
        intent to injure'' means intentionally causing or attempting to 
        cause physical injury other than providing health care goods or 
        services.
            (14) Medical product.--The term ``medical product'' means a 
        drug or device intended for humans, and the terms ``drug'' and 
        ``device'' have the meanings given such terms in sections 
        201(g)(1) and 201(h) of the Federal Food, Drug and Cosmetic Act 
        (21 U.S.C. 321), respectively, including any component or raw 
        material used therein, but excluding health care services.
            (15) Noneconomic damages.--The term ``noneconomic damages'' 
        means damages for physical and emotional pain, suffering, 
        inconvenience, physical impairment, mental anguish, 
        disfigurement, loss of enjoyment of life, loss of society and 
        companionship, loss of consortium (other than loss of domestic 
        service), hedonic damages, injury to reputation, and all other 
        nonpecuniary losses of any kind or nature.
            (16) Punitive damages.--The term ``punitive damages'' means 
        damages awarded, for the purpose of punishment or deterrence, 
        and not solely for compensatory purposes, against a health care 
        provider, health care organization, or a manufacturer, 
        distributor, or supplier of a medical product. Punitive damages 
        are neither economic nor noneconomic damages.
            (17) Recovery.--The term ``recovery'' means the net sum 
        recovered after deducting any disbursements or costs incurred 
        in connection with prosecution or settlement of the claim, 
        including all costs paid or advanced by any person. Costs of 
        health care incurred by the plaintiff and the attorneys' office 
        overhead costs or charges for legal services are not deductible 
        disbursements or costs for such purpose.
            (18) State.--The term ``State'' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, Guam, American Samoa, the Northern 
        Mariana Islands, the Trust Territory of the Pacific Islands, 
        and any other territory or possession of the United States, or 
        any political subdivision thereof.

SEC. 10. EFFECT ON OTHER LAWS.

    (a) Vaccine Injury.--
            (1) To the extent that title XXI of the Public Health 
        Service Act establishes a Federal rule of law applicable to a 
        civil action brought for a vaccine-related injury or death--
                    (A) this Act does not affect the application of the 
                rule of law to such an action; and
                    (B) any rule of law prescribed by this Act in 
                conflict with a rule of law of such title XXI shall not 
                apply to such action.
            (2) If there is an aspect of a civil action brought for a 
        vaccine-related injury or death to which a Federal rule of law 
        under title XXI of the Public Health Service Act does not 
        apply, then this Act or otherwise applicable law (as determined 
        under this Act) will apply to such aspect of such action.
    (b) Other Federal Law.--Except as provided in this section, nothing 
in this Act shall be deemed to affect any defense available to a 
defendant in a health care lawsuit or action under any other provision 
of Federal law.

SEC. 11. STATE FLEXIBILITY AND PROTECTION OF STATES' RIGHTS.

    (a) Health Care Lawsuits.--The provisions governing health care 
lawsuits set forth in this Act preempt, subject to subsections (b) and 
(c), State law to the extent that State law prevents the application of 
any provisions of law established by or under this Act. The provisions 
governing health care lawsuits set forth in this Act supersede chapter 
171 of title 28, United States Code, to the extent that such chapter--
            (1) provides for a greater amount of damages or contingent 
        fees, a longer period in which a health care lawsuit may be 
        commenced, or a reduced applicability or scope of periodic 
        payment of future damages, than provided in this Act; or
            (2) prohibits the introduction of evidence regarding 
        collateral source benefits, or mandates or permits subrogation 
        or a lien on collateral source benefits.
    (b) Protection of States' Rights.--Any issue that is not governed 
by any provision of law established by or under this Act (including 
State standards of negligence) shall be governed by otherwise 
applicable State or Federal law. This Act does not preempt or supersede 
any law that imposes greater protections (such as a shorter statute of 
limitations) for health care providers and health care organizations 
from liability, loss, or damages than those provided by this Act.
    (c) State Flexibility.--No provision of this Act shall be construed 
to preempt--
            (1) any State statutory limit (whether enacted before, on, 
        or after the date of the enactment of this Act) on the amount 
        of compensatory or punitive damages (or the total amount of 
        damages) that may be awarded in a health care lawsuit, whether 
        or not such State limit permits the recovery of a specific 
        dollar amount of damages that is greater or lesser than is 
        provided for under this Act, notwithstanding section 4(a); or
            (2) any defense available to a party in a health care 
        lawsuit under any other provision of State or Federal law.

SEC. 12. APPLICABILITY; EFFECTIVE DATE.

    This Act shall apply to any health care lawsuit brought in a 
Federal or State court, or subject to an alternative dispute resolution 
system, that is initiated on or after the date of the enactment of this 
Act, except that any health care lawsuit arising from an injury 
occurring prior to the date of the enactment of this Act shall be 
governed by the applicable statute of limitations provisions in effect 
at the time the injury occurred.

                          Purpose and Summary

    The costs of the tort system are predicted to soon swamp 
the national economy, \1\ and already a national insurance 
crisis is ravaging the nation's essential health care system. 
Medical professional liability insurance rates have 
skyrocketed, causing major insurers to drop coverage or raise 
premiums to unaffordable levels. Doctors and other health care 
providers have been forced to abandon patients and practices, 
particularly in high-risk specialties such as emergency 
medicine \2\ and obstetrics and gynecology. \3\ Women are being 
particularly hard hit, as are low-income neighborhoods and 
rural areas. Soaring premiums have also left medical schools 
reeling, and small medical schools are particularly vulnerable. 
\4\ And according to the Department of Health and Human 
Services:
---------------------------------------------------------------------------
    \1\ See Michael Freedman, ``The Tort Mess'' Forbes (May 13, 2002) 
(``In the next few years, predicts insurance consultancy Tillinghast-
Towers Perrin, tort costs could increase twice as fast as the economy, 
going from $200 billion last year to $298 billion, or 2.4% of GDP, by 
2005. Since 1994 the average jury award in tort cases as a whole has 
tripled to $1.2 million, in medical malpractice it has tripled to $3.5 
million and in product liability cases it has quadrupled to $6.8 
million, according to just released data from Jury Verdict 
Research.''). Also, according to the Council of Economic Advisers, 
``the United States tort system is the most expensive in the world, 
more than double the average cost of other industrialized nations . . . 
To the extent that tort claims are economically excessive, they act 
like a tax on individuals and firms . . . With estimated annual direct 
costs of nearly $180 billion, or 1.8 percent of GDP, the U.S. tort 
liability system is the most expensive in the world, more than double 
the average cost of other industrialized nations that have been 
studied. This cost has grown steadily over time, up from only 1.3 
percent of GDP in 1970, and only 0.6 percent in 1950.'' Council of 
Economic Advisers, ``Who Pays for Tort Liability Claims? An Economic 
Analysis of the U.S. Tort Liability System'' (April 2002) at 1-2.
    \2\ See Patricia Neighmond, National Public Radio, ``All Things 
Considered'' Analysis--High Cost of Malpractice Insurance in Nevada is 
Causing Some Physicians to Stop Practicing Trauma Medicine or Leave the 
State (April 3, 2002) (``NEIGHMOND: . . . Some doctors have stopped 
practicing emergency medicine because they can no longer afford 
malpractice insurance . . . [S]tate law requires a certain number of 
emergency physicians and specialists to be on call 24 hours a day 7 
days a week. And if the Trauma Center can't comply, it could be shut 
down. If that happens [,] critically injured patients would have to be 
sent to trauma centers in nearby states. Dr. CARRISON: Some patients 
are going to die that wouldn't die, and that extra time, that's what 
saves lives. Time saves lives. The quicker you're at the trauma center, 
the better chance you have of survival.'').
    \3\ In a March 7, 2002 release, the American College of 
Obstetricians and Gynecologists (``ACOG'') states that ``the meteoric 
rise in liability premiums threatens women's access to [health] care.'' 
ACOG continues that ``[e]xperience demonstrates that obstetric 
providers--when confronted with substantially higher costs for 
liability coverage--will stop delivering babies, reduce the number they 
do deliver, and further cut back, or eliminate, care for high-risk 
patients, the uninsured, and the underinsured . . .''.
    \4\ See Myrle Croasdale, ``Rocketing liability rates squeeze 
medical schools,'' American Medical News (May 20, 2002) (``The 
University of Nevada School of Medicine in Reno could be forced to 
close if it can't find affordable liability insurance by June 30. In 
West Virginia, Marshall University's Joan C. Edwards School of Medicine 
in Huntington has cut its pathology program and is trimming resident 
class size. Pennsylvania State University College of Medicine in 
Hershey is cutting faculty salaries, which will make it hard to land 
top researchers . . . [According to] Jordan J. Cohen, MD, president of 
the Assn. of American Medical Colleges, . . . `I think it's adding to 
the view that medicine is plagued by liability costs and is constantly 
on the defensive,' Dr. Cohen says. `I wonder how many students are not 
even considering medicine because of the changes that have occurred.' 
'').

        Doctors who would volunteer their time to provide care 
        in free clinics and other volunteer organizations, or 
        who would volunteer their services to the Medical 
        Reserve Corps, are afraid to do so because they do not 
        have malpractice insurance. This makes it more 
        difficult for clinics to provide care to low-income 
        patients. The clinics must spend their precious 
        resources to obtain their own coverage, and have less 
        money available to provide care to people who need it. 
        The proportion of physicians in the country providing 
        any charity care fell from 76% to 72% between 1997 and 
        1999 alone, increasing the need for doctors willing to 
        volunteer their services. \5\
---------------------------------------------------------------------------
    \5\ Department of Health and Human Services, ``Confronting the New 
Health Care Crisis: Improving Health Care Quality and Lowering Costs by 
Fixing Our Medical Liability System'' (July 24, 2002) at 4 (citing 
Center for Health Systems Change, ``An Update on the Community Tracking 
Study, A Focus on the Changing Health System,'' Issue Brief No. 18 
(February 1999)).

    According to the Associated Press, the current medical 
professional liability premium crisis has also prevented 
doctors from conducting charity missions. \6\
---------------------------------------------------------------------------
    \6\ See ``Doctors say insurance costs force them to cut charity 
work,'' The Associated Press (August 26, 2002) (Local doctors say the 
high cost of medical malpractice insurance is having the secondary 
effect of curbing their ability to do charitable work. A physicians 
group last month canceled an annual trip to poorer regions of 
Appalachia after being unable to sign up enough doctors . . . ``We've 
gone every year for several years. We take supplies, many types of 
specialists, and we treat people there,'' said Theresa Chin, assistant 
to and wife of Dr. Victorino Chin of Holy Family Health Clinic. ``None 
of the doctors want to go because they are afraid of being sued.'').
---------------------------------------------------------------------------
    The current crisis was summarized in TIME magazine as 
follows:

        In some states, hospitals are closing entire clinics 
        and rural communities are losing their only 
        practitioners. Mercy Hospital of Philadelphia closed 
        its maternity ward after annual insurance premiums for 
        its group of four hospitals swelled to $22 million, 
        from $7 million in 2000. In Arizona one woman gave 
        birth by the side of the road before she reached the 
        only remaining maternity ward in an area of 6,000 sq. 
        mi. The sole trauma center in Las Vegas closed for 10 
        days in July, forcing critically injured patients to be 
        helicoptered to California or treated in ill-equipped 
        local emergency rooms.
          Sommer Hollingsworth, president of the Nevada 
        Development Authority, which works to attract employers 
        to southern Nevada, observed that of about 350 firms 
        his group sought to recruit over the past year, ``we've 
        never had anyone ask about the nuclear waste at Yucca 
        Mountain, but client after client wants to know what we 
        are going to do about the doctor situation. The quality 
        of the medical system plays a big role for companies 
        choosing to relocate.''
          Nevada has been especially hard hit because it's one 
        of the states with the sharpest rise in malpractice 
        costs. But those costs are climbing nationwide. 
        According to one study, from 1999 to 2000 the median 
        plaintiff's jury award in medical-malpractice cases 
        increased 43%, from $700,000 to $1 million. Last year 
        the MIIX Group, an insurer in 24 states, saw 26 claim 
        payments of more than $1 million. This year it has 
        faced an average of one new $1 million-plus claim every 
        week . . .
          Because their reimbursement rates are often fixed by 
        contracts with HMOs and managed-care groups, doctors 
        cannot readily pass on their increased costs. To pay 
        higher insurance premiums, some doctors have cut back 
        on staff. But others are dropping high-risk specialties 
        or retiring early. ``I would be working just to pay my 
        malpractice costs,'' said Debra Wright, a Las Vegas 
        obstetrician who took a leave of absence this spring to 
        avoid a premium increase to $180,000, from $50,000 last 
        year. She hopes to resume her work if rates go down. 
        Cheryl Edwards has stopped her obstetrics practice 
        altogether and moved from Las Vegas to Los Angeles for 
        a gynecology and cosmetic-surgery practice. ``I was 
        getting up in the middle of the night and losing money 
        with every baby I delivered.''
          Reformers point to California, where jury awards for 
        noneconomic damages, such as pain and suffering, are 
        capped at $250,000 and malpractice rates have held 
        relatively steady over the past year. With tort reform, 
        says Ron Neupauer, a vice president of Medical 
        Insurance Exchange of California, ``you don't have the 
        emotion-laden blockbuster verdicts.'' . . . Even when 
        tort reforms are put in place, they can take time to 
        bite. In Nevada, where liability caps were passed last 
        month, most insurers have declined to lower rates until 
        they see the change reflected on their balance sheets, 
        which could take years. They may have a point: courts 
        in six states have struck down as unconstitutional 
        limits on a jury's ability to determine damages in 
        malpractice cases, and lawyers in Nevada are readying a 
        case against the new limits.
          While the interest groups jockey, access to the 
        courts is less urgent for most people than access to a 
        doctor. After calling every day for weeks, Elizabeth 
        Gromny finally persuaded her obstetrician to handle her 
        delivery, but only because another patient in military 
        service had been transferred out of state. But 
        complications have forced Gromny to visit specialists, 
        and many specialists have also posted signs in their 
        offices warning that the insurance crisis might force 
        them to close their doors. ``I'm constantly worried 
        about what could happen,'' says Gromny. ``When you're 
        pregnant, the last thing you want to have to worry 
        about is your doctor.'' \7\
---------------------------------------------------------------------------
    \7\ Laura Bradford, ``Out of Medicine; As premiums soar for 
malpractice insurance, doctors get harder to find,'' TIME (September 
16, 2002).

    The current crisis has been caused by increasingly 
escalating ``mega-verdicts.'' According to the Department of 
---------------------------------------------------------------------------
Health and Human Services:

        The number of mega-verdicts is increasing rapidly. The 
        average award rose 76% from 1996-1999. The median award 
        in 1999 was $800,000, a 6.7% increase over the 1998 
        figure of $750,000; and between 1999 and 2000, median 
        malpractice awards increased nearly 43%. Specific 
        physician specialties have seen disproportionate 
        increases, especially those who deliver babies. In the 
        small proportion of cases where damages were awarded, 
        the median award in cases involving obstetricians and 
        gynecologists jumped 43% in 1 year, from $700,000 in 
        1999 to $1,000,000 in 2000. The number of million 
        dollar plus awards has increased dramatically in recent 
        years. In the period 1994-1996, 34% of all verdicts 
        that specified damages assessed awards of $1 million or 
        more. This increased by 50% in 4 years; in 1999-2000, 
        52% of all awards were in excess of $1 million. There 
        have been 21 verdicts of $9 million or more in 
        Mississippi since 1995--one of $100,000,000. Before 
        1995 there had been no awards in excess of $9,000,000. 
        These mega-awards for non-economic damages have 
        occurred (as would be expected) in states that do not 
        have limitations on the amounts that can be recovered . 
        . . Mirroring the increase in jury awards, settlement 
        payments have steadily risen over the last two decades. 
        The average payment per paid claim increased from 
        approximately $110,000 in 1987 to $250,000 in 1999. 
        Defense expenses per paid claim increased by $24,000 
        over the same period. \8\
---------------------------------------------------------------------------
    \8\ Department of Health and Human Services, ``Confronting the New 
Health Care Crisis: Improving Health Care Quality and Lowering Costs by 
Fixing Our Medical Liability System'' (July 24, 2002) at 9-10.

    H.R. 4600 (the HEALTH Act), modeled after California's 
quarter-century old and highly successful health care 
litigation reforms, addresses the current crisis and will make 
health care delivery more accessible and cost-effective in the 
United States. California's Medical Injury Compensation Reform 
Act (``MICRA''), which was signed into law by Governor Jerry 
Brown, has proved immensely successful in increasing access to 
affordable medical care. Overall, according to data of the 
National Association of Insurance Commissioners, the rate of 
increase in medical professional liability premiums in 
California since 1976 has been a very modest 167%, whereas the 
rest of the United States have experienced a 505% rate of 
increase, a rate of increase 300% larger than that experienced 
in California. \9\ As the Los Angeles Times reported, 
``According to data for 2000 from the National Association of 
Insurance Commissioners, insurers spent a smaller percentage of 
premiums collected--45.8%--in California to pay claims against 
medical providers than the national average of 80.9%.'' \10\
---------------------------------------------------------------------------
    \9\ The following comments by the Democratic Vice Chairman of the 
U.S. Commission on Civil Rights, Planned Parenthood of Los Angeles, and 
the AIDS Health Care Foundation have been transcribed from a CD-ROM 
that includes videotaped interviews with supporters of California's 
health care litigation reforms, on which the HEALTH Act is modeled. The 
CD-ROM, entitled ``MICRA: Keeping Health Care Available and 
Affordable,'' was compiled by Californians Allied for Patient 
Protection:
---------------------------------------------------------------------------
Comments by Cruz Reynoso, Democratic Vice Chairman of the U.S. 
Commission on Civil Rights (appointed by former Senate Majority Leader 
George Mitchell in 1993), Professor of Law at UCLA, and former Justice 
of the California Supreme Court:

      ``Medical insurance has been going up. I think there's no 
      question that what the legislature did and continues to do 
      has had an influence on keeping those expenses down and 
      that's a very important public policy obviously for the 
      state. The litigation as I've seen it as a lawyer, and as a 
      judge, and as a law professor is filed for its settlement 
      value and therefore, and particularly if you have at the 
      end of the line the possibly of punitive damages, of high 
      damages aside from the punitive damages, there's a great 
      incentive to try to settle the matter and so there could 
      easily be a quite adverse ramification for the whole 
      industry . . . Publicly-funded medical centers were very 
      supportive of the continued protection of MICRA because if 
      their own insurance rates would go up they would be less 
      able to serve the poor. I think that's very much a matter 
      in the mix that the legislature should take into account . 
      . . I think that folks ought to have access to the courts 
      and I think we need a balance of having access and yet in 
      such a way that it won't be a negative for the interests of 
      society. I personally have favored having as much access to 
      the courts as possible, but at the same time you have to be 
      careful that it doesn't do so in a way that is destructive, 
      for example, in the medical field, destructive of the 
      ability of society to respond to the medical needs of the 
      people. I think MICRA has tried very hard to reach a 
      balance between the interests that plaintiffs have in going 
      into court and the public policy that we've long had in 
      California, and in our country, and the interest of 
      providing reasonable insurance and medical attention.''

Comments by Nancy Sasaki, President and CEO of Planned Parenthood, Los 
Angeles:

      ``A lot of times Planned Parenthood is seen as the primary 
      provider for women . . . If the caps [on non-economic 
      damages] in MICRA were to be increased, you actually would 
      begin to see kind of a domino effect. One of the primary 
      areas that would be of concern to us is how that would 
      affect prenatal care and obstetric care. If insurance costs 
      for the physicians go up they typically will then, as any 
      business would, look at what services are their highest 
      risks, which services are costing them the most, and they 
      may no longer provide that. And that's happened in the 
      past, where physicians have stopped providing obstetric 
      care because of costs. If that were to happen, with our 
      prenatal program, we would have no place to send women for 
      deliveries. We don't do deliveries ourselves, we need a 
      physician who's a certified ob-gyn to provide those, and if 
      we have no place to send them, they'll end up in the 
      emergency rooms of the hospitals delivering with no 
      continuity of care, not knowing the doctor that they're 
      going into, and that's another issue that we've really 
      fought to try and reduce is emergency care for routine 
      types of care that should be able to be provided by a 
      physician. So in that sense, prenatal care would be 
      affected. Our own insurance costs could possibly go up . . 
      . so [if] our costs go up that means that we may not be 
      able to serve as many people as we currently serve and 
      therefore you have greater problems with access to care . . 
      . It's a serious threat to Planned Parenthood because when 
      I sit behind my desk the things that I'm thinking about are 
      those things that are happening in the environment that 
      affect our ability to provide care for women in Los Angeles 
      county.''

Comments by Donna Stidham, Director of Managed Care and Patient 
Services, AIDS Health Care Foundation:

      ``The under-served and the unserved patients tend to be 
      people of color, tend to be women, tend to be people that 
      don't have the resources, and statistics are showing us 
      that is where the [AIDS] epidemic is moving . . . They 
      desperately need the care. [An] increase in the MICRA cap . 
      . . would increase our premiums phenomenally. In a single 
      clinic setting it could probably increase their premiums 
      maybe twenty or thirty thousand dollars. For multiple 
      physicians, I'd hate to even guess, but it'd be in the 
      hundreds of thousands, which would take away from direct 
      patient care because that's where our dollars go is in 
      caring for the patients, paying for their medications, 
      paying for their outpatient services, paying for the 
      physicians to care for them, and the nurses to care for 
      them. So it would directly take away from care, from the 
      patients. You'd see us perhaps not being able to admit all 
      types of patients. Right now we can take any kind of 
      patient, whether they have the ability to pay or not. It 
      would force us to look at taking patients that only have a 
      third party insurer, maybe not even taking some of the 
      patients that have third party insurers because their 
      reimbursement rate wasn't high enough, such as Medicare or 
      Medicare. We'd have to make those sort of hard decisions, 
      and if you make those decisions you're cutting out exactly 
      the people it's our mission to serve. And there are still 
      large awards for patients who've been harmed. But the pain 
      and suffering, that's where it used to be out of control 
      here [in California].''
---------------------------------------------------------------------------
    \10\ Edwin Chen, ``Curb Malpractice Suits to Fix `Badly Broken' 
System, Bush Says'' The Los Angeles Times (July 26, 2002) at A30.
---------------------------------------------------------------------------
    Two Stanford University economists have also concluded that 
direct medical care litigation reforms--including caps on non-
economic damage awards--generally reduce the growth of 
malpractice claims rates and insurance premiums, and reduce 
other stresses on doctors that may impair the quality of 
medical care. \11\ By incorporating MICRA's time-tested reforms 
at the Federal level, the HEALTH Act will make medical 
malpractice insurance affordable again, encourage health care 
practitioners to maintain their practices, and reduce health 
care costs for patients. Its enactment will particularly help 
traditionally under-served rural and inner city communities, 
and women seeking obstetrics care. \12\
---------------------------------------------------------------------------
    \11\ See Daniel P. Kessler and Mark B. McClellan, ``The Effects of 
Malpractice Pressure and Liability Reforms on Physicians' Perceptions 
of Medical Care,'' 60 Law and Contemporary Problems 1:81-106 (1997), at 
105 (``[P]hysicians from states enacting liability reforms that 
directly reduce malpractice pressure experience lower growth over time 
in malpractice claims rates and in real malpractice insurance premiums. 
[Also], physicians from reforming states report significant relative 
declines in the perceived impact of malpractice pressure on practice 
patterns.'').
    \12\ The Association of Obstetricians and Gynecologists (``ACOG'') 
recently issued a ``Red Alert'' on May 6, 2002, listing nine states in 
which obstetricians and gynecologists are leaving their professions due 
to unaffordable professional liability rates caused by a lack of 
litigation reforms:

Florida: This state has the highest average premium for ob-gyns in the 
nation, at $158,000 per year in 2000. But in certain areas, notably 
Dade County, rates can soar to $208,949. Ob-gyns in this state are more 
likely than their colleagues in other states to no longer practice 
obstetrics. The liability situation has been so chronic in Florida, 
that during the crisis of the 1980's, the state began to allow doctors 
to ``go bare'' (not have liability coverage) as long as they could post 
---------------------------------------------------------------------------
bond or prove ability to pay a judgment of up to $250,000.

Mississippi: Liability premiums for obstetrical care rose from 20% to 
400% in 2001. Certain counties are known for being liability ``hot 
spots,'' notorious for high jury awards. ``Forum shopping'' by 
plaintiffs' attorneys--to file cases in high-award counties no matter 
where the medical case originated--is becoming more common. Most 
serious of all: the state suffers from a chronic shortage of medical 
care in rural areas. Few cities under 20,000 have physicians delivering 
babies. Yazoo City--pop. 14,550--has no one practicing obstetrics.

Nevada: The St. Paul Companies, Inc., which dropped its medical 
liability coverage in the last year, had insured 54% of Nevada's ob-
gyns. Physicians are rushing to find available or affordable insurance. 
The University of Nevada Medical Center may lose its medical liability 
coverage as of July 1. The state ranks 5th among states in the highest 
physician liability premium (at $94,820 per year) but only 47th out of 
50 states in the number of physicians for its population. Las Vegas 
could lose as many as 10% of its physicians in the coming year. A 
survey of ob-gyns in Clark County found that 42.3% were now making 
plans to leave the state, if the crisis was not resolved in a few 
months: 6 out of 10 ob-gyns say they would stop obstetrics.

New Jersey: Three medical liability insurance companies will stop 
insuring NJ doctors in 2002 for financial reasons. The state's two 
largest medical liability insurers have stated they cannot pick up all 
the extra business and are rejecting doctors they deem high risk. The 
president of the New Jersey Hospital Association says that rising 
medical liability premiums are a ``wake-up call'' that the state may 
lose doctors. Hospital premiums have risen 250% over the last 3 years. 
Sixty-five percent of hospital facilities report they are losing 
physicians due to liability insurance costs.

New York: The state is second only to Florida in the cost of liability 
insurance for ob-gyns ($144,973 per year in 2000), and is renowned for 
higher jury verdict amounts. (There is no upper limit on noneconomic 
damages in jury verdicts.) Attempts to pass a no-fault compensation 
program for birth-related injuries--similar to laws in VA and FL--have 
been unsuccessful. According to Insurance analysts, the majority of 
physicians may see a 20% hike in premium costs beginning July 1, 2002. 
NY is presently faced with a shortage of ob care in certain rural 
regions.

Pennsylvania: The state is the second highest in the nation for total 
payouts for medical liability--$352 million in fiscal year 2000, or 
nearly 10% of the national total. Despite some tort reform measures 
passed by the state legislature this past winter, ob-gyns were 
disappointed the measures did not provide more relief. The state 
abandoned its provision of a catastrophic loss fund. South Philadelphia 
is losing its only maternity ward: Methodist Hospital has announced 
that after a century of service, its labor and delivery ward would be 
closing by June 30, 2002, due to rising costs of medical liability 
insurance.

Texas: In parts of the state, premiums have soared to $160,746 a year. 
Premiums can vary widely across the state, with some regions less 
affected than others by cost increases. The Texas Medical Association 
expects premiums for 2002 to increase by 30% to 200%. According to the 
Texas Attorney General John Cornyn, Texas doctors are two times as 
likely to be sued as their colleagues across the country. Preliminary 
results of a recent Texas Medical Association survey indicate that more 
than half of responding physicians, including those in the prime of 
their careers, are considering early retirement because of the state's 
medical liability problems.

Washington: In late 2001, the second largest insurance carrier in the 
state announced it was withdrawing from the medical liability market in 
Washington: the decision impacted about 1,500 physicians. In 2001, 
insurance premiums for many physicians increased 55% or more from the 
year before, and ranged from $34,000-$59,000 per year. Some Tacoma 
specialists reported 300% increases in premiums. Unlike California, 
Washington currently has no cap on noneconomic damages in medical 
liability cases.

West Virginia: The state is known for high jury verdict awards, and 
unaffordable insurance rates could fuel an exodus of doctors from the 
state. A majority of the state is already classified as medically 
underserved and cannot afford to lose physicians. Yet an informal ACOG 
survey found that half of all ob-gyn residents and two-thirds of ob-
gyns in private practice plan to leave the state if the crisis is not 
resolved.
  ACOG has also noted that ``In three other states--Ohio, Oregon, and 
Virginia--a crisis is brewing, while four other states--Connecticut, 
Illinois, Kentucky and Missouri--should be watched for mounting 
problems . . .'' ACOG News Release, ``Nation's Obstetrical Care 
Endangered by Growing Liability Insurance Crisis'' (May 6, 2002).
    MICRA's reforms, which have been the law in California for 
25 years, include a $250,000 cap on noneconomic damages, limits 
on the contingency fees lawyers can charge; authorization for 
defendants to introduce evidence showing the plaintiff received 
compensation for losses from outside sources (to prevent double 
recoveries); and authorization for courts to require periodic 
payments for future damages instead of lump sum awards that 
prevent bankruptcies in which plaintiff's would receive only 
pennies on the dollar. The HEALTH Act also includes provisions 
creating a ``fair share'' rule, by which damages are allocated 
fairly, in direct proportion to fault, and reasonable 
guidelines--but not caps--on the award of punitive damages. 
Finally, the HEALTH Act will accomplish reform without in any 
way limiting compensation for 100% of plaintiffs' economic 
losses (anything to which a receipt can be attached), including 
their medical costs, their lost wages, their future lost wages, 
rehabilitation costs, and any other economic out of pocket loss 
suffered as the result of a health care injury. The HEALTH Act 
also does not preempt any State law that otherwise caps 
damages.
    Enactment of the HEALTH Act will not result in more medical 
malpractice cases being brought in Federal court. The Supreme 
Court has held that a ``federal standard'' does not confer 
Federal question jurisdiction in the absence of Congressional 
creation of a Federal cause of action. \13\ Consequently, 
medical malpratice cases under the HEALTH Act could continue to 
be brought in state court.
---------------------------------------------------------------------------
    \13\ See Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 813 
(1986).
---------------------------------------------------------------------------
    Finally, many state supreme courts have judicially 
nullified reasonable litigation management provisions enacted 
by state legislatures, many of which sought to address the 
crisis in medical professional liability that reduces patients' 
access to health care. \14\ Consequently, in such states, 
passage of Federal legislation by Congress may be the only 
means of addressing the state's current crisis in medical 
professional liability and restoring patients' access to health 
care. Laws passed by states that have already provided for, or 
may in the future provide for, different limits on damages in 
health care lawsuits will be preserved under the HEALTH Act, as 
the HEALTH Act provides that ``No provision of this Act shall 
be construed to preempt . . . any State statutory limit 
(whether enacted before, on, or after the date of the enactment 
of this Act) on the amount of compensatory or punitive damages 
(or the total amount of damages) that may be awarded in a 
health care lawsuit, whether or not such State limit permits 
the recovery of a specific dollar amount of damages that is 
greater or lesser than is provided for under this Act . . .'' 
Some states have limited noneconomic damages in medical 
malpractice actions, but at levels higher than $250,000. \15\ 
Some states place aggregate limits on medical malpractice 
awards. \16\ Montana limits noneconomic damages in medical 
malpractice cases at $250,000, but its health care litigation 
reforms do not include other elements of the HEALTH Act. \17\
---------------------------------------------------------------------------
    \14\ Alabama--Clark and Halliburton Industrial Services Division v. 
Container Corp. of America, 589 So. 2d 184 (Ala. 1991) (statute 
allowing for periodic payments of personal injury awards over $150,000 
held unconstitutional under state constitution); Henderson v. Alabama 
Power Co., 627 So. 2d 878 (Ala. 1993) (statute setting $250,000 limit 
on punitive damages awards held unconstitutional under state 
constitution); Moore v. Mobile Infirmary Association, 592 So. 2d 156 
(Ala. 1991) (statute setting $400,000 limit on noneconomic damages 
awards in health care liability actions held unconstitutional under 
state constitution); Smith v. Schulte, 671 So. 2d 1334 (Ala.) (1987 
statute setting $1 million aggregate limit on damages awards in health 
care liability actions held unconstitutional under state constitution), 
cert. denied, 517 U.S. 1220 (1996); Alaska--Turner Construction Co., 
Inc. v. Scales, 752 P.2d 467 (Alaska 1988) (6-year statute of repose on 
suits filed against design professionals held unconstitutional under 
state constitution); Arizona--Anson v. American Motors Co., 747 P.2d 
581 (Ariz. App. 1987) (2-year statute of limitations for wrongful death 
actions, with accrual at time of death, held unconstitutional under 
state constitution); Barrio v. San Manuel Division Hospital For Magma 
Copper Co., 692 P.2d 280 (Ariz. 1984) (statute of limitations which 
required minor injured when below age of seven to bring action for 
medical malpractice by the time she reached age ten held 
unconstitutional under state constitution); Hazine v. Montgomery 
Elevator Co., 861 P.2d 625 (Ariz. 1993) (12-year product liability 
statute of repose held unconstitutional under state constitution); 
Kenyon v. Hammer, 688 P.2d 961 (Ariz. 1984) (3-year statute of 
limitations for wrongful death claim held unconstitutional under state 
constitution); Colorado--Austin v. Litvak, 682 P.2d 41 (Colo. 1984) (3-
year statute of repose in medical malpractice actions held 
unconstitutional under state constitution insofar as the statute 
applied to persons whose claims were based on negligent misdiagnosis); 
Florida--Smith v. Department of Insurance, 507 So. 2d 1080 (Fla. 1987) 
(statute setting $450,000 limit on noneconomic damages awards held 
unconstitutional under state constitution); Georgia--Denton v. Con-Way 
Southern Express, Inc., 402 S.E.2d 269 (Ga. 1991) (statute authorizing 
admission of collateral sources of recovery available to plaintiffs 
seeking special damages for tortious injury held unconstitutional under 
state constitution); Illinois--Best v. Taylor Machine Works, Inc., 689 
N.E.2d 1057 (Ill. 1997) (Civil Justice Reform Amendments of 1995's 
$500,000 limit on noneconomic damages award and abolition of joint 
liability held unconstitutional under state constitution); Indiana--
Martin v. Richey, 711 N.E.2d 1273 (Ind. 1999) (2-year occurrence-based 
statute of limitations as applied to plaintiff was held 
unconstitutional under state constitution); Van Dusen v. Stotts, 712 
N.E.2d 491 (Ind. 1999) (same); Harris v. Raymond, 715 N.E.2d 388 (Ind. 
1999) (same); Kansas--Farley v. Engelken, 740 P.2d 1058 (Kan. 1987) 
(abrogation of collateral source rule in health care liability actions 
held unconstitutional under state constitution); Kansas Malpractice 
Victims Coalition v. Bell, 757 P.2d 251 (Kan. 1988) (Kansas Health Care 
Provider Insurance Availability Act provisions setting $1 million limit 
on aggregate damages in health care liability actions and provision 
requiring annuity for payments for future economic loss in all health 
care liability actions held unconstitutional under state constitution); 
Thompson v. KFB Insurance Co., 850 P.2d 773 (Kan. 1993) (statute 
allowing evidence of collateral source benefits where claimant demands 
judgment for damages in excess of $150,000 held unconstitutional under 
state constitution); Kentucky--McCollum v. Sisters of Charity of 
Nazareth Health Corp., 799 S.W.2d 15 (Ky. 1990) (5-year statute of 
repose for health care liability actions held unconstitutional under 
state constitution); O'Bryan v. Hedgespeth, 892 S.W.2d 571 (Ky. 1995) 
(statute allowing admission of evidence of collateral source payments 
in personal injury actions held unconstitutional under state 
constitution); Williams v. Wilson, 972 S.W.2d 260 (Ky. 1998) (1988 
punitive damages reform statute requiring a plaintiff to show that the 
defendant acted with ``flagrant indifference to the rights of the 
plaintiff and with a subjective awareness that such conduct will result 
in human death or bodily harm'' as a predicate for punitive damages 
liability held unconstitutional under state constitution); Missouri--
Strahler v. St. Luke's Hospital, 706 S.W.2d 7 (Mo. 1986) (statute of 
limitations for health care liability actions held unconstitutional 
under state constitution insofar as the statute applied to minors); New 
Hampshire--Brannigan v. Usitalo, 587 A.2d 1232 (N.H. 1991) (statute 
limiting recovery for noneconomic loss to $875,000 in personal injury 
actions held unconstitutional under state constitution); Heath v. 
Sears, Roebuck & Co., 464 A.2d 288 (N.H. 1983) (12-year statute of 
repose and 3-year statute of limitations for product liability actions 
held unconstitutional under state constitution); North Dakota--Hanson 
v. Williams County, 389 N.W.2d 319 (N.D. 1986) (10-year product 
liability statute of repose held unconstitutional under state 
constitution); Ohio--Adamsky v. Buckeye Local School District, 653 
N.E.2d 212 (Ohio 1995) (2-year statute of limitations for personal 
injury actions against political subdivisions held unconstitutional 
under state constitution, as applied to minors); Crowe v. Owens Corning 
Fiberglas, 718 N.E.2d 923 (Ohio 1999) (limitation on punitive damages 
held unconstitutional under state constitution); Gaines v. Preterm-
Cleveland, Inc., 514 N.E.2d 709 (Ohio 1987) (health care liability 
statute of repose held unconstitutional under state constitution as 
applied to adult litigants who, following discovery, did not have 
adequate time to file actions); Galayda v. Lake Hospital Systems, Inc., 
644 N.E.2d 298 (Ohio 1994) (statute requiring periodic payments of 
future damages awards in medical malpractice suits held 
unconstitutional under state constitution), reconsideration denied, 644 
N.E.2d 1389 (Ohio), cert. denied sub nom. Damian v. Galayda, 516 U.S. 
810 (1995); Gladon v. Greater Cleveland Regional Transit Authority, 
1994 WL 78468 (Ohio App. Mar. 10, 1994) ($250,000 limit on noneconomic 
damages awards held unconstitutional under state constitution), rev'd 
on other grounds, 662 N.E.2d 287 (Ohio 1996); Hardy v. VerMeulen, 512 
N.E.2d 626 (Ohio 1987) (statute barring health care liability claims 
brought more than 4 years after act or omission constituting alleged 
malpractice occurred, as applied to bar claims of health care liability 
plaintiffs who did not know or could not have known of their injuries, 
held unconstitutional under state constitution), cert. denied, 484 U.S. 
1066 (1988); Mominee v. Scherbarth, 503 N.E.2d 717 (Ohio 1986) (statute 
which required health care liability actions to be brought within 1 
year from date cause of action accrued, or 4 years from date alleged 
malpractice occurred, whichever came first, held unconstitutional under 
state constitution insofar as the statute applied to minors); Morris v. 
Savoy, 576 N.E.2d 765 (Ohio 1991) ($200,000 limit on general damages in 
health care liability actions held unconstitutional under state 
constitution); Schwan v. Riverside Methodist Hospital, 452 N.E.2d 1337 
(Ohio 1983) (statute of limitations for health care liability actions, 
as it applied to minors, held unconstitutional under state 
constitution); Sorrell v. Thevenir, 633 N.E.2d 504 (Ohio 1994) (statute 
providing offset of collateral source benefits received by plaintiff 
held unconstitutional under state constitution); Samuels v. Coil Bar 
Corp., 579 N.E.2d 558 (Ohio Cm. Pl. 1991) (same as applied to wrongful 
death actions); Oregon--Lakin v. Senco Products, Inc., 987 P.2d 463 
(Or. 1999) ($500,000 limit on noneconomic damages in personal injury 
and wrongful death actions arising out of common law held 
unconstitutional under state constitution); Rhode Island--Kennedy v. 
Cumberland Engineering Co., Inc., 471 A.2d 195 (R.I. 1984) (10-year 
statute of repose for product liability actions held unconstitutional 
under state constitution); South Dakota--Knowles v. Federal, 544 N.W.2d 
183 (S.D. 1996) ($1 million aggregate limit on economic and noneconomic 
damages in health care liability actions held unconstitutional under 
state constitution, but more limited statute capping noneconomic 
damages awards in health care liability actions at $500,000 remained in 
effect); Texas--Lucas v. Federal, 757 S.W.2d 687 (Tex. 1988) ($500,000 
aggregate limit on damages in health care liability actions held 
unconstitutional under state constitution); Nelson v. Krusen, 678 
S.W.2d 918 (Tex. 1984) (2-year statute of limitations for medical 
malpractice actions held unconstitutional under state constitution); 
Utah--Berry v. Beech Aircraft Corp., 717 P.2d 670 (Utah 1985) (statute 
of repose barring product liability claims 6 years after of purchase or 
10 years after date of manufacture of product held unconstitutional 
under state constitution); Lee v. Gaufin, 867 P.2d 572 (Utah 1993) 
(provision of Utah Health Care Malpractice Act subjecting minors to 2-
year statute of limitations and 4-year statute of repose held 
unconstitutional under state constitution); Washington--Sofie v. 
Fibreboard Corp., 771 P.2d 711 (Wash. 1989) (variable limit on 
noneconomic damages awards held unconstitutional under state 
constitution); Wisconsin--Kohnke v. St. Paul Fire & Marine Insurance 
Co., 410 N.W.2d 585 (Wis. App. 1987) (medical malpractice statute of 
limitations held unconstitutional under state constitution), aff'd on 
other grounds, 424 N.W.2d 191 (Wis. 1988).
    \15\ See La. Rev. Stat. Ann. Sec. 40:1299.42(b) (1992) (limiting 
noneconomic damages to $500,000); Mass. Gen. Laws, Ch. 231, Sec. 60H 
(2000) (limiting noneconomic damages to $500,000); Mich. Comp. Laws 
Sec. 600.1483 (1996) (limiting noneconomic damages to $500,000 if 
certain criteria are met, otherwise capping them at $280,000); N.D. 
Cent. Code Sec. 32-42-02 (1996) (limiting noneconomic damages to 
$500,000); S.D. Codified Laws Sec. 21-3-11 (Michie 1987) (limiting 
noneconomic damages to $500,000); Utah Code Ann. Sec. 78-14-7.1 (1999) 
(limiting noneconomic damages to $400,000, adjusted for inflation); W. 
Va. Code Sec. 55-7B-8 (1994) (limiting noneconomic damages to 
$1,000,000); Wis. Stat. Sec. 893.55 (1997) (limiting noneconomic 
damages to $350,000, adjusted for inflation).
    \16\ See N.M. Stat. Ann. Sec. 41.5 (Michie 1996) (limit to 
$600,000, excluding punitive damages and medical care and related 
benefits);Va. Code Ann. Sec. 8.01-581.15 (Michie Cum. Supp. 2000).
    \17\ See Mont. Code Ann. Sec. 25-9-411 (1999) (limiting noneconomic 
damages to $250,000).
---------------------------------------------------------------------------
    According to the Department of Health and Human Services:

        [A] major contributing factor to the most enormous 
        increases in liability premiums has been rapidly 
        growing awards for non-economic damages in states that 
        have not reformed their litigation system to put 
        reasonable standards on these awards. Among the states 
        with the highest average medical malpractice insurance 
        premiums are Florida, Illinois, Ohio, Nevada, New York, 
        and West Virginia. These states have not reformed their 
        litigation systems as others have. (Florida's caps 
        apply only in limited circumstances. New York has 
        prevented insurers from raising rates, and accordingly 
        it is expected that substantial increases will be 
        needed in 2003.) . . . The effect of these premiums on 
        what patients must pay for care can be seen from an 
        example involving obstetrical care. The vast majority 
        of awards against obstetricians involve poor outcomes 
        at childbirth. As a result, payouts for poor infant 
        outcomes account for the bulk of obstetricians' 
        insurance costs. If an obstetrician delivers 100 babies 
        per year (which is roughly the national average) and 
        the malpractice premium is $200,000 annually (as it is 
        in Florida), each mother (or the government or her 
        employer who provides her health insurance) must pay 
        approximately $2,000 merely to pay her share of her 
        obstetrician's liability insurance. If a physician 
        delivers 50 babies per year, the cost for malpractice 
        premiums per baby is twice as high, about $4,000. It is 
        not surprising that expectant mothers are finding their 
        doctors have left states that support litigation 
        systems imposing these costs. In addition to premium 
        increases for physicians, nursing home malpractice 
        costs are rising rapidly because of dramatic increases 
        in both the number of lawsuits and the size of awards. 
        Nursing homes are a new target of the litigation 
        system. Between 1995 and 2001, the national average of 
        insurance costs increased from $240 per occupied 
        skilled nursing bed per year to $2,360. From 1990 to 
        2001, the average size of claims tripled, and the 
        number of claims increased from 3.6 to 11 per 1,000 
        beds. These costs vary widely across states, again in 
        relation to whether a state has implemented reforms 
        that improve the predictability of the legal system. 
        Florida ($11,000) had one of the highest per bed costs 
        in 2001. Nursing homes in Mississippi have been faced 
        with increases as great as 900% in the past 2 years.'' 
        \18\
---------------------------------------------------------------------------
    \18\ Department of Health and Human Services, ``Confronting the New 
Health Care Crisis: Improving Health Care Quality and Lowering Costs by 
Fixing Our Medical Liability System'' (July 24, 2002) at 12-13.

    Also according to the Department of Health and Human 
---------------------------------------------------------------------------
Services:

        The insurance crisis is less acute in states that have 
        reformed their litigation systems. States with limits 
        of $250,000 or $350,000 on non-economic damages have 
        average combined highest premium increases of 12-15%, 
        compared to 44% in states without caps on non-economic 
        damages . . . [T]here is a substantial difference in 
        the level of medical malpractice premiums in states 
        with meaningful caps, such as California, Wisconsin, 
        Montana, Utah and Hawaii, and states without meaningful 
        caps. \19\
---------------------------------------------------------------------------
    \19\ Id. at 14-15.

    The California courts have described several purposes of 
California Civil Code section 3333.2, which limits recovery of 
noneconomic damages to $250,000. One purpose is to ``provide a 
more stable base on which to calculate insurance rates'' by 
eliminating the ``unpredictability of the size of large 
noneconomic damage awards, resulting from the inherent 
difficulties in valuing such damages and the great disparity in 
the price tag which different juries placed on such losses.'' 
\20\ Another purpose is to ``promote settlements by eliminating 
`the unknown possiblity of phenomenal awards for pain and 
suffering that can make litigation worth the gamble.' '' \21\ A 
third purpose is to be fair to medical malpractice plaintiffs 
by ``reduc[ing] only the very large noneconomic damage awards, 
rather than to diminish the more modest recoveries from pain 
and suffering and the like in the great bulk of cases.'' \22\
---------------------------------------------------------------------------
    \20\ Fein v. Permanent Medical Group, 38 Cal.3d 137, 163 (1985); 
see also Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital 
8 Cal.4th 100, 112 (1984).
    \21\ Fein v. Permanent Medical Group, 38 Cal.3d 137, 163 (1985).
    \22\ Id.
---------------------------------------------------------------------------

                Background and Need for the Legislation

THE NATIONAL HEALTH CARE LITIGATION AND MALPRACTICE INSURANCE CRISIS IS 
                    RAVAGING THE HEALTH CARE SYSTEM

    A recent survey conducted for the bipartisan legal reform 
organization ``Common Good''--whose Board of Advisors include 
former Senator George McGovern, former Speaker of the House 
Newt Gingrich, former Deputy Attorney General during the 
Clinton Administration Eric Holder, former Senator Alan 
Simpson, former Senator Paul Simon, and former Attorney General 
Richard Thornburgh--reveals the dire need for reforming health 
care litigation in America. What follows is an excerpt from the 
``Executive Summary'' of the survey's findings:

        Rather than explore the number of suits, the size of 
        jury awards, or the costs of malpractice insurance, 
        this survey sought to explore--through interviews with 
        physicians, nurses and hospital administrators--how the 
        fear of litigation affects the practice of medicine and 
        the delivery of medical care. The results are striking. 
        Concerns about liability are influencing medical 
        decision-making on many levels. From the increased 
        ordering of tests, medications, referrals, and 
        procedures to increased paperwork and reluctance to 
        offer off-duty medical assistance, the impact of the 
        fear of litigation is far-reaching and profound.
          Broadly, half (51%) of all physicians think that 
        their ability to provide quality medical care to 
        patients has gotten worse in the past 5 years. Further, 
        more than three-fourths of physicians feel that concern 
        about malpractice litigation (76%) has hurt their 
        ability to provide quality care in recent years. All 
        respondent groups report increased levels of concern or 
        awareness about the risks of malpractice liability over 
        their career and nearly one-third (29%) of physicians 
        state that they have been interested in a certain 
        specialty but shied away from it due to fear of higher 
        legal exposure. These findings seem to suggest that the 
        broad impact of the fear of litigation is significant 
        and growing.
          Some of the more arresting study findings are on the 
        impact of liability concerns on the provision of 
        medical care. Broadly, nearly all physicians and 
        hospital administrators feel that unnecessary or 
        excessive care is veryoften or sometimes provided 
        because of fear about litigation. More specifically, 
        physicians report that the fear of malpractice claims 
        causes themselves and/or other physicians to:

         Order more tests than they would based only 
        on professional judgment of what is medically needed. 
        (91% have noticed other physicians, and 79% report they 
        themselves do this due to concerns about malpractice 
        liability)

         Refer patients to specialists more often than 
        they would based only on their professional judgment of 
        what is medically needed. (85% have noticed other 
        physicians, and 74% report they themselves do this due 
        to concerns about malpractice liability)

         Suggest invasive procedures such as biopsies 
        to confirm diagnoses more often than they would based 
        only on their professional judgment of what is 
        medically needed. (73% have noticed other physicians, 
        and 51% report they themselves do this due to concerns 
        about malpractice liability)

         Prescribe more medications such as 
        antibiotics than they would based only on their 
        professional judgment of what is medically needed. (73% 
        have noticed other physicians, and 41% report they 
        themselves do this due to concerns about malpractice 
        liability) . . .

          Not surprisingly, there is nearly unanimous agreement 
        among physicians, nurses and hospital administrators 
        that these extra tests, referrals and procedures 
        contribute in a significant way to health care costs 
        issues . . .
          Conversations with colleagues appear to be impacted 
        by the fear of litigation. While more than two-thirds 
        of both physicians and nurses report that frank 
        discussions of an adverse event or error at least 
        sometimes helps them or a colleague avoid making a 
        similar mistake in an actual medical case, many report 
        that their colleagues are often uncomfortable having 
        such conversations.

         Only one-fourth or fewer of physicians, 
        nurses and hospital administrators think that their 
        colleagues are very comfortable discussing adverse 
        events or uncertainty about proper treatment with them.

         Even fewer--roughly 5%--think that their 
        colleagues are very comfortable discussing medical 
        errors with them.

          Fear of liability is cited by physicians and hospital 
        administrators as the leading factor that discourages 
        medical professionals from openly discussing and 
        thinking of ways to reduce medical errors . . .
          The clear majority of physicians, nurses and hospital 
        administrators all feel that malpractice claims occur 
        mainly from adverse results rather than actual error. 
        \23\
---------------------------------------------------------------------------
    \23\ See Harris Interactive, ``Common Good Fear of Litigation 
Study: The Impact of Medicine,'' Final Report (April 11, 2002) 
(``Executive Summary'') at 8-11.

    The survey asked physicians, ``Based on your experience, 
have you noticed the fear of malpractice liability causing 
physicians to . . . ?'' The results are startling. The 
following percentages of physicians reported that litigation 
fears caused them to order more tests than they would based 
only on professional judgment of what is medically needed 
(91%); prescribe more medications such as antibiotics than they 
would based only on professional judgement of what is medically 
needed (73%); refer patients to specialists more often than 
they would based only on professional judgment (85%); and 
suggest invasive procedures more often than they would based 
solely on their professional judgment (73%). \24\ 94% of 
physicians think such extra tests, referrals, or procedures 
contribute in a significant way to health care costs. \25\ When 
asked ``Generally speaking, how much do you think that fear of 
liability discourages medical professionals from openly 
discussing and thinking of ways to reduce medical errors? 
Fifty-nine percent of physicians replied `a lot.' \26\ And 
according to the Department of Health and Human Services, 
`Doctors are reluctant to collect quality-related information 
and work together to act on it for fear that it will be used 
against them or their colleagues in a lawsuit. Perhaps as many 
as 95% of adverse events are believed to go unreported.' '' 
\27\
---------------------------------------------------------------------------
    \24\ Id. at 20 (Table 7).
    \25\ Id. at 21 (Table 8).
    \26\ Id. at 30 (Table 17).
    \27\ Department of Health and Human Services, ``Confronting the New 
Health Care Crisis: Improving Health Care Quality and Lowering Costs by 
Fixing Our Medical Liability System'' (July 24, 2002) at 6 (citing 
Maulik, Joshi, Anderson, John et.al., ``A Systems Approach to Improving 
Error Reporting,'' 16 Journal of Health Care Information Management 
1)).
---------------------------------------------------------------------------
    Doctors themselves, who are most keenly aware of the 
litigation threats they face, are not blaming insurance 
companies for high premiums because they know the problem lies 
in an unregulated medical litigation system. \28\ 60% of 
America's private practice physicians, as well as dentists, 
hospitals, and other healthcare providers, are insured by 
insurance companies that were created by doctors, and which are 
owned and operated by doctors, and which provide only medical 
malpractice insurance for doctors in the states in which they 
are based. \29\ In fact, most such insurers are mutual 
insurance companies, in which any ``excess profits'' must be 
rebated to the policyholders through dividends or used to 
offset unexpected losses and thereby hold down premiums for 
policyholders and potential insureds. The Common Ground survey 
also found that 87% of physicians stated they fear potential 
malpractice liability more today than they did when they 
started their careers, \30\ and 83% somewhat or strongly 
disagree with the statement that physicians can trust the 
current system of justice to achieve a reasonable result. \31\ 
Indeed, median awards for malpractice claims grew 7 times the 
rate of general inflation between 1994 and 2000, while 
negotiated settlement payouts grew at nearly triple the rate of 
inflation. \32\
---------------------------------------------------------------------------
    \28\ As the chair of Our Common Good has written, ``The moral 
authority of victims is powerful. But the resulting laissez-faire 
lawsuit culture means that social policy gets made, by default, at the 
intersection of personal tragedy and personal greed. All of society 
ends up victimized by the victims . . . Suing is not a unilateral right 
of freedom, like free speech or a property right. Those hallowed 
constitutional rights--the safeguards of our freedom--protect us 
against government power. Suing, by contrast, is a use of government 
power against another free citizen, coming down to that fateful verdict 
when the full power of government may compel the defendant to pay 
millions. Being sued is like being indicted for a crime, except that 
the penalty is money. Today in America, however, we let any self-
interested person use that power without any significant check . . . 
Setting limits on lawsuits is not an infringement of freedom, but a 
critical tool of freedom. Otherwise one angry person, by legal threats, 
can bully everyone else. Limiting lawsuits is also a critical tool of 
social policy. For example, Americans cannot sue utility companies for 
damage sustained from blackouts, because legislatures long ago 
prohibited such suits to keep utility bills from skyrocketing.'' 
Phillip K. Howard, ``There Is No `Right to Sue','' The Wall Street 
Journal (July 31, 2002) at A14. As Justice Oliver Wendell Holmes wrote 
in the Harvard Law Review, the law is a ``standard which we hold the 
parties to know beforehand . . . not a matter dependent upon the whim 
of the particular jury . . .'' Oliver Weldell Holmes, ``Law in Science 
and Science in Law,'' 12 Harv.L.Rev. 443, 458 (1899).
    \29\ See http://www.thepiaa.org/about--piaa/what--is--piaa.htm.
    \30\ See Harris Interactive, ``Common Good Fear of Litigation 
Study: The Impact of Medicine,'' Final Report (April 11, 2002) at 16 
(Table 3).
    \31\ Id. at 39 (Table 26).
    \32\ See American Medical Association, ``Trends Report: Medical 
Professional Liability Insurance'' (April 2002) at 7. While median jury 
awards and settlements for alleged malpractice grew at 18.4% and 7.4% 
per year, respectively, from 1994 to 2000, the rate of general 
inflation was only 2.5% per year over the same period.
---------------------------------------------------------------------------
    As the Reagan Administration's Tort Policy Working Group 
reported in its seminal study of the effects of tort laws on 
insurance premiums:

        [Losses due to previous price decisions] are ``sunk 
        costs'' which the industry cannot recoup simply by 
        charging higher premiums. If premiums in fact are 
        higher than the insured risks and the currently 
        available investment return dictate, either other 
        sources of capital . . . should offer the same 
        insurance at a lower price, or insureds will retain 
        these ``excess profits'' for themselves through self-
        insurance or the formation of captives. The fact that 
        there appears to be little insurance coverage being 
        made available by new or expanding underwriters . . . 
        strongly indicates that recoupment of losses is not a 
        particularly compelling explanation for the current 
        insurance availability/affordability crisis.
          It is particularly puzzling that the proponents of 
        this theory advocate the abolition of the insurance 
        industry's antitrust immunity contained in the 
        McCarran-Ferguson Act (Public Law 79-15) as an 
        appropriate response to the asserted problem of the 
        industry's cash-flow ``mismanagement.'' It is hard to 
        reconcile the argument that the current problems of the 
        insurance industry stem from ``excessive competition'' 
        with the proffered solution of removing the industry's 
        antitrust immunity. Since the goal of antitrust law is 
        to enhance competition, if one truly believes that the 
        problems of the insurance industry are a result of too 
        much competition, the last thing one would advocate is 
        a legal change which would increase the level of 
        competition. While the Working Group did not review and 
        takes no position on the continuing validity of the 
        industry's antitrust immunity, it is readily obvious 
        that the suggestion that allegedly ``excessive 
        competition'' can be cured by even more competition is 
        patently absurd.
          The reasons why the loss recoupment (or excessive 
        pricing) theories advocated by some make little 
        economic sense can briefly by summarized as follows:

         Insurers, like all profit maximizing 
        companies, charge the price which maximizes their 
        profits. Past gains or past losses are irrelevant to 
        setting the price today which will maximize profits 
        tomorrow. The argument that insurers are charging 
        higher premiums to recoup past losses suggests that 
        absent such losses their premiums would be lower--that 
        is, that they would not be charging premiums that 
        maximize their profits. That makes little sense.

         Even if excessive premiums were being charged 
        by some insurers to recoup their past losses, for the 
        reasons discussed, other insurers would offer the same 
        coverage at lower prices reflecting the actual risk, or 
        insureds would retain such excess profits for 
        themselves through self-insurance or the formation of 
        captives. \33\
---------------------------------------------------------------------------
    \33\ Report of the Tort Policy Working Group on the Causes, Extent 
and Policy Implications of the Current Crisis in Insurance Availability 
and Affordability (February 1986) at 27-28. Many insurance companies 
are mutuals, meaning that they are owned by their policyholders. The 
suggestion that they are charging their policyholder-owners 
unnecessarily high premiums makes even less sense, since any such 
excess profits must be rebated through policyholder dividends.

    As the Tort Policy Working Group also stated, ``These same 
points apply equally well to arguments that premiums are set 
excessively high to recoup losses resulting from mismanaged 
investment portfolios. Just as past losses are irrelevant to 
determining the premiums which will maximize profits, 
investment portfolio losses should have no bearing on 
premiums.'' \34\ The Tort Policy Working Group continued:
---------------------------------------------------------------------------
    \34\ Id. at 29, n.20.

        A[n] . . . important contribution of tort liability to 
        the availability/affordability crisis is the tremendous 
        uncertainty that has been generated by rapidly changing 
        standards of liability and causation. The ``rules of 
        the game'' have become so unpredictable that the 
        insurance industry often cannot assess liability risks 
        with any degree of confidence. This appears to have 
        severely exacerbated the problem. \35\
---------------------------------------------------------------------------
    \35\ Id. at 3.

---------------------------------------------------------------------------
        Further:

        The increase in the number of tort lawsuits and the 
        level of awarded damages (or settlements) in and of 
        itself has an obvious inflating effect on insurance 
        premiums. To illustrate, assuming all other factors are 
        held constant, if the number of lawsuits against a 
        company or person doubles in 10 years, and if the 
        average damage award (or settlement) doubles over this 
        same period, that company or person will experience at 
        least a four-fold increase in insurance premiums over 
        those 10 years. As noted above, however, for both 
        medical malpractice and product liability the last 10 
        years have witnessed much more than a doubling in 
        lawsuits and average awards . . . [T]he current 
        explosion in premiums results in large part from the 
        fact that now that the insurance industry is facing 
        substantial underwriting losses, it must price coverage 
        to reflect the actual risks presented by tort law. \36\
---------------------------------------------------------------------------
    \36\ Id. at 49.
---------------------------------------------------------------------------
        . . .
        Simply put, insurance, like other business activities, 
        operates most efficiently within a stable legal regime. 
        Tort law, unfortunately, over recent years has been 
        anything but stable . . . In conclusion, the current 
        problems of tort law can be summarized as follows:

         Too many defendants are found liable (or 
        forced into settlements) where there should be no 
        liability, either because they engaged in no wrongful 
        activity, or because they did not cause the underlying 
        injury.

         Damages have become excessive, particularly 
        in the area of non-economic damages such as pain and 
        suffering, mental anguish and punitive damages. And,

         Transaction costs are far too high. \37\
---------------------------------------------------------------------------
    \37\ Id. at 51-52.

    The ability of the tort system to deter injuries caused by 
medical negligence is greatly reduced by the haphazard 
relationship between negligent injuries and compensation 
through the tort system. Research of the Harvard Medical 
Practice Study consisted of reviews of medical tort claims 
filed by a specialist medical reviewer teams. The Harvard Study 
team concluded that ``when we compared the tort claims brought 
by the patients in our sample with the judgment made by our 
medical reviewers, we found that in a substantial proportion of 
cases where claims were filed, our reviewers judged from the 
medical record that a negligent adverse event had not occurred. 
Thus, the tort system imposes the costs of defending claims on 
[health care] providers who may not even have been involved in 
an injury, let alone a negligent injury.'' \38\ Indeed, the 
researchers found that, of the 47 medical malpractice claims 
they studied that resulted in litigation, \39\ ``[i]n 14 cases, 
the physicians reviewed the record and found no adverse event. 
For most of these cases, the physicians examined the outcome 
and concluded that the cause was the underlying disease rather 
than medical treatment . . . In these 14 cases, our physician 
reviewers took a stand opposite to that of the plaintiff-
patient's expert.'' \40\ Further, the reviewers found that in 
an additional 10 cases an adverse event occurred, but there was 
no negligence on the part of the health care provider. \41\ 
Thus, of the 47 claims filed that the researchers analyzed, 
less than half demonstrated any actual negligence, and many 
demonstrated no discernable injury. \42\ Physicians will 
respond to the incentives created by tort law only if they 
believe their punishments are connected in some rational way to 
their negligence. But research shows that they do not believe 
that. They tend to see the tort system more as a random 
generator of punishments and rewards. A majority of physicians 
feel that they will be held legally liable for seriously 
adverse outcomes, almost regardless of the quality of care they 
actually provided. Physicians and risk managers are therefore 
moved by the threat of malpractice liability to avoid the risk 
of liability rather than to avoid the risk of injury. \43\
---------------------------------------------------------------------------
    \38\ See Harvard Medical Practice Study to the State of New York, 
Patients, Doctors, and Lawyers: Medical Injury, Malpractice Litigation, 
and Patient Compensation in New York at 11-5 (1990).
    \39\ See id. at 7-1.
    \40\ See id. at 7-33.
    \41\ See id. at 7-33.
    \42\ See also Paul Weiler, et al., A Measure of Malpractice (1993) 
at 71 (``[Of those 47,] 10 claims involved hospitalization that had 
produced injuries, though not due to provider negligence; and another 
three cases exhibited some evidence of medical causation, but not 
enough to pass our probability threshold. That left 26 malpractice 
claims, more than half the total of 47 in our sample, which provided no 
evidence of medical injury, let alone medical negligence.'').
    \43\ See Harvard Medical Practice Study to the State of New York, 
Patients, Doctors, and Lawyers: Medical Injury, Malpractice Litigation, 
and Patient Compensation in New York at 9-34 (1990).
---------------------------------------------------------------------------
    The data produced by the Harvard Medical Practice Study has 
been further analyzed to determine how accurately malpractice 
litigation leads to payment. Confidential medical records were 
reviewed to determine the insurers' honest assessment of the 
patients' injuries, and the study's findings indicate that in 
malpractice claims, only the severity of the patient's 
disability, not negligence or even the occurrence of an injury 
caused by medical care, was statistically significant in 
predicting whether a plaintiff would receive payment. \44\ From 
its previous study, the Harvard authors identified 51 litigated 
claims and followed them over a 10-year period. The authors 
conclude, ``Among the malpractice claims we studied, the 
severity of the patient's disability, not the occurrence of an 
adverse event or an adverse event due to negligence, was 
predictive of payment to the plaintiff.'' \45\ As one writer on 
seeing these findings put it: ``If the permanence of a 
disability, not the fact of negligence, is the reason for 
compensation, the determination of negligence may be an 
expensive sideshow.'' \46\ This is widely understood by 
physicians as determined by a recent survey conducted for the 
bipartisan legal reform organization ``Common Good,'' which 
found that 96% of physicians believe malpractice claims occur 
mainly from adverse results rather than actual medical errors. 
\47\
---------------------------------------------------------------------------
    \44\ See Troyan A. Brennan, et al., Relation Between Negligent 
Adverse Events and the Outcomes of Medical Malpractice Litigation, 335 
New England Journal of Medicine 1963 (December 26, 1996) at 1966 
(``Overall, empirical evidence does not strongly support using the 
negligence standard to prevent medical injury.'').
    \45\ See id. at 1963.
    \46\ Id. at 1967.
    \47\ See Harris Interactive, ``Common Good Fear of Litigation 
Study: The Impact of Medicine,'' Final Report (April 11, 2002) at 42 
(Table 29). See also O'Connell, Jeffrey and Pohl, Christopher, ``How 
Reliable is Medical Malpractice Law?,'' 359 Journal of Law and Health 
(1998) (``The evidence is growing that there is a poor correlation 
between injuries caused by negligent medical treatment and malpractice 
litigation.'').
---------------------------------------------------------------------------
    The Harvard Study researchers conclude that ``In the 
multivariate analysis, disability (permanent vs. temporary or 
none) was the only significant predictor of payment. . . . 
Neither the presence of an adverse event due to negligence . . 
. nor the presence of an adverse event of any type . . . was 
associated with payment to the plaintiff.'' \48\
---------------------------------------------------------------------------
    \48\ Troyan A. Brennan, et al., Relation Between Negligent Adverse 
Events and the Outcomes of Medical Malpractice Litigation, 335 New 
England Journal of Medicine 1963 (December 26, 1996) at 1965. Another 
report by the Institute of Medicine regarding medical errors states 
that ``Preventable adverse events [in U.S. hospitals] are a leading 
cause of death'' and ``at least 44,000, and perhaps as many as 98,000, 
Americans die in hospitals each year as a result of medical errors.'' 
L.T. Kohn, J.M. Corrigan, M. Donaldson, eds., ``To Err is Human: 
Building a Safer Health System'' (Institute of Medicine: 1999). 
However, those conclusions have been disputed. See Clement J. McDonald, 
Michael Weiner, and Siu L. Hui, ``Deaths Due to Medical Errors Are 
Exaggerated in Institute of Medicine Report,'' 284 JAMA 1: 93-95 (July 
5, 2000), at 93-94 (``Motor vehicle occupants do survive their ride if 
collisions are avoided. Unlike most people who step into motor 
vehicles, most patients admitted to hospitals have high disease burdens 
and high death risks even before they enter the hospital . . . The 
Harvard Study [upon which the Institute of Medicine's conclusions are 
based] includes no information about the baseline risk of death in [the 
patients studied] or information about deaths in any comparison group. 
Therefore, it cannot be determined whether adverse events are 
correlated with, let alone whether they cause, death . . . Given these 
facts, using available data and some reasonable assumptions, we believe 
that the increment in the published death rate due to adverse events 
above the baseline death rate could be very small.'').
---------------------------------------------------------------------------
    The medical journal Annals of Medicine has recently 
detailed a series of reports of medical errors. In an editorial 
about the new series, Dr. Robert M. Wachter, associate chairman 
of the department of medicine at the University of California 
at San Francisco, and his colleagues wrote that the medical 
profession ``for reasons that include liability issues'' \49\ 
has not harnessed the full power of errors to teach and thereby 
reduce errors.
---------------------------------------------------------------------------
    \49\ Editorial, ``Learning from Our Mistakes: Quality Grand Rounds, 
a New Case-Based Series of Medical Errors and Patient Safety,'' 136 
Annals of Internal Medicine 11 (June 4, 2002) at 850.
---------------------------------------------------------------------------
    Research has demonstrated that direct medical care 
litigation reforms--including caps on non-economic damage 
awards--reduce the growth of malpractice claims rates and 
insurance premiums, and reduce other stresses on doctors that 
may impair the quality of medical care. \50\ Researchers' 
findings point to the stresses created by the adversarial 
quality of both litigation and equally adversarial pre-trial 
maneuvers. \51\ Indeed, physicians who are under the 
malpractice gun are isolated from both their patients and their 
professional colleagues; they feel vilified by the accusations 
and the personal invective that litigation requires; they are 
distracted and engage in excessive rumination, to the detriment 
of timely and effective medical decision-making; and they 
experience a marked loss of professional self-confidence. 
Litigation causes stress; stress causes dysfunctional 
behaviors; and these behaviors can contribute to the making of 
additional errors. \52\ Researchers have found that 
significantly more of sued physicians than nonsued physicians 
reported that they were likely to stop seeing patients with 
whom the risk of litigation seemed greater, to think about 
retiring early, and to discourage their children from pursuing 
medicine as a career. Also, research has found that both sued 
and nonsued physicians order more diagnostic tests that their 
clinical judgment deems unnecessary and have stopped performing 
certain high-risk procedures. As the researchers concluded, 
``The changes in professional behavior among the respondents 
suggest that malpractice litigation may have an impact on 
physicians'' freedom to exercise their own clinical judgment. 
As a result, patients may be deprived of the full range of a 
physician's professional expertise. In addition, almost half of 
those sued (48.9%) reported that because of fear of potential 
litigation they will not see certain kinds of patients . . . 
[A]ccess to health care may be becoming restricted because of 
factors associated with malpractice litigation. The funding 
that many physicians may opt for early retirement and 
discourage others from entering medicine may also eventually 
have an impact on health care availability . . . [T]he 
resultant stress on both sued and nonsued physicians may in the 
long run not serve the public interest or the quality of 
medicine. It may diminish rather than enhance the integrity and 
availability of medical care.' \53\
---------------------------------------------------------------------------
    \50\ See Daniel P. Kessler and Mark B. McClellan, ``The Effects of 
Malpractice Pressure and Liability Reforms on Physicians' Perceptions 
of Medical Care,'' 60 Law and Contemporary Problems 1: 81-106 (1997), 
at 105 (``[P]hysicians from states enacting liability reforms that 
directly reduce malpractice pressure experience lower growth over time 
in malpractice claims rates and in real malpractice insurance premiums. 
[Also], physicians from reforming states report significant relative 
declines in the perceived impact of malpractice pressure on practice 
patterns.'').
    \51\ See Thomasson et al., Patient Safety Implications of Medical 
Malpractice Claimed Resolution Procedures, in Proceedings of Enhancing 
Patient Safety and Reducing Errors in Health Care (1998) at 158.
    \52\ See Sara C. Charles, M.D. et al., Sued and Nonsued Physicians' 
Satisfaction, Dissatisfactions, and Sources of Stress, 28 Psychosamtics 
462, 466 (1987) (``The finding that sued physicians were more stressed 
from dealing with high-risk and emergency situations, being on call, 
and from fear of making an incorrect diagnosis suggests that the 
experience of litigation accentuates the stresses of ordinary practice 
. . . Increased anxiety about these activities, however, may result in 
avoidant behaviors, which, in the long run, diminish rather tan refine 
clinical competence.'').
    \53\ Sara C. Charles, M.D. et al., Sued and Nonsued Physicians 
Self-reported Reactions to Malpractice Litigation, 142:4 Am. J. 
Psychiatry 437, 440 (1985).
---------------------------------------------------------------------------
    Senator Joe Lieberman has described the current medical 
care legal crisis as follows: ``Mr. President, in my view, you 
can add the civil justice system to the list of fundamental 
institutions in our country that are broken and in need of 
repair . . . In our time, unfortunately, the civil justice 
system has too often become a game of legalistic sophistry, of 
bullying, of bluffing, a game which overcompensates lawyers, 
undercompensates victims, particularly seriously injured 
victims, and costs all the rest of us an awful lot of money in 
higher prices for consumer products, for health care, higher 
premiums for insurance, fewer jobs, and fewer new products to 
improve and protect our lives . . . Our present system for 
compensating patients who have been injured by medical 
malpractice is ineffective, inefficient and, again, in many 
respects, unfair.'' \54\
---------------------------------------------------------------------------
    \54\ Senator Lieberman, floor statement on the Common Sense Product 
Liability and Legal Reform Act (April 27, 1995). As Senator Lieberman 
has summed up his own reform proposals: ``Key provisions of the reform 
include, No. 1, establishing a uniform statute of limitations, 2 years; 
No. 2, allowing periodic payments for awards . . . No. 3, applying 
several--not joint and several--liability for noneconomic damages, pain 
and suffering.'' These or very similar provisions are in the HEALTH 
Act.
---------------------------------------------------------------------------
    As Senator Lieberman has described, the crisis is national 
in scope and warrants a Federal response: ``Mr. President, I 
did not always support a national or Federal approach to 
product liability reform or tort reform generally, and I can 
understand the hesitancy, particularly of some of the Members, 
to support Federal involvement in what traditionally has been a 
province of the States . . . So I listened to [] folks, and I 
came to understand the necessity of Federal action and, of 
course, to understand the reality and appreciate the reality 
that we are one country; that products travel from State to 
State; that people using them travel from State to State; and 
that there is a crying need out there in the interest of every 
State and our country, our economy, the equity of our society, 
to build a floor of fairness, a common system that will protect 
the rights of all.'' \55\
---------------------------------------------------------------------------
    \55\ Id.
---------------------------------------------------------------------------
    The personal impact of the current crisis is made clear in 
the following poignant report from the Mississippi Clarion-
Ledger:

        Dr. Kirk Kooyer arrived in the Mississippi Delta in 
        1994 to serve the poor. ``I came here with a Christian 
        conviction in my heart,'' said the 39-year-old Michigan 
        native. Now he and his wife, Maria Weller, a Vicksburg 
        pediatrician, are moving their mission to North Dakota, 
        he said, because of increasing litigation. ``It's the 
        harassment of dealing with meritless lawsuits,'' he 
        said. ``It makes you feel frustrated and demoralized.'' 
        . . . When Kooyer leaves Rolling Fork on Thursday, 
        Sharkey and Issaquena counties will lose their only 
        pediatrician, who is also a board-certified internist. 
        Two doctors will remain to handle all emergencies at 
        the already struggling Sharkey-Issaquena Community 
        Hospital, where nearly every patient is below the 
        poverty level. ``If one of us is on vacation and the 
        other one's sick, you don't have a doctor,'' said Dr. 
        Andrew George of Rolling Fork, one of the remaining 
        physicians. ``You can't have a hospital without a 
        doctor.'' Hospital administrator Winfred Wilkinson said 
        the loss of Kooyer ``is going to put a terrible strain 
        on us. What's going to be hard is to find someone to 
        replace him because whoever comes will face the same 
        thing. It's the patients who'll suffer.'' . . . Since 
        Kooyer arrived in 1994, Sharkey County's infant 
        mortality has declined. According to state Department 
        of Health statistics, mortality dropped from an average 
        of 10 deaths per 1,000 live births between 1990 and 
        1994 to 3.4 deaths between 1996 and 2000. Contributing 
        to that success is the Cary Christian Center, which 
        provides prenatal classes and home visits. Kooyer has 
        assisted in the ministry there. ``Every year, we save 
        one or two babies in the emergency room,'' Kooyer said. 
        ``I'm concerned a lot of the progress we've made could 
        be lost when there's no longer a pediatrician in 
        Sharkey County.'' . . . ``It just kills me he's leaving 
        because he's one of the brightest physicians around,'' 
        said Dr. Chris Glick of Jackson, president-elect of the 
        National Perinatal Association. ``He's made an 
        incredible difference in the health of women and 
        children.'' In fact, if Normal Rockwell painted a 
        doctor, he would probably look like Kooyer, she said. 
        ``People say, 'I want my doctor to be a kind-hearted 
        family man who's soft and gentle.' That's what he is. 
        ``It's so ironic he's being run off because he's the 
        kind of guy we need in the Delta. He could have had a 
        very well-to-do practice in Michigan but instead he 
        chose to work in the poorest counties in Mississippi as 
        a gift from his heart.'' . . . When Hazel Norton of 
        Rolling Fork, the patient who filed suit [against 
        Kooyer], read [a] drug [Propulsid, which Kooyer 
        prescribed] might cause harm, she said she stopped 
        taking it. ``Actually, I didn't get hurt by 
        Propulsid,'' Norton, who had the drug prescribed for 
        her heartburn, said. But because she had taken the 
        drug, she said she thought she could join a class-
        action lawsuit ``and I might get a couple of thousand 
        dollars.'' The last thing she intended, Norton said, 
        was for Kooyer to be sued. ``He's really a good doctor, 
        very intelligent,'' said Norton, who's been Kooyer's 
        patient since 1994. ``He makes you feel so 
        comfortable.'' She said she intended for the drug 
        company to be sued, but that lawyers told her it would 
        be better for her case to sue Kooyer in order to keep 
        the case in Mississippi. After finding out Kooyer had 
        been sued, she said she wrote a letter to her 
        attorneys, objecting. ``I'm kind of upset. I do not 
        want him leaving because of all the suits,'' she said. 
        ``If we run off all the doctors, what are the people 
        gonna do?'' Kooyer was eventually dropped from the 
        litigation but not before he made up his mind to leave 
        Mississippi. ``These are just the symptoms of a state 
        in which key people have lost their ethical 
        integrity,'' he said . . . Verdicts in lawsuits against 
        pharmaceutical companies are not against doctors, Sweet 
        said. He acknowledged his law firm and others have 
        included physicians in recent lawsuits against drug 
        companies, which he said often put the blame on 
        physicians. ``I'm not after the doctors, but the way 
        the law is I have to do this,'' Sweet said. \56\
---------------------------------------------------------------------------
    \56\ Jerry Mitchell, ``Tort Reform: Just What the Doctor Ordered?'' 
Clarion-Ledger (July 29, 2002) at A1.
---------------------------------------------------------------------------

   SKYROCKETING INSURANCE RATES ARE PREVENTING ACCESS TO HEALTH CARE

    The combined national effects of the nation's patchwork of 
medical care litigation rules have led doctors to face 
skyrocketing insurance rates and caused untold numbers of 
doctors to leave the profession or reduce the number of 
patients they see. \57\
---------------------------------------------------------------------------
    \57\ See, e.g., Joelle Babula, ``Crisis Alters Lives, 
Livelihoods,'' The Las Vegas Review-Journal (April 7, 2002) (``You 
don't just pick a doctor out of the phone book to perform open heart 
surgery on your baby daughter,'' said Emma's father, Steve Walker. ``We 
were supposed to wait as long as we could for the surgery, until she 
gets bigger and stronger. But now she won't get that chance because the 
doctors may no longer be here.'' Emma's heart surgeon, Dr. Robert 
Wiencek, is one of only four pediatric cardiac surgeons in Las Vegas. 
The four doctors, who practice together at Cardiovascular Surgery 
Associates, all are preparing to move out of state because they are 
having problems finding medical malpractice insurance . . . ``My 
cardiologist friends in California pay between $45,000 and $50,000 a 
year for malpractice,'' Wiencek said. ``What I pay now is $78,000 and I 
expect that to at least double.'' If Wiencek and his group do move and 
if Emma needs more surgeries or has to postpone her next one, her 
family will follow Wiencek wherever he ends up. ``We'd fly or drive 
wherever he goes,'' said Emma's mother, Kelly Walker. ``We found out 
about Emma's heart condition when I was 4 months pregnant, and this 
team of doctors has been with us since then.''.).
---------------------------------------------------------------------------
    Women are being particularly hard hit. The American College 
of Obstetricians and Gynecologists (``ACOG''), in a release 
entitled ``How Caps Protect Women's Access to Health Care,'' 
states that it ``believes that the meteoric rise in liability 
premiums threatens women's access to [health] care.'' ACOG 
continues that ``[e]xperience demonstrates that obstetric 
providers--when confronted with substantially higher costs for 
liability coverage--will stop delivering babies, reduce the 
number they do deliver, and further cut back, or eliminate, 
care for high-risk patients, the uninsured, and the 
underinsured . . . Also hurt without a cap will be the nation's 
39 million uninsured patients--the majority of them women and 
children--who rely on non-profit licenced community clinics for 
health care. Unable to shift higher insurance costs to their 
patients, these clinics will have no alternative but to care 
for fewer people.'' ACOG continued that, without a cap on non-
economic damages, ``women's access to prenatal care will be 
reduced'' and that ``[a]s premiums increase, women's access to 
general health care--including regular screenings for 
reproductive cancers, high blood pressure and cholesterol, 
diabetes, sexually transmitted diseases, and other serious 
health risks--will decrease without a cap.'' \58\ As the Las 
Vegas Review-Journal reports, ``Most of the doctors are insured 
by American Physicians Assurance, a company that recently began 
charging doctors even more for delivering what it considers too 
many babies, said Dennis Coffin, an insurance agent 
representing the company . . . Doctors say that if they deliver 
less than 125 babies a year, they face annual malpractice 
premiums that jump from about $40,000 to $80,000. Those who 
deliver between 125 and 175 babies will have to pay more than 
$100,000 per year in medical malpractice premiums. The prices 
continue to rise for doctors who deliver more than 175 babies a 
year.'' \59\
---------------------------------------------------------------------------
    \58\ Release, American College of Obstetricians and Gynecologists, 
``How Caps Protect Women's Access to Health Care'' (March 7, 2002).
    \59\ Joelle Babula, ``Medical Malpractice Crisis: Pregnant Women 
Turned Away'' Las Vegas Review-Journal (May 7, 2002).
---------------------------------------------------------------------------
    Skyrocketing medical insurance rates have caused similar 
crises nationwide. \60\ Medical malpractice insurance premiums 
are increasing at the highest rate since the mid-1980's \61\ 
and consequently doctors are practicing more defensively, 
ordering unnecessary extra tests and choosing unnecessary 
procedures that limit their risks. \62\
---------------------------------------------------------------------------
    \60\ Doctors across America are seeing steep jumps in their medical 
malpractice premiums from years 2000 to 2001. See Steve Friess, 
``Malpractice Insurance Soars, Doctors Feel Hit'' USA Today (April 8, 
2002) (``St. Paul ended coverage for 42,000 doctors nationwide, citing 
nearly $1 billion in losses, attributed primarily to high jury awards 
and settlements in malpractice lawsuits. Now those doctors are shopping 
for other insurance, but other companies are refusing to write policies 
for obstetricians, general surgeons and emergency room doctors in 
states with no or ineffective limits to jury awards.''). In Florida, 
liability insurance coverage for pregnancy-related care is now running 
as high as $202,000 in some counties. See USA Today, ``You Might Feel a 
Bit of a Pinch: Malpractice Insurance Costs Push Doctors to Cut 
Services or Move'' (December 4, 2001). In Texas, liability insurance 
coverage for pregnancy-related care runs as high as $160,000 for 
physicians in Dallas, Houston, and Galveston. Id. In Michigan, 
liability insurance coverage for general surgery in Detroit is running 
as high as $94,000 annually. Id. The following are some more examples 
provided in 26 Medical Liability Monitor 10 (October 2001) ``Trends in 
2001 Rates for Physicians Medical Professional Liability Insurance.'' 
Internal Medicine--Florida (Dade and Broward counties) $26,896-$50,774; 
Florida (Palm Beach county) $30,464-$44,660; Michigan (Wayne and McComb 
counties, Detroit area) $18,376-$40,233; Illinois (Chicago/Cook County) 
$15,539-$28,153; Massachusetts $8,428-$9,768; Ohio (Cleveland area) 
$10,853-$16,270; Texas (Dallas, Houston, Galveston) $14,552-$25,563 and 
(rest of Texas) $16,779-$28,289; Nevada (Las Vegas area) $11,636-
$15,804; New York (N.Y., Nassau, Suffolk counties) $16,751-$21,648; 
General surgeons--Florida (Dade/Broward counties) $63,189-$159,166; 
Florida (Palm Beach county) $62,120-$81,998; Massachusetts $27,244-
$31,521; Texas (Dallas, Houston, Galveston) $34,306-$133,957 and (rest 
of Texas) $29,830-$50,293; Michigan (Wayne and McComb counties, Detroit 
area) $66,611-$94,195; Illinois (Chicago/Cook County) $50,021-$70,178; 
Ohio (Cleveland area) $33,397-$60,021; Nevada (Las Vegas area) $40,388-
$56,892; West Virginia $36,094-$56,371; Obstetricians/gynecologists--
Florida (Dade/Broward counties) $143,249-$202,949; Florida (Palm Beach 
county) $128,584-$169,731; Massachusetts $76,176-$88,288; Texas 
(Dallas, Houston, Galveston) $69,918-$160,746 and (rest of Texas) 
$46,607-$78,579; New York (New York, Nassau, Suffolk counties) $89,317-
$115,429; Michigan (Wayne and McComb counties, Detroit area) $87,444-
$123,890; Illinois (Chicago/Cook County) $88,928-$110,091; Ohio 
(Cleveland) $58,131-$95,310; Nevada (Las Vegas area) $71,092-$94,820; 
Ohio (Cleveland) $58,131-$95,310; West Virginia $63,165-$84,551.
---------------------------------------------------------------------------
  In 2002, medical malpractice insurance rates are up by the following 
amounts in the following states: Internal medicine--Arkansas (32.5%); 
Colorado (9.4%); D.C. (19%); Georgia (29% to 34%); Illinois (16% to 
35%); Indiana (46% to 58.3%); Louisiana (23.4%); Maryland (25%); 
Montana (58%); Nevada (27.5%); Pennsylvania (46% to 81%); Texas (40% to 
57%); Utah (40%); Virginia (25.9%); West Virginia (36%-66.8%); General 
surgery--Arkansas (32.5%); Colorado (8.7%); D.C. (19%); Georgia (29% to 
34); Illinois (16% to 35%); Indiana (39.4% to 52.3%); Louisiana (15%); 
Maryland (24.9%); Montana (55.7%); Nevada (39.5%); Pennsylvania (46% to 
81%); Texas (32.1% to 54%); Utah (40%); Virginia (25.8%); West Virginia 
(36% to 50.3%); Obstetrics/gynecology--Arkansas (32.5%); Colorado 
(5.6%); D.C. (19%); Georgia (29% to 34%); Illinois (16% to 35%); 
Indiana (39.4% to 52.4%); Louisiana (15%); Maryland (25%); Montana 
(55.5%); Nevada (15% to 38.5%); Pennsylvania (40% to 81%); Texas (31.7% 
to 48%); Utah (40%); Virginia (25.9%); West Virginia (28.5% to 36%). 
See 27 Medical Liability Monitor 1 (January 21, 2002) at 5.
---------------------------------------------------------------------------
    \61\ See Joseph B. Treaster, ``Doctors Face A Big Jump In 
Insurance'' The New York Times (March 22, 2002) (``Higher malpractice 
insurance rates are likely to add to rising health care costs, although 
managed care has limited doctors' ability to pass along their higher 
expenses. Beyond that, rising malpractice rates have caused some 
doctors to quit practicing or to practice medicine defensively, 
ordering extra tests or choosing procedures that limit their risks. 
`The situation is very ominous,' said Gerry Conway, the director of 
government affairs for the New York State Medical Society. `Increases 
like this cannot be absorbed by physicians.' ''); Tricia Cortez, 
``Texas Doctors Plan One Day Strike'' Loredo Morning Times (February 
19, 2002) (``One Laredo doctor, who requested anonymity, said 
malpractice insurance for doctors has doubled or even tripled because 
of the escalating number of lawsuits and jury awards. `Last year, I was 
paying $9,000 in insurance for $1.5 million maximum yearly coverage. 
This year, I am paying $24,000 a year for $600,000 maximum coverage. 
So, my insurance premiums nearly tripled, but my coverage was cut in 
half,' the doctor said. These costs, however, pale in comparison to 
insurance costs paid by obstetricians/gynecologists and other high-risk 
specialty doctors. Dr. Santiago Gutierrez, a Laredo ob-gyn, said fellow 
ob-gyns along the border are paying $60,000 to $250,000 in malpractice 
insurance a year . . . A January article in American Medical News 
reported that Texas was one of eight states where physicians saw 
medical liability rates increase by 30 percent or more.'').
    \62\ See Joseph B. Treaster, ``Malpractice Rates Are Rising 
Sharply; Health Costs Follow,'' The New York Times (September 10, 2001) 
(``Medical malpractice insurance premiums are increasing at the highest 
rate since the mid-1980's, adding to rising health care costs. Insurers 
say the increases, typically in the double digits, result mainly from a 
rise in jury awards, now averaging $3.49 million. Some of the biggest 
insurers are raising rates in many states by more than 30 percent. Even 
insurers owned by doctors and hospitals, which work to keep rates low, 
are increasing prices by 10 percent to 18 percent. Insurers began 
raising rates last year, after several years of price-cutting 
competition that left premiums behind inflation. A 4-percent rise in 
premiums last year was the biggest since 1994, and insurers say the 
increases are greatly accelerating this year . . . Health care costs 
are expected to increase about 10 percent this year. Rising malpractice 
premiums account for about one-tenth of the increase, according to Dr. 
William F. Jessee, chief executive of the Medical Group Management 
Association, which represents 188,000 doctors, or nearly half of those 
who buy the coverage . . . Rising medical malpractice premiums are also 
adding to medical costs in another way: Doctors are practicing more 
defensively, ordering extra tests and choosing procedures that limit 
their risks. Dr. Nigel Spier, an obstetrician-gynecologist in 
Hollywood, Fla., said doctors were performing more Caesarean 
deliveries, for example, which are more costly than vaginal deliveries. 
Insurers put most of the blame for the increases on a jump in big 
awards by juries and large settlements. While the number of malpractice 
suits has been holding steady, the average jury award rose to $3.49 
million in 1999, up 79 percent from $1.95 million in 1993, according to 
the latest compilation by Jury Verdict Research of Horsham, Pa. . . . 
St. Paul, the second-largest malpractice insurer, has raised rates for 
doctors an average of 24 percent this year in 25 states, with rates 
jumping 65 percent in Ohio and Mississippi. Scpie Companies is raising 
rates an average of 30 percent to 50 percent in a dozen states, 
including Florida and Texas.'').
---------------------------------------------------------------------------
    The medical insurance crisis has already caused St. Paul--
an insurer of 42,000 doctors, 750 hospitals, 5,800 health care 
facilities, and 72,000 health care providers such as nurses--to 
leave the business entirely. \63\ In the words of Thomas A. 
Bradley, chief financial officer of St. Paul, the medical 
malpractice insurance crisis was ``basically another World 
Trade Center loss for us this year.'' \64\ Other medical 
malpractice insurers have also recently left the market, \65\ 
and many others have become insolvent. Licensed carriers' 
medical professional liability insurance business has, on 
average, been unprofitable in every year from 1990-2000. \66\ 
It has also been recently reported that ``nearly all companies 
that used to write nursing home liability [insurance] are 
getting out of the business.'' \67\ Since the costs of nursing 
home care are mainly paid by Medicaid and Medicare, these 
increased costs are borne by taxpayers, and consume resources 
that could otherwise be used to expand health (or other) 
programs.
---------------------------------------------------------------------------
    \63\ See Joseph T. Hallinan, ``St. Paul Gradually Will Pull Out Of 
Malpractice-Insurance Sector,'' The Wall Street Journal (December 13, 
2001) at B2 (``Among its biggest money losers is the medical-
malpractice business, expected to generate underwriting losses this 
year of $940 million. St. Paul provides malpractice insurance to 42,000 
doctors in the U.S., in addition to 750 hospitals, 5,800 health-care 
facilities and 72,000 health-care providers such as nurses. St. Paul 
said it won't cancel these policies but will instead allow them to 
lapse as they come up for renewal. The company said it will take 
roughly 2 years to complete the process of not renewing the business. 
Last year, the malpractice business accounted for about 10% of the 
company's $5.8 billion of total written premiums. St. Paul insures 
about 6% of the nation's 797,000 doctors.'').
    \64\ ``St. Paul to Exit Medical Malpractice, Pose $900 Million 
Charge,'' Best's Insurance News (December 12, 2001) (``While medical 
malpractice was once 40% of St. Paul's book of business, the company 
has been backing away from the line, which has now fallen to 10.5% of 
its net premiums written in 2000, according to A.M. Best Co. data. The 
company will take in an estimated $530 million in net written premiums 
for medical malpractice in 2001, and will post an underwriting loss of 
$940 million, including the $600 million reserve charge, for the year. 
`It's basically another World Trade Center loss for us this year,' 
Thomas A. Bradley, chief financial officer, said in the call. Medical 
malpractice has become an increasingly difficult business to write, 
Fishman said, noting that over the years, many low-risk doctors have 
pulled out of the commercial market to form mutual companies that 
offered cheaper coverage, which has increased adverse selection in the 
market. `The fundamentals of the business has changed. This is not just 
a cycle,' he said.'').
    \65\ See Meg Green, ``Med Malcontent: Top medical malpractice 
writer St. Paul Cos. Abandons the Unprofitable Business. Who Will Fill 
the Void?'' Best's Review (February 1, 2002) at 12 (``St. Paul Cos.' 
decision to withdraw from the market . . . comes on the heels of two 
other companies also leaving the market this year. Phico Group Inc., 
which wrote $182.5 million in direct medical malpractice premiums for 
2000, has been taken under control by regulators. Also, Frontier 
Insurance Group, which wrote $69.3 million in direct medical 
malpractice premiums, stopped taking on risk earlier this year . . . 
`It used to be someone had to make an error to get sued,' Riley said. 
`Now you have failure to do something. These cases are being brought in 
hindsight.' . . . The medical malpractice market is littered with 
failed companies. From Frontier and Phico to companies like PIC 
Insurance Group and PIE Mutual Insurance Co., both of which were taken 
over by regulators--some insurers are finding medical malpractice too 
dangerous to their bottom line. Once a profitable product for insurers, 
medical malpractice has seen losses soar in recent years as combined 
ratios have skyrocketed. In 2000, the industry lost $1.30 for every $1 
in premium it took in, according to A.M. Best Co. data.'').
    \66\ See American Medical Association, ``Trends Report: Medical 
Professional Liability Insurance'' (April 2002) at 5.
    \67\ A.M. Best Company, Inc., ``As Nursing home liability losses 
soar, carriers stop writing business,'' (February 7, 2000).
---------------------------------------------------------------------------
    According to the Department of Health and Human Services:

        The litigation crisis is affecting patients' ability to 
        get care not only because many doctors find the 
        increased premiums unaffordable but also because 
        liability insurance is increasingly difficult to obtain 
        at any price, particularly in non-reform states. 
        Demonstrating and exacerbating the problem, several 
        major carriers have stopped selling malpractice 
        insurance.

         St. Paul Companies, which was the largest 
        malpractice carrier in the United States, covering 9% 
        of doctors, announced in December 2001 that it would no 
        longer offer coverage to any doctor in the country.

         MIXX pulled out of every state; it will 
        reorganize and sell only in New Jersey.

         PHICO and Frontier Insurance Group have also 
        left the medical malpractice market.

         Doctors Insurance Reciprocal stopped writing 
        group specialty coverage at the beginning 2002.

          States that had not enacted meaningful reforms (such 
        as Nevada, Georgia, Oregon, Mississippi, Ohio, 
        Pennsylvania, and Washington) were particularly 
        affected. Fifteen insurers have left the Mississippi 
        market in the past 5 years. \68\
---------------------------------------------------------------------------
    \68\ Department of Health and Human Services, ``Confronting the New 
Health Care Crisis: Improving Health Care Quality and Lowering Costs by 
Fixing Our Medical Liability System'' (July 24, 2002) at 14.

    Many other insurers are also pulling out of the 
professional medical liability market, while staying in the 
insurance market generally as a combination of factors that 
came together in the past few years caused turmoil in the 
medical-malpractice market. Frequency of claims has leveled off 
at a high level, for example, while the severity of claims has 
grown at an annual rate of 5% to 8%. \69\ The commonly made 
claim that sharp increases in medical liability insurance rates 
are due to insurer losses in the stock market is dubious, as 
less than 15% of the assets of medical liability insurance 
companies are stocks. \70\
---------------------------------------------------------------------------
    \69\ See Best's Insurance News, ``Nevada Complaint Blames St. Paul 
Cos. for Med-Mal Crisis'' (May 31, 2002) (``A combination of factors 
that came together in the past few years caused turmoil in the medical-
malpractice market, said Larry Smarr, president of Physicians Insurers 
Association of America, a trade group representing most of the 
physician-owned medical liability companies. `Frequency of claims has 
leveled off, but at a high level, while the severity of claims has 
grown at an annual rate of 5% to 8% and there has been nothing to 
forestall that trend,'' he said. ``We're seeing more and more larger 
awards driving up costs to the extent that carriers have to take rate 
increases.' The industry is on an uphill progression on paid-claims 
severity, Smarr said. When you look at California, which has instituted 
tort reform, the medical-malpractice costs have risen since 1976--the 
year the California micro law went into effect--through 2001, just as 
it has in other states, he said. But according to information compiled 
by the National Association of Insurance Commissioners, California med-
mal costs grew by 196% in that time, compared with the rest of the 
country, which grew by 505% for the same period, he said.'').
    \70\ See Physician Insurers Association of America, ``Bordering on 
Malpractice: Serious Errors Found in Consumer Federation of America 
Report on Medical Liability Insurance'' (May 9, 2002).
---------------------------------------------------------------------------
    Beyond insurers, rising rates due to an unregulated 
litigation system are decimating the ranks of doctors and 
physicians, who are being forced to leave their patients and 
practices. \71\ The problem is particularly acute for 
practitioners in managed care, where prescribed fixed costs 
prevent them from recouping insurance costs. \72\ Hardest hit 
by the premium increase are doctors in high-risk specialties, 
such as obstetrics and emergency medicine. \73\ Obstetricians 
and gynecologists are facing increasing numbers of lawsuits 
nationwide, \74\ yet the majority of these costly lawsuits are 
dropped or settled without any payment on behalf of the 
practitioner. \75\ This situation is depleting the ranks of 
obstetricians and gynecologists. \76\ Further, malpractice 
premiums are disproportionately high among obstetricians and 
family practitioners that deliver babies. \77\ These high 
premiums and correspondingly lower incomes discourage medical 
students from entering into obstetrics or high risk 
specialties. In addition, physicians approaching retirement 
will have a greater incentive to retire earlier instead of 
later. Surveys of physicians show that malpractice premiums are 
affecting decisions on specialty areas that rising malpractice 
premiums will most significantly impact low-income women who 
are insured through Medicaid. \78\ In sum, rising malpractice 
premiums will cost lives. \79\ High or no caps on non-economic 
damages in medical malpractice cases decrease access to health 
care, particularly for low-income people and those seeking 
physician care in high-risk specialties such as obstetrics and 
gynecology.
---------------------------------------------------------------------------
    \71\ See Rachel Zimmerman and Christopher Oster, ``Assigning 
Liability: Insurers' Missteps Helped Provoke Malpractice `Crisis','' 
The Wall Street Journal, (June 24, 2002 edition) at A1 (``[M]alpractice 
litigation has a big effect on premiums . . . Premiums in Maine are 
relatively low [because] `the heavily rural population isn't notably 
litigious . . . `Scpie stopped writing coverage in any state other than 
California.'). Scpie Holdings, a medical professional liability 
insurer, can survive in California, where health care is particularly 
accessible, because California enacted reasonable medical litigation 
management reforms over 25 years ago that include a $250,000 cap on 
noneconomic damages and limits on the contingency fees lawyers can 
charge, among other reforms. The HEALTH Act contains the very same 
litigation management reforms that have kept medical professional 
liability premiums affordable--and health care accessible--in 
California. Modeled after California's reforms, the HEALTH Act will do 
the same for the rest of country. See also `Lack of Surgeons Threatens 
Network,' Mississippi State Medical Association Legislative Report 
(March 15, 2002) Dr. Hugh Gamble, MSMA President and Trauma Committee 
Chairman said hospitals around the state are in danger of losing their 
trauma level status because surgeons are leaving the state . . . 
Neurosurgeons in Tupelo, Columbus, Greenwood and Greenville are 
limiting trauma care because of the liability risk. Dr. Rodney 
Frothingham, `People who have children traveling from school in the 
north half of the state are going to have to pray a little harder that 
they make it home safely,' said Frothingham.''); John Porretto, the 
Associated Press, ``Doctors Looking Elsewhere to Practice,'' published 
in the Tupelo Daily Journal (March 21, 2002) (``The Mississippi State 
Medical Association says it knows of at least 20 frustrated physicians 
who have decided in the past 3 weeks to quit or move as it's become 
clear Mississippi lawmakers will not pass tort reform legislation in 
the 2002 session, which ends April 7. Dr. Hugh Gamble of Greenville, 
the medical association's president, estimates the state could lose 10 
percent of its 4,000 to 4,500 doctors to departure or retirement by 
year's end . . . Mississippi Insurance Commissioner George Dale said 
Wednesday the chances of more companies offering malpractice coverage 
in the near future are not good . . .''); Mel Huff, ``Texas Docs Twice 
as Likely to Get Sued,'' The Brownsville Herald (March 17, 2002) (``A 
Texas Medical Association survey of area doctors taken in April 2001 
showed that of those who responded, 65 percent had been sued; 71 
percent said they were afraid to respond to emergency room calls 
because of lawsuits; and 55 percent said they were inclined to leave 
the Valley if the liability crisis does not improve . . . Dr. Carlos 
Chavez, a Brownsville heart surgeon, described the effect of frivolous 
lawsuits as a chain reaction that increases physicians' malpractice 
premiums, causes them to practice medicine more defensively, drives up 
costs and ultimately restricts the availability of health care . . . 
Dr. Bradley Nordyke, a general practitioner, noted that although he has 
never been sued, his insurance company told him last year that his 
coverage was being dropped. He found another carrier at a 400 percent 
rate increase. Then--although he still has not been sued--that insurer 
also dropped him . . . Dr. Carol Erwin said that today she can treat 
only half as many patients as she could 20 years ago because of the 
increase in paperwork needed to document a defense against potential 
lawsuits.''); Tom Gorman, ``Physicians Fold Under Malpractice Fee 
Burden,'' The Los Angeles Times (March 4, 2002) at A1 (``In Las Vegas, 
more than 10% of the doctors are expected by summer to quit or 
relocate, plunging the city toward crisis. Already, specialists are 
becoming harder to find around the country and trauma centers that 
treat life-threatening emergencies are closing . . . The turmoil began 
when the St. Paul Cos. of Minnesota, the nation's second largest 
malpractice insurer, announced in December it would no longer renew 
policies for 42,000 doctors nationwide. The insurer said it had lost 
nearly $1 billion in its malpractice business last year. Other 
companies are offering coverage, but charging much higher rates to 
avoid the losses encountered by St. Paul. The situation is particularly 
acute in Las Vegas, home to two-thirds of the state population, because 
60% of its 1,700 doctors were insured by St. Paul. Replacement policies 
are costing some doctors four or five times as much--$200,000 or higher 
annually, more than most doctors' take-home pay . . . Dr. Cheryl 
Edwards, 41, closed her decade-old obstetrics and gynecology practice 
in suburban Henderson because her insurance jumped from $37,000 to 
$150,000 a year. She moved her practice to West Los Angeles, leaving 
behind 30 pregnant patients. `I was happy in Las Vegas,' she said, `but 
I had no choice but to leave.' In California--where juries hearing 
malpractice lawsuits are limited to maximum awards of $250,000 for pain 
and suffering--Edwards' insurance premium this year is $17,000. Because 
of 1975 tort reform, doctors in California are largely unaffected by 
increasing insurance rates. But the situation is dire in states such as 
Nevada where there is no monetary cap . . . The Legislature, however, 
isn't scheduled to meet for a year. Dr. Frank Jordan--a 31-year veteran 
of vascular surgery, including 13 years in Las Vegas--couldn't wait. He 
closed his practice and retired. I did the math,' the 56-year-old 
doctor said. `If I were to stay in business for 3 years, it would cost 
me $1.2 million for insurance. I obviously can't afford that. I'd be 
bankrupt after the first year, and I'd just be working for the 
insurance company. What's the point?' . . . Last year, St. Paul lost 
$1.88 in Nevada for every dollar paid by doctors, spokeswoman Andrea 
Woods said . . . Both trauma centers in Wheeling, W.Va., have closed 
because their neurosurgeons couldn't pay their new malpractice 
premiums. The trauma center at Abington Memorial Hospital outside 
Philadelphia faces closure next month as its doctors scramble to find 
affordable insurance. Las Vegas' only trauma center has announced it 
will close for 12 hours March 12 because two of its eight trauma 
surgeons can't afford insurance premiums. People in southern Nevada 
needing emergency surgery during that period will be airlifted to 
hospitals in Southern California, Phoenix, Reno or Salt Lake City.'').
    \72\ See Terry E. Tyrpin, ``Tort Reform Would Cure Med Mal 
Crisis,'' National Underwriter Property & Casualty-Risk & Benefits 
Management (January 28, 2002) at 25 (``Because most doctors are locked 
into 1-IMO or PPO plans that prescribe fixed costs for services, there 
is not much wiggle room for doctors to charge their patients higher 
medical fees that reflect increased overhead expenses, such as 
insurance. Doctors are now resorting to dropping risky procedures, 
fleeing heavily litigious states, practicing without insurance, or 
deciding they can no longer afford to practice medicine. Insurers also 
are backed into a corner. Unless they pass on the cost of the 
exorbitant jury awards, insurers transacting professional liability 
coverage in the medical field will be looking for more commercially 
viable business. If the medical malpractice insurance market contracts 
as insurers look for more lucrative areas in which to allocate capital, 
it could force some medical professionals to refrain from practicing or 
to affiliate with large firms with pre-existing insurance coverage. 
Ultimately, the cost of medical care will go up if malpractice coverage 
becomes scarce. If the cost of insurance dissuades some from practicing 
medicine, those communities will have fewer choices among physicians . 
. . In Texas, insurers pay out $1.65 in losses and expenses per $1 
received in malpractice premiums. In Connecticut, that ratio is more 
than 180 percent. The national average is a 126 combined ratio--not 
exactly the type of lure that will drive insurers to pick up the 10 
percent marketshare St. Paul is leaving behind . . . Increasing rates 
by an average of 24 percent this year in 27 states couldn't save St. 
Paul, the nation's largest malpractice underwriter . . . Meanwhile, in 
August, the Pennsylvania Insurance Department placed PHICO into 
rehabilitation after its surplus dropped from $127 million to $6 
million in just 6 months. Both companies' failed medical malpractice 
business--which leaves between 50,000 and 100,000 doctors across the 
country without coverage--are high-profile symptoms of a high-stakes 
problem.'').
    \73\ See Emily Richmond, ``Nevada Doctors Face Insurance Crisis; 
Skyrocketing Premiums Could Force Some Out of Business,'' The Las Vegas 
Sun (January 28, 2002) (``Nevada has one of highest rates of medical 
malpractice suit filings, legal experts said. There's no limit in 
Nevada to what juries can award patients for damages in medical 
malpractice suits, unlike the $250,000 cap in neighboring California. 
`We see lawyers moving here from as far away as Florida to take 
advantage of the no cap,' said Las Vegas attorney John Cotton, who 
specializes in defending physicians and health-care providers. `You 
can't turn on the television without seeing one of their ads.' . . . 
Hardest hit by the premium increase are doctors in high-risk 
specialties, such as obstetrics and emergency medicine.'').
    \74\ See 5 ACOG Clinical Review 5 (September/October 2000) at 15 
(``The average number of claims filed against all [ob/gyn] 1999 survey 
respondents during their careers was 2.53. This number represents a 
significant increase from the 1996 survey (2.31).'').
    \75\ See id. at 16 (``Of the 570 closed claims that were reported 
in the survey, 53.9% were dropped or settled without any payment on 
behalf of the ob/gyn. These claims include those dropped by the 
plaintiff, dismissed by the court, and settled without payment by the 
ob/gyn.'').
    \76\ See id. (``Of the survey respondents, 8.9% reported that they 
no longer practiced obstetrics as a result of the risk of malpractice. 
Another 17.1% reported that they had decreased the level of high-risk 
obstetric care. An additional 6.2% reported that they had decreased the 
number of deliveries . . . Of the ob/gyns who completed the survey, 
8.2% reported that they decreased gynecologic services as a result of 
the risk of malpractice.'').
    \77\ See Stephen A. Norton, ``The Malpractice Premium Costs of 
Obstetrics,'' Inquiry, (Spring 1997) at 62.
    \78\ See id. at 68. See also Committee to Study Medical 
Professional Liability and the Delivery of Obstetrical Care, Division 
of Health Promotion and Disease Prevention, Institute of Medicine, 1 
Medical Professional Liability and the Delivery of Obstetrical Care 
(1989) at 6-7 (``Although this reduction in available obstetrical care 
[due to the current state of liability law] may affect the entire 
population, the evidence suggests that it particularly affects low-
income women . . . The general reductions in obstetrical practice among 
obstetricians, family physicians, and nurse-midwives reported in both 
state and national survey data appear to have a disproportionate affect 
on the availability of care for low-income women . . . Sixty-seven 
percent of the respondents to the survey indicated that professional 
liability concerns reduced their center's ability to furnish 
obstetrical services of the scope of services they could offer . . . 
[T]he committee is persuaded that the effects of medical liability 
concerns in obstetrics are being disproportionately experienced by poor 
women and women whose obstetrical care is financed by Medicaid or 
provided by Community and Migrant Health Centers, and that this problem 
is, in turn, exacerbating the long-standing problems of financing and 
delivering obstetrical care to poor women.'').
    \79\ See Patricia Neighmond, National Public Radio, ``All Things 
Considered'' (April 3, 2002) (``NEIGHMOND: But today the University 
Medical Trauma Center is on fragile footing. The reason? Some doctors 
have stopped practicing emergency medicine because they can no longer 
afford malpractice insurance. In certain cases, premiums have increased 
sixfold in just 1 year. One trauma surgeon's policy rose to $200,000, 
about the same amount as his income. Nevada state law requires a 
certain number of emergency physicians and specialists to be on call 24 
hours a day 7 days a week. And if the Trauma Center can't comply, it 
could be shut down. If that happens, Carrison says critically injured 
patients would have to be sent to trauma centers in nearby states. Dr. 
CARRISON: Some patients are going to die that wouldn't die, and that 
extra time, that's what saves lives. Time saves lives. The quicker 
you're at the trauma center, the better chance you have of 
survival.'').
---------------------------------------------------------------------------
    A report prepared on behalf of the American Health Care 
Association analyzing the cost of general liability and 
professional liability (``GL/PL'') claims to the long term care 
industry in the United States summarizes the current crisis in 
that industry:

        National trends in GL/PL losses are increasing at an 
        alarming rate. In the 5-year period between 1990 and 
        1995 costs more than doubled from $240 per bed to $590 
        per bed. Since 1995 costs have quadrupled to an 
        estimated $2,360 per bed . . . In many states, the 
        increase in liability costs is largely offsetting 
        annual increases in Medicaid reimbursements . . . The 
        average long term care GL/PL cost per annual occupied 
        skilled nursing bed has increased at an annual rate of 
        24% a year from $240 in 1990 to $2,360 in 2001. 
        National costs are now ten times higher than they were 
        in the early 1990's . . . Florida and Texas were 
        leaders in driving the increase in GL/PL costs for the 
        long term care industry. With trends during the 1990's 
        in the range of 25% to 35% a year, costs in these two 
        states have risen to close to $11,000 per bed in 
        Florida and $5,500 per bed in Texas. Numerous states 
        across the country are indicating similar annual trends 
        including Georgia (50%), West Virginia (50%), Arkansas 
        (45%), Mississippi (40%), Alabama (31%), and California 
        (29%). With current costs in these states up to $3,300 
        per bed, it won't take long at these annual trend rates 
        to reach Florida level loss costs . . . GL/PL claim 
        costs have absorbed 20% ($3.78) of the $18.47 increase 
        in the countrywide average Medicaid reimbursement rate 
        from 1995 to 2000. Almost half of the total amount of 
        claim costs paid for GL/PL claims in the long term care 
        industry is going directly to attorneys . . . Annual 
        commercial insurance premium levels increased on 
        average 130% between 2000 and 2001, often with reduced 
        coverage . . . On average, a quarter of a million more 
        dollars of premium was charged per insured for almost 
        half a million less coverage per claim. \80\
---------------------------------------------------------------------------
    \80\ Theresa W. Bourdon and Sharon C. Dubin, Aon Risk Consultants, 
Inc., ``Long Term Care General Liability and Professional Liability 
Actuarial Analysis'' (February 28, 2002) at 3-4.

    Due to the significant lag time between the time an 
insurance policy is issued and the payment of any claims that 
may arise, it is difficult to measure actual insurance payment 
trends as of any given moment. That is, data on medical 
professional liability claims closed with indemnity on behalf 
of individual defendants for claims reported in 2000 show that 
the average total payment per claim is $149,449 for the 
reporting period of 0-12 months, $258,968 for the reporting 
period of 13-24 months, $292, 825 for the reporting period 25-
36 months, $312,981 for the reporting period 37-48 months, and 
$408,352 thereafter. \81\ This means that looking at total 
payments made this year will fail to account for medical 
professional liability claims paid out 2 years from now and 
consequently they will underestimate the depth of the current 
crisis, especially since smaller claims tend to be paid out 
first, and larger more controversial claims paid out much 
later. However, data reported for closed claims demonstrate the 
following escalation in average loss and allocated loss 
adjustment expenses for the following years: 1991 ($181,351); 
1992 ($206,050); 1993 ($214,293); 1994 ($218,262); 1995 
($210,299); 1996 ($230,223); 1997 ($257,557); 1998 ($266,308); 
and 1999 ($286,184). \82\ The average payments have risen 81.1% 
between 1991 and 2000. This is a compound annual growth of 
approximately 6.9%, which is over two and a half times as great 
as the 2.6% compound annual growth of the Consumer Price Index 
during this same period. \83\
---------------------------------------------------------------------------
    \81\ See Physician Insurers Association of America, ``Analysis of 
October 13, 2001 Consumer Federation of America Report on Medical 
Malpractice Industry Performance'' (May 1, 2002) at 4.
    \82\ See id. at 5.
    \83\ See id. at 6.
---------------------------------------------------------------------------

  THE HEALTH ACT INCLUDES REFORMS WITH PROVEN TRACK RECORDS OF MAKING 
                      HEALTH CARE MORE ACCESSIBLE

    The HEALTH Act is modeled on California's Medical Injury 
Compensation Reform Act of 1975 (``MICRA''), whose major 
reforms include a $250,000 cap on the amount of non-economic 
damages, such as those for pain and suffering, that may be 
awarded in medical malpractice lawsuits \84\; limits on 
contingency fees lawyers can charge in such suits \85\; 
authorization for defendants in such cases to introduce 
evidence showing the plaintiff received compensation for all or 
a portion of the plaintiff's losses and a prohibition on 
subrogation to the rights of the plaintiff by providers of 
collateral source payments \86\; and authorization for courts 
to require periodic payments for future damages instead of lump 
sum awards. \87\ The contingency fee limits were upheld by the 
California Supreme Court in Roa v. Lodi Medical Group, 37 
Cal.3d 920 (1985). The other provisions were upheld by the 
California Supreme Court in Fein v. Permanente Medical Group, 
38 Cal.3d 137 (1985), and the United States Supreme Court 
upheld the same without written opinions. \88\ The 
Congressional Research Service has concluded that current 
Supreme Court Commerce Clause jurisprudence supports the 
constitutionality of Congressional regulation of medical 
malpractice. \89\
---------------------------------------------------------------------------
    \84\ See Ca. Civ. Sec. 3333.2.
    \85\ See Ca. Bus. & Prof. Sec. 6146.
    \86\ See Ca. Civ. Sec. 3333.1.
    \87\ See Ca. Civ. Pro. Sec. 667.7.
    \88\ Fein v. Permanente Medical Group, 38 Cal.3d 137 (1985), appeal 
dismissed, 474 U.S. 892 (1985) (Justice White dissenting); Roa v. Lodi 
Medical Group, Inc., 37 Cal.3d 920, (1985), appeal dismissed, 474 U.S. 
990 (1985).
    \89\ See Henry Cohen, CRS Report for Congress 95-797: Federal Tort 
Reform Legislation: Constitutionality and Summaries of Selected 
Statutes (updated March 26, 2002) at 3 (``The Court in [United States 
v. Lopez] then noted that, if the Gun-Free School Zones Act of 1990 was 
`to be sustained, it must be under the third category as a regulation 
of an activity that substantially affects interstate commerce' [citing 
514 U.S. 549, 561 (1995)]. The Act, however, had `nothing to do with 
``commerce'' or any sort of economic enterprise . . . [and] is not an 
essential part of a larger regulation of economic activity, in which 
the regulatory scheme could be undercut unless the intrastate activity 
were regulated'' [citing 514 U.S. 549, 561 (1995)]. The same apparently 
could be said of some torts, such as the assault example suggested 
above. But it does not appear that it could be said with respect to 
torts that substantially affect commerce, such as the manufacture of 
defective products or medical malpractice.'') (emphasis added). See 
also Henry Cohen, CRS Report for Congress 95-797A: Federal Tort Reform 
Legislation: Constitutionality and Summaries of Selected Statutes 
(updated May 23, 2002) (Summary) (concluding that ``Congress has the 
authority to enact tort reform `generally,' [including] reforms that 
have been widely implemented at the state level, such as caps on 
damages and limitations on joint and several liability and on the 
collateral source rule'' and that ``there would appear to be no due 
process or federalism (or any other constitutional) impediments to 
Congress' limiting a state common law right of recovery'' and that 
``there seems little doubt that tort reform legislation, in general, 
would be within Congress' commerce power.'').
---------------------------------------------------------------------------
    As outlined in a report examining the effects of raising 
California's existing cap on non-economic damages in medical 
malpractice cases, high or no such caps increase incentives to 
litigate weak or marginal claims. \90\ Further, as the Reagan 
Administration's Tort Policy Working Group reported in its 
seminal study of the effects of tort laws on insurance 
premiums, ``Plaintiffs' attorneys also often see high non-
economic damage awards as necessary to justify high contingency 
fees, which may lead them to press for a high non-economic 
damage award when it may be in their clients' interest to 
obtain a quick and fair settlement.'' \91\ Further, 
``Contingency fees also distort the incentives of attorneys. 
Such fees may lead plaintiffs' attorneys to hold out for high 
non-economic damages (and, potentially, windfall profits for 
the attorney requiring only minimal additional work on the 
attorney's part), while the clients may be best served with 
obtaining economic damages and more limited non-economic 
damages as promptly as possible.'' \92\
---------------------------------------------------------------------------
    \90\ See Hamm et al., ``California's MICRA Reforms: How Would A 
Higher Cap on Non-Economic Damages Affect the Cost of an Access to 
Health Care?'' LECG, Inc. (July 27, 1998) at 5.
    \91\ Report of the Tort Policy Working Group on the Causes, Extent 
and Policy Implications of the Current Crisis in Insurance Availability 
and Affordability (February 1986) at 67.
    \92\ Id. at 73.
---------------------------------------------------------------------------
    When health care providers are forced to pay more for 
malpractice insurance, payers--including businesses providing 
employee health insurance and consumers--ultimately pick up the 
tab. The Government Accounting Office (``GAO''), in its study 
of medical liability costs, has documented the linkages between 
malpractice premiums and the cost of health care. The GAO found 
that ``hospitals and physicians incur and pass on to consumers 
additional expenses that directly or indirectly relate to 
medical liability. Therefore, estimates of higher malpractice 
premiums--taken by themselves--understate the full effect of 
medical liability costs on national health expenditures.'' \93\ 
Additional evidence shows that an increase in malpractice 
premiums results in an increase in doctor's fees. Researchers 
who modeled the effects of premium increases on doctors' fees 
and found that an increase in medical malpractice premiums 
increased doctors' fees by an average of 16% for physician 
visits, and 9-17% for hospital visits. \94\
---------------------------------------------------------------------------
    \93\ See GAO (GAO/AIMD-95-169), ``Medical Liability: Impact on 
hospital and Physician Cost Extends Beyond Insurance,'' (September 
1995) at 1.
    \94\ Danzon, Patricia M., Pauly, Mark V., and Raynard S. Kington, 
``The Effects of Malpractice Litigation on Physicians' Fees and 
Incomes,'' 80 AEA Papers and Proceedings 2: 122-27 (May 1990) at 125.
---------------------------------------------------------------------------
    To the extent that physicians are successful in shifting 
the increased costs resulting from the higher cap to patients, 
the cost of employer-sponsored health insurance will go up. An 
increase in the cost of employer-sponsored health insurance 
programs will affect employees in one of two ways. One, 
employers that continue to offer health insurance tot heir 
employees are likely to raise the employees' required 
contribution toward the cost of health care by requiring larger 
coinsurance payments, higher deductibles, or increases in the 
employee's share of premiums. Two, some employers may decide to 
terminate health insurance coverage for their employees, or 
firms on the verge of adding health insurance to their benefit 
package may decide not to so, for reasons of costs. Employers 
may also decide to reduce the size of their benefit package.
    A fundamental tenet of economics is that, for most goods 
and services, an increase in price will cause a reduction in 
demand. Consequently, increases in health care insurance 
premiums lead to an increase in the number of individuals going 
without coverage. An increase in health insurance costs will 
decrease participation in health insurance programs, 
particularly by low-income workers. And just as an increase in 
price causes consumers to buy less, a reduction in price causes 
providers to supply less health care. Retirement decisions are 
influenced by future earnings potential. If a physician nearing 
retirement sees his or her malpractice costs increase a 
significant amount, the physician will be more likely to retire 
sooner rather than later. Further, hospitals currently provide 
uncompensated care to the uninsured. An increase in 
expenditures on the direct and indirect costs of medical 
liability will require hospitals to cut back on other 
expenditures, including such care. This will reduce the ability 
of these institutions to provide needed services to those 
unable to pay for them. \95\
---------------------------------------------------------------------------
    \95\ See Hamm et al., ``California''s MICRA Reforms: How Would A 
Higher Cap on Non-Economic Damages Affect the Cost of an Access to 
Health Care?'' LECG, Inc. (July 27, 1998) at 24.
---------------------------------------------------------------------------
    In addition, many rural and inner city areas are medically 
under-served because these communities do not offer the 
potential income that other communities offer. To the extent it 
is more difficult for physicians to pass along the higher cost 
of malpractice premiums to lower-income families, a higher cap 
will exacerbate the provider shortage in rural and inner city 
areas. \96\ The higher costs brought about by a higher cap on 
non-economic damages will increase these hospitals'' costs 
without adding to their revenues, further jeopardizing their 
survival. \97\
---------------------------------------------------------------------------
    \96\ See id. at 21.
    \97\ See id. at 22.
---------------------------------------------------------------------------
    Finally, MICRA's limits on attorneys fees allow more money 
to go directly to injured patients. \98\ According to the 
Department of Health and Human Services:
---------------------------------------------------------------------------
    \98\ Defense fees, unlike the fees charged by the complainant's 
lawyer, are not based on the size of the award nor are they contingent 
upon winning the case. The defending party has a powerful economic 
incentive to keep defense costs to a minimum.

        The friction generated by operating the [medical 
        litigation] system takes most of the money. When 
        doctors and hospitals buy insurance (sometimes they are 
        required to buy coverage that provides more 
        ``protection'' than the total amount of their assets), 
        it is intended to compensate victims of malpractice for 
        their loss. However, only 28% of what they pay for 
        insurance coverage actually goes to patients; 72% is 
        spent on legal, administrative, and related costs. Less 
        than half of the money that does go back to injured 
        patients is used to compensate the patient for economic 
        loss that is not compensated from other sources--the 
        purpose of a compensation system. More than half of the 
        amount the plaintiff receives duplicates other sources 
        of compensation the patient may have (such as health 
        insurance) and goes for subjective, non-economic 
        damages (a large part of which, moreover, actually goes 
        to the plaintiff's lawyer). The malpractice system does 
        not accurately identify negligence, deter bad conduct, 
        or provide justice. The results it obtains are 
        unpredictable, even random. The same study that found 
        that only 1.53% of patients who were injured by medical 
        error filed a claim also found, on the flip side, that 
        most events for which claims were filed did not 
        constitute negligence. Other studies show the same 
        random results. \99\
---------------------------------------------------------------------------
    \99\ Department of Health and Human Services, ``Confronting the New 
Health Care Crisis: Improving Health Care Quality and Lowering Costs by 
Fixing Our Medical Liability System'' (July 24, 2002) at 11.

    Most other countries, including England and Scotland, 
prohibit contingent fees in many circumstances. \100\ Indeed, 
other professional associations in the United States, including 
medicine and accounting, regard the use of contingent fees in 
those occupations as unethical. Yet unlike their counterparts 
in other countries and certain other professions, lawyers in 
the United States have long been permitted to charge contingent 
fees. With lawyers now representing plaintiffs on a contingent 
fee basis in the vast majority of the roughly one million tort 
cases that are filed each year, the practice is more common 
than ever. \101\ Researchers have estimated that ``no less than 
$7.5 to $10 billion in unethical, windfall contingency fees are 
now charged annually.'' \102\
---------------------------------------------------------------------------
    \100\ See Mary A. Glendon, A Nation under Lawyers 54 (1994).
    \101\ See Lester Brickman, Contingency Fee Abuses, Ethical 
Mandates, and the Disciplinary System: The Case Against Case-by-Case 
Enforcement, 53 Wash. & Lee L. Rev. 1339, 1349, n.45 (1996). 
Plaintiffs' lawyers take roughly 95% of all personal injury cases on a 
contingency. See Richard W. Painter, Litigating on a Contingency: A 
Monopoly of Champions or a Market for Champerty, 71 Chi.-Kent L. Rev. 
625, 626 n.3 (1995) (citing sources).
    \102\ Lester Brickman, ABA Regulation of Contingency Fees: Money 
Talks, Ethics Walks, 65 Fordham L. Rev. 247, 314 app. A (1996).
---------------------------------------------------------------------------
    As the Reagan Administration's Tort Policy Working Group 
reported in its seminal study of the effects of tort laws on 
insurance premiums, ``Where plaintiff's award is moderate, such 
a contingency fee may, in fact, be quite reasonable, since the 
attorney has significant costs and may face substantial risks 
that must be reimbursed.'' \103\ The HEALTH Act's sliding scale 
under which attorneys fees are allocated allows attorneys to 
keep more of plaintiff's moderate awards. However, we live in a 
world of limited resources. Those resources can either fund 
lawyers and the legal system, or they can fund patients in our 
health care system, and the HEALTH Act appropriately limits 
contingency fees attorneys charge for very large plaintiff's 
awards.
---------------------------------------------------------------------------
    \103\ Report of the Tort Policy Working Group on the Causes, Extent 
and Policy Implications of the Current Crisis in Insurance Availability 
and Affordability (February 1986) at 72.
---------------------------------------------------------------------------
    For example, today, in a case in which a victim that is 
awarded $2,000,000 in economic damages to cover his 
demonstrable, actual injuries--including the costs of pain 
relief medication, their lost wages, their future lost wages, 
rehabilitation costs, and any other quantifiable losses--and 
$500,000 in unquantifiable noneconomic damages, the victim's 
lawyer will take his standard one-third cut out of the total 
$2.5 million award. That would leave the lawyer with $832,500 
and the victim would recover $1,667,500. With the protections 
of the HEALTH Act in place, on the other hand, the same case 
would yield tens of thousand of dollars more for the victim. 
Even though the HEALTH Act caps noneconomic damages at 
$250,000, it reduces the amounts of money a victim's lawyer can 
take the higher the victim's demonstrable economic damages are. 
The HEALTH Act limits attorney awards on the following scale: 
lawyers can only take 40% of the first $50,000 awarded, 33.3% 
of the next $50,000 awarded, 25% of the next $500,000 awarded, 
and 15% of any award over $600,000. Under this scale, of a 
total award of 2,000,000 in economic damages and $250,000 in 
noneconomic damages, the victim's lawyer would gets $409,150, 
and the victim would get $1,840,850 in damages. That's $173,350 
more than the same victim would get without the protections of 
the HEALTH Act. Even with the cap on unquantifiable noneconomic 
damages in the HEALTH Act--which allows doctors to stay in 
business to provide medical care in the first place by making 
liability insurance affordable--the larger the demonstrable, 
real-life economic damages are, the better off victims will be 
under the HEALTH Act because under its provisions lawyers can 
take only 15% of awards over $600,000. The more actual losses a 
victim suffers, the better off they are under the HEALTH Act. 
The more clearly a victim has suffered harm (that is, the more 
quantifiable their damages are), the better off that victim 
will be under the HEALTH Act. And it is only fair that victims 
with more demonstrable losses be able to keep a greater 
percentage of their awards. The HEALTH Act provides more money 
to victims, and less money to lawyers. Indeed, insofar as 
quantifiable, economic damages may be awarded under the HEALTH 
Act, \104\ the HEALTH Act not only does not limit such awards; 
it requires that a greater percentage of such awards go to 
victims, not lawyers. In sum, under the HEALTH Act, the larger 
a victim's demonstrable, real-life economic damages are, the 
more they will receive because lawyers will be allowed to take 
only 15% of awards over $600,000. Standard attorney contingency 
fee agreements allow lawyers to take one-third--a full 33.3%--
of their client's awards, so victims are left with only 66%. 
The HEALTH Act would allow victims to keep roughly 75% of 
awards under $600,000, and 85% of awards over $600,000.
---------------------------------------------------------------------------
    \104\ See Marilyn Werber Serafini, ``Risky Business'' The National 
Law Journal (May 18, 2002) at 1474 (``Trial lawyers don't dispute that 
court awards have risen. But they argue that the increase has been 
mostly in awards for economic damages, which are meant to reimburse a 
patient for lost wages, and to cover tangible expenses, such as medical 
bills for hospital stays, rehabilitation, and physician visits.'').
---------------------------------------------------------------------------
    Further, as the Reagan Administration's Tort Policy Working 
Group reported in its seminal study of the effects of tort laws 
on insurance premiums, ``[T]he prevailing plaintiff is not only 
liable to his attorney for the agreed to contingency fee, but 
also for litigation expenses. Such expenses often can amount to 
an additional five to 8 percent of the underlying award.'' 
\105\ Allowing victims to keep more of their awards, and 
lawyers less, will allow them to recoup more of their awards 
devoted to paying litigation expenses.
---------------------------------------------------------------------------
    \105\ Report of the Tort Policy Working Group on the Causes, Extent 
and Policy Implications of the Current Crisis in Insurance Availability 
and Affordability (February 1986) at 72, n.20.
---------------------------------------------------------------------------

THE HEALTH ACT PREVENTS WASTEFUL AND UNNECESSARY ``DEFENSIVE MEDICINE''

    One of the most harmful effects of limitless non-economic 
damages is their adverse impact on settlement. When a 
contingency fee attorney is presented with the possibility of a 
windfall on non-economic damages, that attorney is much less 
likely to settle a case. If Congress is to encourage settlement 
rather than litigation, it must control the arbitrary and 
unpredictable award of non-economic damages. To avoid 
situations in which a contingency fee attorney can claim injury 
occurred because certain tests weren't performed, doctors 
engage in ``defensive medicine'' by performing tests and 
prescribing medicines that are not necessary for health. 
Research by two Stanford economists demonstrates that direct 
litigation reforms, including the same caps on non-economic 
damages and collateral source rule reforms included in the 
HEALTH Act, would greatly increase health care productivity by 
reducing the incidence of wasteful ``defensive medicine'' 
without increasing harmful health outcomes. \106\ The types of 
reforms these researchers considered ``direct'' include caps on 
non-economic damage awards and collateral source rule reforms. 
\107\
---------------------------------------------------------------------------
    \106\ See Daniel P. Kessler and Mark B. McClellan, ``How Liability 
law Affects Medical Productivity,'' National Bureau of Economic 
Research (NBER) Working Paper 7533 (February 2000) at 31-32 
(``[P]revious research suggests that `direct' reforms--designed to 
reduce the level of compensation of potential claimants--improve 
productivity in health care by reducing the prevalence of defensive 
treatment practices . . . Direct reforms affect treatment intensity 
primarily through their effect on claims rates . . . Because defending 
against any claim imposes nonfinancial as well as financial costs on 
physicians, and because the nonfinancial costs of claim defense are 
correlated with compensation, direct reforms reduce treatment intensity 
by reducing both the (insured) financial and the (uninsured) 
nonfinancial dimensions of malpractice pressure. However, these reform-
induced reductions in treatment intensity have negligible effects on 
health outcomes. This implies that doctors practice defensive medicine, 
and that reform-induced reductions in the level of liability improve 
medical productivity . . . For example, our estimates suggest a savings 
of $4.76 in hospital expenditures on elderly patients with cardiac 
illness for each $1 reduction in ALAE (e.g., litigation costs incurred 
by the malpractice insurer in connection with claim defense) per 
physician per year. In contrast, we found no consistent evidence of any 
substantial effects on health outcomes of reducing such measures of 
malpractice pressure.'').
    \107\ See Daniel P. Kessler and Mark B. McClellan, ``How Liability 
law Affects Medical Productivity,'' National Bureau of Economic 
Research (NBER) Working Paper 7533 (February 2000) at 25 (Table 1).
---------------------------------------------------------------------------

ENACTING THE HEALTH ACT WILL SAVE FEDERAL TAXPAYERS BILLIONS OF DOLLARS 
                                 A YEAR

    Two Stanford University economists have conducted two 
extensive studies using national data on Medicare populations 
and concluded that patients from states that adopted direct 
medical care litigation reforms--such as limits on damage 
awards--incur significantly lower hospital costs while 
suffering no increase in adverse health outcomes associated 
with the illness for which they were treated. In sum, the 
studies concluded that in states with medical litigation 
reforms in place, there was an average reduction of 4.3% in 
hospital costs for patients in managed care programs, \108\ and 
an average reduction of 7.4% in hospital costs for patients in 
non-managed care programs. \109\ They have thereby quantified 
the cost of ``defensive medicine,'' in which doctors perform 
tests and prescribe medicines that are not necessary for health 
in order to avoid patients' future claims that they suffered 
adverse health effects because the doctor did not do more.
---------------------------------------------------------------------------
    \108\ Daniel P. Kessler and Mark B. McClellan, ``Medical Liability, 
Managed Care, and Defensive Medicine,'' National Bureau of Economic 
Research (NBER) Working Paper 7537 (February 2000) at 16. The 
researchers in this study analyzed populations in managed care 
programs. Id. at 3.
    \109\ Daniel P. Kessler and Mark B. McClellan, ``Do Doctors 
Practice Defensive Medicine?'' The Quarterly Journal of Economics (May 
1996) at 386 (``Our analysis indicates that reforms that directly limit 
liability--caps on damage awards . . . and collateral source rule 
reforms--reduce hospital expenditures by 5 to 9 percent within 3 to 5 
years of adoption . . . .). The researchers in this study analyzed 
populations in predominantly non-managed care programs in the mid-
1980's, and found that, of the populations studied with two different 
types of illnesses, direct health care litigation reforms would reduce 
hospital expenditures by 5.8% and 8.9% several years after their 
adoption. Id. at 367, 382.
---------------------------------------------------------------------------
    If the same sorts of litigation reforms studied by the 
Stanford economists were to apply nationwide, those health care 
cost reductions--which, again, are not associated with any 
adverse health outcomes--would result in vast savings of 
Federal taxpayer dollars currently spent through the Medicare 
and Medicaid programs. \110\
---------------------------------------------------------------------------
    \110\ Medicaid is a needs-based, health care benefit financed 
jointly by State and Federal Government, but administered by the State 
governments, whereas Medicare is a Federal health care program, not 
based on need, financed by FICA taxes (Part A), and a combination of 
premiums plus matching Federal funds (Part B).
---------------------------------------------------------------------------
    Using recent data, it is estimated that 96.8% of Federal 
Medicare payments pays for physician and hospital expenses. 
\111\ In 2001, the net Federal outlays for Medicare 
beneficiaries in managed care group plans was $42.1 billion 
\112\ out of total Federal Medicare benefits of $233 billion. 
\113\ If direct health care litigation reforms had been applied 
nationwide a few years ago, we could expect $40.8 billion in 
managed care costs reduced by 4.3%, and $191 billion in non-
managed care costs reduced by 7.4%. This amounts to a total of 
approximately $15.45 billion ($1.75 billion plus $13.7 billion) 
in Federal taxpayer savings in Federal Medicare hospital costs.
---------------------------------------------------------------------------
    \111\ ``Medicare: Payments to Physicians'' CRS Report to Congress 
(November 26, 2001) at 6, 2.
    \112\ Congressional Budget Office, Medicare and Medicaid/SCHIP 
``Fact Sheets''.
    \113\ Id.
---------------------------------------------------------------------------
    The latest estimates from the Congressional Budget Office 
are that, in 2002, Federal Medicaid payments to beneficiaries 
in managed care programs will be $19.6 billion out of total 
Federal Medicaid payments of $146.1 billion. \114\ There is no 
way to know exactly how much Federal Medicaid payments go to 
pay certain expenses because there are no requirements under 
Medicaid for providers to notify states or for states to notify 
the Federal Government regarding the amounts of Medicaid funds 
that go to pay certain costs. However, if we assume that 
roughly the same percentages of Federal dollars go to pay for 
hospital costs under Medicaid as they do under Medicare, then 
if direct health care litigation reforms had been applied 
nationwide a few years ago, we could expect the $19.6 billion 
in managed care costs to be reduced by 4.3%, and the $126.5 
billion in non-managed care costs to be reduced by 7.4%. 
Therefore, we could expect a total of approximately $10.2 
billion ($843 million plus $9.36 billion) in Federal taxpayer 
savings in Medicare hospital costs.
---------------------------------------------------------------------------
    \114\ Id.
---------------------------------------------------------------------------
    Further, we also know that in the years following the 
enactment of the Medical Injury Compensation Reform Act 
(``MICRA'') in California--which among other things capped 
noneconomic damages at $250,000--medical malpractice premiums 
declined by roughly 25%. \115\ Federal Medicare payments for 
physician services are estimated at $41.2 billion in 2001, 
\116\ and the percent of that figure that pays for malpractice 
premiums is 3.2%, \117\ or $1.32 billion. Consequently, if 
direct health care litigation reforms had been applied 
nationwide a few years ago, we could expect $33 million in 
Federal Medicare savings. If roughly the same 3.2% in 
malpractice premiums came from the in $117.4 billion Federal 
dollars spent on Medicaid in 2000, \118\ we could expect an 
additional $939 million in Federal Medicaid savings.
---------------------------------------------------------------------------
    \115\ Office of Health Research, Statistics & Technology, U.S. 
Department of Health and Human Services (1968) at 203.
    \116\ ``Medicare: Payments to Physicians'' CRS Report to Congress 
(November 26, 2001) at 1.
    \117\ Id. at 6, 2.
    \118\ ``Medicaid: A Fact Sheet'' CRS Report to Congress (updated 
October 25, 2001) at 1.
---------------------------------------------------------------------------
    In sum, if direct health care litigation reforms had been 
applied nationwide a few years ago, we could expect a total of 
approximately $25.65 billion in Federal taxpayer savings in 
Medicare and Medicaid hospital costs, plus another $972 million 
in Federal taxpayer savings in Medicare and Medicaid 
malpractice premium costs, per year. That constitutes a total 
Federal savings of $27 billion, enough money to provide 
millions of Americans with annual health care insurance 
coverage.
    These estimated savings are in line with aggregate 
statistics regarding Federal expenditures on health services 
and supplies reported by the Health Care Financing 
Administration (``HCFA''). The HCFA projects that the Federal 
Government spent $431.8 billion on health services and supplies 
in 2001. \119\ Using an estimated savings rate of 6.5%--
weighted to account for greater savings rates in non-managed 
care and accounting for the fact that more Federal funds pay 
for health care for beneficiaries in non-managed care than in 
managed care--one would expect that if direct medical care 
litigation reforms had been applied nationwide a few years ago, 
the Federal taxpayer would have saved approximately $28 billion 
in 2001.
---------------------------------------------------------------------------
    \119\ See Table 4: Health Services and Supplies Expenditures 
Aggregate and per Capita Amounts, Percent Distribution and Average 
Annual Percent Change by Source of Funds: Selected Calendar Years 1980-
2011 (Health Care Financing Administration) at http://www.hcfa.gov/
stats/NHE-Proj/proj2001/tables/t4.htm.
---------------------------------------------------------------------------
    The two Stanford University economists measured the savings 
from direct health care litigation reforms on hospital 
expenditures for treating elderly heart disease patients. As 
they reported, however, ``Hospital expenditures on treating 
elderly heart disease patients are substantial--over $8 billion 
per year in 1991--but they comprise only a fraction of total 
expenditures on health care. If our results are generalizable 
to medical expenditures outside the hospital, to other 
illnesses, and to younger patients, then direct reforms could 
lead to expenditure reductions of well over $50 billion per 
year without serious adverse health outcomes.'' \120\ The $50 
billion figure has been cited by former Senators George 
McGovern and Alan Simpson, who co-signed a Wall Street Journal 
op-ed urging health care litigation reform stating ``Legal fear 
drive[] [doctors] to prescribe medicines and order tests, even 
invasive procedures, that they feel are unnecessary. Reputable 
studies estimate that this `defensive medicine' squanders $50 
billion a year, enough to provide medical care to millions of 
uninsured Americans.'' \121\ The savings resulting from direct 
health care litigation reforms is particularly important given 
the dire predictions of increased health care costs in the 
coming decade. For example, a report by the Centers for 
Medicare and Medicaid Services, an arm of the Department of 
Health and Human Services, reports that health costs are 
expected to grow at a rate of 7.3 percent annually between now 
and 2011. The report, published on March 12, 2002, in the 
journal Health Affairs, says health care spending could reach 
$2.8 trillion, or 17 percent of the nation's gross domestic 
product, by 2011, up from 13.2 percent in 2000. Last January, 
the centers said health care costs rose 6.9 percent, to $1.3 
trillion, in 2000, as Americans spent more on prescription 
drugs and hospital care. Health care spending averaged $4,637 
per person, marking what the report's authors called the ``end 
of an era of reasonable health care cost growth throughout most 
of the 1990's.'' \122\
---------------------------------------------------------------------------
    \120\ Daniel P. Kessler and Mark McClellan, ``Do Doctors Practice 
Defensive Medicine?'' The Quarterly Journal of Economics (May 1996) at 
387-88. See also Department of Health and Human Services, ``Confronting 
the New Health Care Crisis: Improving Health Care Quality and Lowering 
Costs by Fixing Our Medical Liability System'' (July 24, 2002) at 7 
(citing Kessler, D. and McClellan, M., ``Do Doctors Practice Defensive 
Medicine,'' Quarterly Journal of Economics, 111(2): 353-390 (1996)) 
(``The leading study estimates that limiting unreasonable awards for 
non-economic damages could reduce health care costs by 5-9% without 
adversely affecting quality of care. This would save $60-108 billion in 
health care costs each year. These savings would lower the cost of 
health insurance and permit an additional 2.4-4.3 million Americans to 
obtain insurance.'').
    \121\ See George McGovern and Alan Simpson, ``We're Reaping What We 
Sue,'' The Wall Street Journal (April 17, 2002) at A20.
    \122\ See press release of the Centers for Medicare & Medicaid 
Services, ``Health Care Costs Expected to Rise to $2.8 Trillion Over 
Next 10 Years'' (March 12, 2002); see also ``Health Costs May Double by 
2011'' The Washington Post (March 12, 2002) at A4.
---------------------------------------------------------------------------
    Senator Lieberman, in advocating direct health care 
litigation reforms such as those contained in the HEALTH Act, 
has also commented on the need to reduce wasteful medical 
spending. In his floor statement on the Common Sense Product 
Liability and Legal Reform Act, Senator Lieberman stated that 
``The system promotes the overuse of medical tests and 
procedures defensively by doctors who have told me, and I am 
sure told every other Member of this Chamber, they would not 
order this test, it is not medically necessary, but they do it 
to protect themselves from the fear of a possible lawsuit. The 
Rand Corp. has estimated the ways in which the current 
defensive practice of medicine actually costs the victims of 
malpractice. Rand has estimated that injured patients receive 
only 43 percent of the money spent on medical malpractice and 
medical product liability litigation. That is 43 cents out of 
every dollar, and victims often receive their awards only after 
many, many years of delay because of the ornate process, the 
bullying and bluffing that the current rules of malpractice 
encourage . . . Let me go back to defensive medicine and try to 
detail briefly its impact on the current system because it is 
even greater than the direct cost of liability insurance. The 
Office of Technology Assessment--our own office here--has found 
that as high as 8 percent of diagnostic procedures are ordered 
primarily because of doctors' concerns about being sued. That 
does not sound like a high percentage, but it amounts to 
billions of dollars. These defensive practices alone--sometimes 
difficult to measure--present a hidden but very significant 
burden on our health care system . . . Taxpayers and health 
care consumers bear the financial burden of these excessive 
costs. Liability insurance and defensive medicine insurance 
premiums also drive up the cost of Medicare and Medicaid and 
therefore exacerbate an increased Federal budget deficit.'' 
\123\
---------------------------------------------------------------------------
    \123\ Senator Lieberman, floor statement on the Common Sense 
Product Liability and Legal Reform Act (April 27, 1995).
---------------------------------------------------------------------------
    According to the Department of Health and Human Services:

        The Federal Government--and thus every taxpayer who 
        pays Federal income and payroll taxes--also pays for 
        health care, in a number of ways. It provides direct 
        care, for instance, to members of the armed forces, 
        veterans, and patients served by the Indian Health 
        Service. It provides funding for the Medicare and 
        Medicaid programs. It funds Community Health Centers. 
        It also provides assistance, through the tax system, 
        for workers who obtain insurance through their 
        employment. The direct cost of malpractice coverage and 
        the indirect cost of defensive medicine increases the 
        amount the Federal Government must pay through these 
        various channels, it is estimated, by $28.6-47.5 
        billion per year. This amount includes $23.66-42.59 
        billion for the cost of defensive medicine; $3.91 
        billion in liability insurance paid to Medicare, 
        Medicaid, Veteran's Affairs, and other Federal 
        programs; $246 million in liability insurance paid 
        through health benefits for its employees and retired 
        employees; and $778 million in lost tax revenue from 
        self-employed and employer-sponsored health insurance 
        premiums that are excluded from income. If reasonable 
        limits were placed on non-economic damages to reduce 
        defensive medicine, it would reduce the amount of 
        taxpayers' money the Federal Government spends by 
        $25.3-44.3 billion per year. This amount includes 
        $23.66-42.59 billion in savings from elimination of 
        defensive medicine and $1.68 billion in reductions in 
        liability insurance premiums paid by the Federal 
        Government. This is a very significant amount. It would 
        more than fund a prescription drug benefit for Medicare 
        beneficiaries and help uninsured Americans obtain 
        coverage through a refundable health credit. The 
        Administration's proposed Medicare prescription drug 
        plan is estimated to cost $190 billion over 10 years by 
        the CBO. The Administration's proposed Health Insurance 
        Tax Credit is estimated to cost $89 billion over 10 
        years. \124\
---------------------------------------------------------------------------
    \124\ Department of Health and Human Services, ``Confronting the 
New Health Care Crisis: Improving Health Care Quality and Lowering 
Costs by Fixing Our Medical Liability System'' (July 24, 2002) at 6 
(citing Maulik, Joshi, Anderson, John et.al., ``A Systems Approach to 
Improving Error Reporting,'' 16 Journal of Health Care Information 
Management 1)).
---------------------------------------------------------------------------

                CONGRESS SHOULD ENACT A FAIR SHARE RULE

    Respect for the law is fostered when it is fair and just 
and punishments are proportionate to the wrongs committed. As 
Thomas Jefferson noted, ``if the punishment were only 
proportional to the injury, men would feel that their 
inclination as well as their duty to see the laws observed.'' 
\125\
---------------------------------------------------------------------------
    \125\ Thomas Jefferson, A Bill for Proportioning Crimes and 
Punishments in Cases Heretofore Capital, in 2 The Papers of Thomas 
Jefferson 492, 493 (Julian P. Boyd ed., 1950).
---------------------------------------------------------------------------
    The rule of joint liability, commonly called joint and 
several liability, provides that when two or more persons 
engage in conduct that might subject them to individual 
liability and their conduct produces a single injury, each 
defendant will be liable for the total amount of damages. \126\ 
Joint liability is unfair because it puts full responsibility 
on those who may have been only marginally at fault. \127\
---------------------------------------------------------------------------
    \126\ See Coney v. J.L.G. Indus., Inc., 454 N.E.2d 197 (Ill. 1983).
    \127\ For example, in Walt Disney World Co. v. Wood, 515 So.2d 198 
(Fla. 1987), Disney was required to pay 86% of the damages award, even 
though it was found only 1% at fault for the claimant's harm.
---------------------------------------------------------------------------
    As Senator Lieberman has observed, ``There is a concept--
joint and several liability started out in the law as a way of 
proportioning responsibility when an accident was caused by a 
number of different parties working together in a way that 
caused negligence, and often it was not clear which one 
actually caused it. So they said everybody could be held liable 
regardless of the percentage of negligence. It now has grown to 
a point where what it really means is that somebody who is not 
liable, or liable very little, if they happen to have deep 
pockets, they can be held fully liable. That is the wrong 
message to send . . . If you hurt somebody, you have to pay. If 
you do not, you should not have to pay. What kind of cynicism 
is developed when somebody who did little or no wrong ends up 
having to pay the whole bill because somebody else slipped 
away. Our amendment also adopts the basic proposal of the 
underlying bill that punitive damages--which have been much 
discussed here and are an essential part of the continued 
bullying and bluffing that goes on in our tort system--be 
limited to $250,000 or three times economic damages.'' \128\
---------------------------------------------------------------------------
    \128\ Senator Lieberman, floor statement on the Common Sense 
Product Liability and Legal Reform Act (April 27, 1995).
---------------------------------------------------------------------------
    The Volunteer Protection Act of 1997, Pub. L. No. 105-19, 
111 Stat. 218, abolished joint liability for non-economic 
damages for volunteers of nonprofit organizations. That law was 
overwhelmingly supported by a bipartisan majority of Congress. 
\129\ Joint liability also brought about a serious public 
health crisis that critically threatened the availability of 
implantable medical devices, such as pacemakers, heart valves, 
artificial blood vessels, and hip and knee joints. Companies 
had ceased supplying raw materials and component parts to 
medical implant manufacturers because they found the costs of 
responding to litigation far exceeded potential sales revenues, 
even though courts were not finding the suppliers liable. 
Congress responded to the crisis and enacted legislation, the 
Biomaterials Access Assurance Act of 1998, P.L. No. 105-230, 21 
U.S.C. Sec. Sec. 1601-1606, that allows medical device 
suppliers to obtain early dismissal, without extensive 
discovery or other legal costs, in certain tort suits involving 
finished medical implants.
---------------------------------------------------------------------------
    \129\ See Dan Carney, Volunteer Liability Limit Heads to President, 
Cong. Q., May 24, 1997, at 1199 (``The measure passed the House on May 
21 by a vote of 390-35, and the Senate cleared it by voice vote later 
that day. An earlier Senate version passed May 1 by a vote of 99-1. '') 
(omitting references to bill numbers).
---------------------------------------------------------------------------
    As Senator Lieberman has observed, ``Consumers are the ones 
who suffer when valuable innovations do not occur or when 
needed products, like life-saving medical devices, do not come 
to market or are not available in our country any longer 
because no one will supply the necessary raw materials. The 
inadequacies and excesses of our product liability system are 
quite literally matters of life and death for some people whose 
lives depend on medical devices that may no longer be available 
in the United States.'' \130\
---------------------------------------------------------------------------
    \130\ Senator Lieberman, floor statement on the Common Sense 
Product Liability and Legal Reform Act (April 27, 1995).
---------------------------------------------------------------------------
    Joint and several liability, although motivated by a desire 
to insure that plaintiffs are made whole, leads to a search by 
plaintiffs' attorneys for ``deep pockets'' and to a 
proliferation of lawsuits against those minimally liable or not 
liable at all. The HEALTH Act, by providing for a ``fair 
share'' rule that apportions damages in proportion to a 
defendant's degree of fault, prevents unjust situations in 
which hospitals can be forced to pay for all damages resulting 
from an injury even when the hospital is minimally at fault. 
For example, say a drug dealer staggers into the emergency room 
with a gunshot wound after a deal goes bad. The surgeon that 
works on him does the best he can, but it is not perfect. The 
drug dealer sues. \131\ The jury finds the drug dealer 
responsible for the vast majority of his own injuries, but it 
also finds the hospital 1% responsible because the physician 
was fatigued after working too long. Today the hospital can be 
made to pay 100% of the damages if no other defendant has the 
means to pay their share of the damages. That is unfair.
---------------------------------------------------------------------------
    \131\ This hypothetical is not fanciful. See Ray Flanagan, ``After 
Stabbing Son, Mom Sues Doctors'' The Scranton Time Tribune (May 29, 
2002) (``Mrs. Taylor and her husband, Brian, are suing . . . the 
obstetricians who treated her in the months before she exploded in 
violence that left her son, Zachary, with two punctured lungs, a 
severed jugular vein and scalp wounds on July 14, 2000 . . . They 
accuse the doctors and their employers of not adequately responding as 
she became more psychotic, delusional and depressed as the end of her 
pregnancy neared.'').
---------------------------------------------------------------------------
    The HEALTH Act's ``fair share'' rule in which damages must 
be allocated against a defendant only in direct proportion to 
that defendant's fault means accountability.

            THE HEALTH ACT ALLOWS UNLIMITED ECONOMIC DAMAGES

    Nothing in the HEALTH Act denies injured plaintiffs the 
ability to obtain adequate redress, including compensation for 
100% of their economic losses (anything to which a receipt can 
be attached), including their medical costs, including the 
costs of pain relief medication, their lost wages, their future 
lost wages, rehabilitation costs, and any other economic out of 
pocket loss suffered as the result of a health care injury. 
Ceilings on non-economic damages limit only the inherently 
unquantifiable elements of damages, such as those awarded for 
pain and suffering, loss of enjoyment, and other intangible 
items.

  THE HEALTH ACT IS A NECESSARY CONGRESSIONAL RESPONSE TO A NATIONAL 
                            ECONOMIC CRISIS

    Modern Federal liability reform efforts have their roots in 
a project that took place from 1976 to 1980 under Presidents 
Ford and Carter. During that time, a Federal Interagency Task 
Force on Product Liability conducted an in-depth research and 
analysis of state product liability law. The Task Force found 
that the patchwork of ever-changing product liability laws in 
51 jurisdictions--50 states and the District of Columbia--
created problems for interstate commerce. \132\ The HEALTH Act 
is based on Congress' authority to regulate interstate commerce 
under Article I, Sec. 8 of the Constitution.
---------------------------------------------------------------------------
    \132\ See Interagency Task Force On Product Liability, U.S. 
Department of Commerce, Final Report V-19 to V-21 (1976).
---------------------------------------------------------------------------
    The HEALTH Act does not preempt existing or future State 
laws that cap the amount of economic, non-economic, or punitive 
damages that may be awarded in a health care lawsuit. It does, 
however, preempt State laws \133\ that contain weaker 
protections and conflict with the HEALTH Act's other 
provisions.
---------------------------------------------------------------------------
    \133\ The term ``state law'' includes the common law as well as 
statutes and regulations. See Cipollone v. Liggett Group, 505 U.S. 504, 
522 (1992) (``At least since Erie R. Co. v. Tompkins, [304 U.S. 64 
(1938)], we have recognized the phrase `state law' to include common 
law as well as statutes and regulations.''); Norfolk & Western R. Co. 
v. Train Dispatchers, 499 U.S. 117, 128 (1991) (stating the phrase 
``all other law, including State and municipal law'' ``does not admit 
of [a] distinction . . . between positive enactments and common-law 
rules of liability.'').
---------------------------------------------------------------------------
    It takes time, of course, for legal reforms to fully 
control insurance premiums. As the Reagan Administration's Tort 
Policy Working Group reported in its seminal study of the 
effects of tort laws on insurance premiums:

        [M]any insurers are reluctant to write policies which 
        take tort reforms completely into account until those 
        reforms have been found to be constitutionally valid . 
        . . Just as insurers are reluctant to write policies on 
        the basis of statutes that may be declared 
        unconstitutional, they also are reluctant to write 
        policies on the basis of statutes whose meaning is 
        ambiguous and whose effect may be eviscerated through 
        hostile judicial interpretation . . . It also is 
        important to note that tort liability is only one 
        factor--albeit the most important factor--which 
        determines the price of insurance. There are other 
        considerations which also change over time, such as the 
        prevailing interest rates, the return available from 
        investment securities, State regulatory practices 
        (including reserve requirements), and taxes, which 
        affect the price of insurance. If some or all of these 
        considerations exert upward pressure on the price of 
        insurance, tort reform provisions may do no more in the 
        short-term than to reduce the rate of premium 
        increases. \134\
---------------------------------------------------------------------------
    \134\ Tort Policy Working Group, An Update on the Liability Crisis 
(March 1987), at 90-91.

    However, as the Reagan Administration's Tort Policy Working 
Group made clear, there is no question that the HEALTH Act's 
reforms do work: ``The inescapable conclusion is that MICRA has 
had a very substantial impact on the cost of medical 
malpractice insurance for California physicians.'' \135\
---------------------------------------------------------------------------
    \135\ Id. at 95.
---------------------------------------------------------------------------

THE HEALTH ACT'S PROVISIONS ALLOWING CONSIDERATION OF COLLATERAL SOURCE 
             COMPENSATION PREVENTS UNFAIR DOUBLE RECOVERIES

    Many plaintiffs receive compensation for medical bills or 
lost wages via health insurance, disability insurance or 
workers' compensation, yet the hospital, physician or other 
health care provider being sued is not allowed to tell the jury 
about this other source of compensation. Even after these 
``collateral source payments'' have already been paid to the 
person bringing the lawsuit, that person is allowed to try to 
collect a second time in their lawsuit. As a result, plaintiffs 
often are paid twice for the same damages. This phenomenon is 
sometimes referred to as double recovery. However, allowing the 
plaintiff to collect twice for the same medical bills or other 
economic losses drives up the cost of health care for all.
    The HEALTH Act allows the trier of fact to determine 
whether to offset damage awards based on evidence of collateral 
benefits. The tier of fact should be informed of the collateral 
source as a factor to consider when determining the net amount 
of compensation necessary to make the claimant whole. The 
purpose of this provision is to eliminate a double recovery, or 
recovery substantially greater than the trier of fact 
determined to be appropriate under a the circumstances.
    The HEALTH Act also prohibits ``collateral sources'' from 
obtaining reimbursement from medical malpractice defendants or 
their insurers. This provision is modeled after that in 
California's MICRA law, \136\ and its purpose was described in 
an opinion signed by former Supreme Court Justice and current 
Vice Chair of the U.S. Commission on Civil Rights Cruz Reynoso, 
as follows: ``by redistributing the financial impact of 
malpractice among the different types of insurers involved in 
the health field, the costs would be spread over a wider base, 
alleviating the immediate problems posed by a growing cadre of 
uninsured doctors and a potential shortage of medical care.'' 
\137\
---------------------------------------------------------------------------
    \136\ Ca.Civ. Sec. 3333.1.
    \137\ Barme v. Wood, 689 P.2d 446, 450 (Ca. 1984).
---------------------------------------------------------------------------

    THE HEALTH ACT DOES NOT CAP PUNITIVE DAMAGES, BUT DOES INCLUDE 
                  REASONABLE GUIDELINES FOR THEIR USE

    The United States Supreme Court has observed that punitive 
damages have ``run wild'' in the United States, jeopardizing 
fundamental constitutional rights. \138\ The Supreme Court has 
also emphasized that ``the impact of [a punitive damages award] 
is unpredictable and potentially substantial.'' \139\
---------------------------------------------------------------------------
    \138\ Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1, 18 
(1991). See also Honda Motor Co., Ltd. v. Oberg, 512 U.S. 415, 432 
(1994) (stating that punitive damages ``pose an acute danger of 
arbitrary deprivation of property,'' raising serious due process 
concerns).
    \139\ International Bhd. of Elec. Workers v. Foust, 442 U.S. 42, 50 
(1979).
---------------------------------------------------------------------------
    The HEALTH Act does not cap punitive damages. Rather, it 
includes reasonable guidelines that would govern their award. 
Under these guidelines, a punitive damages award could not 
exceed the greater of $250,000, or two times the amount of 
economic damages that are awarded (and economic damages under 
the HEALTH Act are not limited at all). Federal legislation 
should put reasonable parameters on punitive damages to make 
the punishment fit the offense. \140\ Proportionality has been 
an important part of the United States Supreme Court's 
consideration of the validity of criminal punishment. \141\ 
Even serious crimes such as larceny, robbery, and arson have 
sentences defined with a maximum set forth in a statute. \142\ 
As former Supreme Court Justice Lewis Powell wrote, ``It is 
long past time to bring the law of punitive damages into 
conformity with our notions of just punishment.'' \143\ Under 
the HEALTH Act, the larger the economic losses suffered by the 
victim, the larger the punishment will be.
---------------------------------------------------------------------------
    \140\ Congress included a cap on punitive damages for individuals 
and small businesses in the Year 2000 Readiness and Responsibility Act, 
Pub. L. 106-37, 113 Stat. 135 (1999). The ``Y2K Act'' established 
procedures and legal standards for lawsuits stemming from Year 2000 
date-related computer failures.
    \141\ See Solem v. Helm, 463 U.S. 277, 284 (1983) (``The principle 
that a punishment should be proportionate to the crime is deeply rooted 
and frequently repeated in common-law jurisprudence ''); Weems v. 
United States, 217 U.S. 349, 366-67 (1910) (it is ``a precept of the 
fundamental law'' as well as ``a precept of justice that punishment 
should be graduated and proportioned to the offense '').
    \142\ Some examples of Federal criminal fines, even for 
particularly egregious crimes, do not exceed $250,000 and include the 
following: tampering with consumer products ($250,000 if death 
results), U.S. Sentencing Guidelines Manual Sec. Sec. 2N1.1, 5E1.2 
(1998); assault on the President ($30,000), U.S. Sentencing Guidelines 
Manual Sec. Sec. 2A6.1, 5E1.2 (1998); bank robbery ($75,000), U.S. 
Sentencing Guidelines Manual Sec. Sec. 2B3.1, 5E1.2; and sexual 
exploitation of children ($100,000), U.S. Sentencing Guidelines Manual 
Sec. Sec. 2G2, 5E1.2 (1998). See generally Jonathan Kagan, Comment, 
Toward a Uniform Application of Punishment: Using the Federal 
Sentencing Guidelines as a Model for Punitive Damages Reform, 40 
U.C.L.A. L. Rev. 753 (1993).
    \143\ Lewis Powell, ``The `Bizarre' Results of Punitive Damages,'' 
Wall Street Journal (March 8, 1995), at A21.
---------------------------------------------------------------------------
    Academic groups have recommended limiting punitive damages 
to prevent excessive punitive damages awards. \144\
---------------------------------------------------------------------------
    \144\ See American Bar Association, Special Committee on Punitive 
Damages of the American Bar Association, Section on Litigation, 
Punitive Damages: A Constructive Examination (1986) at 64-66 
(recommending that punitive damages awards in excess of three-to-one 
ratio to compensatory damages be considered presumptively ``excessive 
''); American College of Trial Lawyers, Report on Punitive Damages of 
the Committee on Special Problems in the Administration of Justice 15-
16 (1989), at 15 (proposing that punitive damages be awarded up to two 
times a plaintiff's compensatory damages or $250,000, whichever is 
greater); American Law Institute, 2 Enterprise Responsibility for 
Personal Injury--Reporters' Study (1991), at 258-59 (endorsing concept 
of ratio coupled with alternative monetary ceiling).
---------------------------------------------------------------------------
    At the state level, limits on punitive damages awards exist 
in a number of states. \145\
---------------------------------------------------------------------------
    \145\ See Ala. Code Sec. 6-11-21 (1999); Alaska Admin. Code tit. 58 
Sec. 9.17.020(f)-(h) (1999); Colo. Rev. Stat. Sec. 13-21-
102(1)(a)(1998); Conn. Gen. Stat. Sec. 52-240b (1999); Fla. Stat. Ann. 
Sec. 768.73(1)(b) (West Supp. 1998); Ind. Code Ann. Sec. 34-51-3-4 
(1999); Kan. Stat. Ann. Sec. 60-3701 (1998); N.J. Stat. Ann. 
Sec. 2A:15-5.14 (West 1999); N.C. Gen. Stat. Sec. 1D-25 (1999); N.D. 
Cent. Code Sec. 32.03.2-11(4) (1999); Okla. Stat. tit. 23 Sec. 9.1 
(1998); Tex. Civ. Prac. & Rem. Code Ann. Sec. 41.008 (West 1999); Va. 
Code Ann. Sec. 8.01-38.1 (1999).
---------------------------------------------------------------------------
    Opponents of punitive damages reform argue that changes in 
the law are not needed because large punitive damages awards 
are often reduced on appeal. However, the practical reality is 
that the impact of potentially infinite punitive damages 
stretches beyond an actual award. The amounts of punitive 
damages actually awarded are dwarfed by the amounts paid out in 
settlements because of the mere threat of the imposition of 
potentially infinite punitive damages causes defendants to 
settle for large amounts they would not have otherwise. On 
average, over 90% of product liability cases are settled out of 
court or otherwise disposed of without trial. \146\ In many of 
these cases, the threat of punitive damages may be abused to 
force higher settlements. \147\ As Yale law professor George 
Priest has observed: ``[T]he availability of unlimited punitive 
damages affects the 95% to 98% of cases that settle out of 
court prior to trial. It is obvious and indisputable that a 
punitive damages claim increases the magnitude of the ultimate 
settlement and, indeed, affects the entire settlement process, 
increasing the likelihood of litigation.'' \148\ This 
observation is supported by the findings of a February 1996 
study by the Pacific Research Institute for Public Policy. The 
Institute's study concluded that the unpredictability of a 
prospective punitive damage award contributes significantly to 
the uncertainty, and therefore the risk, of a court trial 
outcome; and that both the uncertainty posed by the prospect of 
unlimited punitive damages, combined with the relative 
probability of a punitive damage award if a case goes to jury 
trial, provide litigants who demand punitive damages with 
potent leverage against risk-averse defendants, and tip the 
balance in settlement bargains in favor of litigants with weak 
or frivolous cases. \149\
---------------------------------------------------------------------------
    \146\ See Brian J. Ostrom and Neal B. Kauder, State Justice Inst., 
Examining the Work of State Courts, 1993: A National Perspective from 
the Court Statistics Project 24 (1993).
    \147\ See Stephen Daniels and Joanne Martin, Myth and Reality in 
Punitive Damages, 75 Minn.L.Rev. 1, 28 (1990) (noting that ``jury 
verdicts in the minority of matters actually adjudicated play an 
important role in determining the worth, or settlement value, of civil 
matters filed but not tried''). Furthermore, in some states, punitive 
damages are not insurable. Thus, a business that does not self-insure 
can be subject to unwarranted pressure to settle a case for 
compensatory damages, which are insurable; a punitive damages award 
could end the business.
    \148\ George L. Priest, Punitive Damages Reform: The Case of 
Alabama, 56 La. L. Rev. 825, 830 (1996).
    \149\ See Steven Hayward, Pacific Research Inst. Public Policy, The 
Role of Punitive Damages In Civil Litigation: New Evidence 8 (1996).
---------------------------------------------------------------------------
    It has also been argued that unlimited punitive damages are 
needed to police wrongdoing. However, there is no credible 
evidence that the behavior of profit-making enterprises is less 
safe in either those states that have set limits on punitive 
damages or in the six states--Louisiana, Nebraska, Washington, 
New Hampshire, Massachusetts, and Michigan--that do not permit 
punitive damages at all. \150\ Furthermore, plaintiffs in these 
six states have no more difficulty obtaining legal 
representation than in those states where punitive damages are 
potentially limitless.
---------------------------------------------------------------------------
    \150\ See W. Kip Viscusi, Punitive Damages: The Social Costs of 
Punitive Damages Against Corporations In Environmental and Safety 
Torts, 87 Geo. L.J. 285, 294 (1998).
---------------------------------------------------------------------------

 THE ``CLEAR AND CONVINCING'' RULE IS APPROPRIATELY APPLIED TO CLAIMS 
                  FOR QUASI-CRIMINAL PUNITIVE DAMAGES

    The HEALTH Act provides that punitive damages may be 
awarded against a person in a health care lawsuit only if it 
proven by clear and convincing evidence that such person acted 
with malicious intent to injure the claimant, or that such 
person deliberately failed to avoid unnecessary injury that 
such person knew the claimant was substantially certain to 
suffer. The ``clear and convincing evidence'' burden of proof 
standard is appropriate because it reflects the quasi-criminal 
nature of punitive damages. Such a standard takes a middle 
ground between the burden of proof standard ordinarily used in 
civil cases--that is, proof by a ``preponderance of the 
evidence''--and the criminal law standard, that is, proof 
``beyond a reasonable doubt.''
    The ``clear and convincing evidence'' standard is the law 
in twenty-nine states and the District of Columbia \151\ and it 
has been recommended by the principal academic groups that have 
analyzed the law of punitive damages over the past 15 years, 
including the American Bar Association, the American College of 
Trial Lawyers, and the National Conference of Commissioners on 
Uniform State Laws. \152\ The Supreme Court has also 
specifically endorsed the ``clear and convincing evidence'' 
standard in punitive damages cases. \153\ There is also support 
for the ``clear and convincing evidence'' standard at the 
Federal level. The Volunteer Protection Act of 1997, \154\ 
which was enacted with strong bipartisan support, requires 
``clear and convincing evidence'' of punitive damages liability 
before punitive damages can be imposed against volunteers of 
nonprofit organizations.
---------------------------------------------------------------------------
    \151\ See Ala. Code Sec. 6-11-20 (1999); Alaska Stat. 
Sec. 09.17.020 (1999); Cal. Civ. Code Sec. 3294(a) (1999); Fla. Stat. 
ch. 768.73 (1998); Ga. Code Ann. Sec. 51-12-5.1 (1999); Iowa Code Ann. 
Sec. 668A.1 (1997); Kan. Stat. Ann. Sec. 60-3701(c) (1998); Ky. Rev. 
Stat. Ann. Sec. 411.184(2) (Michie/Bobbs-Merrill 1998); Minn. Stat. 
Ann. Sec. 549.20 (West Supp. 1998); Miss. Code Ann. Sec. 11-1-65(1)(a) 
(Supp. 1998); Mont. Code Ann. Sec. 27-1-221(5) (1998); N.J. Stat. Ann. 
Sec. 2A:15-5.12 (1999); Nev. Rev. Stat. Ann. Sec. 42-005(1) (1998); 
N.C. Gen. Stat. 10-15(b) (1999); N.D. Cent. Code Sec. 32-03.2-11 (Supp. 
1999); Ohio Rev. Code Ann. Sec. 2307.80(A) (Anderson 1999); Okla. Stat. 
Ann. tit. 23, Sec. 9.1 (West Supp. 1998); Or. Rev. Stat. Sec. 18.537 
(1997); S.C. Code Ann. Sec. 15-33-135 (Law. Co-op. Supp. 1998); S.D. 
Codified Laws Ann. Sec. 21-1-4.1 (1999); Tex. Civ. Prac. & Rem. Code 
Sec. 41.003 (1999); Utah Code Ann. Sec. 78-18-1 (1999); Linthicum v. 
Nationwide Life Ins. Co., 723 P.2d 675 (Ariz. 1986); Jonathan Woodner, 
Co. v. Breeden, 665 A.2d 929 (D.C. 1995); Masaki v. General Motors 
Corp., 780 P.2d 566 (Haw. 1989); Travelers Indem. Co. v. Armstrong, 442 
N.E.2d 349 (Ind. 1982); Tuttel v. Raymond, 494 A.2d 1353 (Me. 1985); 
Owens-Illinois v. Zenobia, 601 A.2d 633 (Md. 1992); Rodriguez v. Suzuki 
Motor Corp., 936 S.W.2d 104 (Mo. 1996); Hodges v. S.C. Toof & Co., 833 
S.W.2d 896 (Tenn. 1992); Wangen v. Ford Motor Co., 294 N.W.2d 437 (Wis. 
1980). One state, Colorado, requires proof ``beyond a reasonable 
doubt'' in punitive damages cases. See Colo. Rev. Stat. Sec. 13-25-
127(2) (1987).
    \152\ See American Bar Association, Special Committee on Punitive 
Damages of the American Bar Association, Section on Litigation, 
Punitive Damages: A Constructive Examination 19 (1986); American 
College of Trial Lawyers, Report on Punitive Damages of the Committee 
on Special Problems in the Administration of Justice 15-16 (1989); 
National Conference Of Commissioners On Uniform State Laws, Uniform Law 
Commissioners' Model Punitive Damages Act Sec. 5 (approved on July18, 
1996); see also American Law Institute, 2 Enterprise Responsibility for 
Personal Injury--Reporters' Study 248-49 (1991).
    \153\ See Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1, 23 
n.11 (1991) (stating that ``[t]here is much to be said in favor of a 
state's requiring, as many do . . . a standard of `clear and convincing 
evidence' '').
    \154\ Pub. L. No. 105-19, 111 Stat. 218.
---------------------------------------------------------------------------

BIFURCATED PROCEDURES FOR CONSIDERING PUNITIVE DAMAGES PREVENTS UNFAIR 
                         AND PREJUDICIAL AWARDS

    The HEALTH Act also contains a procedural reform called 
``bifurcation.'' Under such a procedure, at either party's 
request, a trial would be divided so that the proceedings on 
punitive damages would be separate from and subsequent to the 
proceedings on compensatory damages. This procedure would 
achieve judicial economy by having the same jury determine both 
compensatory damages and punitive damages issues.
    Bifurcated trials are fair because they prevent evidence 
that is highly prejudicial and relevant only to the issue of 
punishment from being heard by jurors and improperly considered 
when they are determining underlying liability. For example, 
plaintiffs' lawyers routinely introduce evidence of a company's 
net worth. Although a jury is often instructed to ignore such 
evidence unless it decides to punish the defendant, this is 
very difficult as a practical matter for jurors to do. The net 
result may be that jurors overlook key issues regarding whether 
a defendant is liable for compensatory damages and make an 
award simply because they believe the defendant can afford to 
pay it. Bifurcation would help prevent that unfair result 
because evidence of the defendant's net worth would be 
inadmissible in the first, compensatory damages phase of the 
case. Bifurcation also helps jurors compartmentalize a trial, 
allowing them to more easily separate the burden of proof that 
is required for compensatory damage awards--that is, proof by a 
preponderance of the evidence--from a higher burden of proof 
for punitive damages, that is, proof by clear and convincing 
evidence.
    Recognizing the benefit of bifurcation, some courts have 
adopted the procedure as a matter of common law reform. \155\ 
Other states have made changes through court rules or 
legislation. \156\ Bifurcation of punitive damages trials is 
supported by the American Bar Association, the American College 
of Trial Lawyers, and the National Conference of Commissioners 
on Uniform State Laws, among other well-known organizations. 
\157\
---------------------------------------------------------------------------
    \155\ See Hodges v. S.C. Toof & Co., 833 S.W.2d 896 (Tenn. 1992); 
Transportation Ins. Co. v. Moriel, 879 S.W.2d 10 (Tex. 1994).
    \156\ See, e.g., Cal. Civ. Code Sec. 3295(d); Minn. Stat. Ann. 
Sec. 549.20; Miss. Code Ann. Sec. 11-165(1)(a).
    \157\ See American Bar Association, Special Committee on Punitive 
Damages of the American Bar Association, Section on Litigation, 
Punitive Damages: A Constructive Examination (1986) at 19; American 
College of Trial Lawyers, Report on Punitive Damages of the Committee 
on Special Problems in the Administration of Justice (1989) at 18-19; 
National Conference Of Commissioners On Uniform State Laws, Uniform Law 
Commissioners' Model Punitive Damages Act Sec. 5 (approved on July18, 
1996) at Sec. 11; American Law Institute, 2 Enterprise Responsibility 
for Personal Injury--Reporters' Study 248-49 (1991) at 255 n.41.
---------------------------------------------------------------------------
    The HEALTH Act provides that a court may allow a claimant 
to file an amended pleading for punitive damages only upon a 
motion by the claimant and after a finding by the court, upon 
review of supporting and opposing affidavits or after a 
hearing, after weighing the evidence, that the claimant has 
established by a substantial probability that the claimant will 
prevail on the claim for punitive damages. These provisions are 
also in California's MICRA law. \158\
---------------------------------------------------------------------------
    \158\ See Ca.Civ.Pro. Sec. 425.13 (``In any action for damages 
arising out of the professional negligence of a health care provider, 
no claim for punitive damages shall be included in a complaint or other 
pleading unless the court enters an order allowing an amended pleading 
that includes a claim for punitive damages to be filed. The court may 
allow the filing of an amended pleading claiming punitive damages on a 
motion by the party seeking the amended pleading and on the basis of 
the supporting and opposing affidavits presented that the plaintiff has 
established that there is a substantial probability that the plaintiff 
will prevail on the claim pursuant to Section 3294 of the Civil 
Code.'').
---------------------------------------------------------------------------

   CONGRESS SHOULD ENACT A SAFE HARBOR FROM PUNITIVE DAMAGES FOR FDA 
                               COMPLIANCE

    Litigation is threatening the viability of the life-saving 
drug industry. \159\ To help encourage new drug development and 
contain the costs of life-saving drugs, the HEALTH Act contains 
a safe harbor from punitive damages for defendants whose drugs 
or medical products comply with rigorous regulations and do not 
misrepresent or withhold information from the FDA or make 
illegal payments to FDA officials. Under the HEALTH Act, the 
FDA retains its authority to outright ban harmful products.
---------------------------------------------------------------------------
    \159\ See Michael Freedman, ``The Tort Mess'' Forbes (May 13, 2002) 
(``The pharmaceutical industry has always been a ripe target for suits. 
The difference nowadays is simply that the dollar amounts have gotten 
bigger. Between 1989 and 2000 the 300,000 claimants alleging damage 
from the Dalkon Shield contraceptive device got $2.6 billion in 
settlements. By contrast, the 320,000 claimants in the Wyeth (formerly 
American Home Products) diet drug litigation will share $13 billion. 
The litigation sliced Wyeth's net worth from $7 billion in 1996 to $2.8 
billion in 2000. If a drug saves 100 lives for every one it loses, 
someone who faces certain death should not hesitate to use it. But what 
happens if the tort system says every death must be paid for? The 
average payout on a wrongful death claim increased from $1 million in 
1994 to $5.7 million in 2000 (the most recent data point available), 
according to Jury Verdict Research. To merely break even, the drug's 
maker would have to charge $57,000 for every dose. It can't get away 
with that. So a potential wonder drug may never see the light of day. A 
study in the Journal of the American Medical Association estimates that 
100,000 people die each year in the U.S. from drug-related deaths. If 
the families of each sued and won that average of $5.7 million, total 
liability would hit $570 billion. That's twice the combined revenues of 
the top 12 drug companies . . . Steven Garber, a researcher at the Rand 
Research Institute for Civil Justice, says drug companies are willing 
to take on the risk of lawsuits in marketing blockbusters like Viagra 
and Vioxx. But in other cases the chance of liability is too great. 
Garber says companies once stopped making new products for use during 
pregnancy because of the high risk of birth defects. Companies also 
limit research on orphan drugs--those that cure rare, often fatal 
illnesses--because the potential tort liability outweighs the profit 
potential.'').
---------------------------------------------------------------------------
    FDA standards and regulations are rigorous. The regulatory 
objectives of the Food, Drug, and Cosmetics Act (``FDCA'') are 
to ensure that the manufacturer shares all risk information 
with the FDA so that the agency may make informed risk-benefit 
judgments about the utility of a pharmaceutical. These 
judgments occur throughout the life of the drug. The agency 
determines which drugs reach the market and the labeling for 
those that do. The receipt of new safety information can lead 
the agency, after holding a hearing, to withdraw approval for 
marketing of a drug. \160\ The Secretary of Health and Human 
Services also has the authority to order the withdrawal of 
marketing approval without a hearing where there appears to be 
an ``imminent hazard to public health.'' \161\
---------------------------------------------------------------------------
    \160\ See 21 U.S.C. Sec. 355(e)(1); 21 C.F.R. Sec. 5.82.
    \161\ See 21 U.S.C. Sec. 355(e).
---------------------------------------------------------------------------
    In particular, before permitting the sale of a 
pharmaceutical product, the manufacturer is required to 
generate both safety and efficacy information and must present 
this information to the FDA in a new drug application 
(``NDA''). \162\ The NDA process requires the pharmaceutical 
manufacturer to submit proposed labeling for the drug. \163\ 
The FDA and the manufacturer then generate the drug's initial 
label based on the manufacturer-supplied information concerning 
the drug's safety and efficacy. \164\ If the FDA approves the 
NDA and licenses the drug for sale, the manufacturer has a 
continuing obligation to report safety-related information to 
the agency. \165\ Drug product labeling often changes over time 
as the FDA receives information from the manufacturer or other 
sources about a drug's safety in the marketplace.
---------------------------------------------------------------------------
    \162\ Under the FDCA, the manufacturer must submit an NDA to the 
agency and receive pre-marketing approval in order to market a ``new 
drug,'' that is, any drug that is ``not generally recognized, among 
experts qualified by scientific training and experience to evaluate the 
safety and effectiveness of drugs, as safe and effective for use under 
the condition prescribed, recommended, or suggested in the labeling 
thereof.'' 21 U.S.C. Sec. 321(p)(1). If the manufacturer of a ``new 
drug'' wishes to distribute it lawfully, he can submit an NDA in 
conformance with 21 U.S.C. Sec. 355(b). Approval for marketing can be 
obtained only if, among other things, the applicant submits ``adequate 
and well-controlled studies'' demonstrating safety and efficacy. Id. 
Sec. 355(d). Alternatively, the manufacturer can claim that the product 
is not a ``new drug'' because it is ``generally recognized'' as being 
``safe and effective'' for its intended uses. Id. Sec. 321(p)(1), (2). 
Courts have, however, construed such general recognition to be based on 
the same adequate and well-controlled investigations required for 
approval of an NDA under 21 U.S.C. Sec. 355(d). See Weinberger v. 
Bentex Pharmaceuticals, Inc., 412 U.S. 645, 653 (1973).
    \163\ 21 U.S.C. Sec. 355(b)(1)(F).
    \164\ Although the manufacturer submits proposed initial labeling 
with the NDA, the actual labeling is often the result of negotiations 
between the FDA and the manufacturer. The agency's power to disapprove 
the NDA ensures that it retains practical control over the contents of 
drug labeling.
    \165\ The post-marketing requirements are set forth in 21 C.F.R. 
Sec. 314.80 (1993).
---------------------------------------------------------------------------
    To obtain FDA approval for marketing a prescription drug, a 
pharmaceutical applicant must generate substantial pre-
marketing safety and efficacy information through human 
clinical trials. The FDA must ensure that the proposed new drug 
complies with the FDCA mandate that safety be established and 
that ``substantial evidence'' of efficacy be demonstrated for 
the drug's proposed uses. \166\ The FDA review process often 
takes years of evaluation after the NDA's submission. 
Ultimately, approval by the FDA reflects a risk-benefit 
judgment that the product will enhance public health. The 
entire NDA process is a lengthy one, typically taking between 
five and 7 years to complete.
---------------------------------------------------------------------------
    \166\ See 21 U.S.C. Sec. 355(d) (1988) (``[S]ubstantial evidence'' 
means evidence consisting of adequate and well-controlled 
investigations, including clinical investigations, by experts qualified 
. . . to evaluate the effectiveness of the drug involved, on the basis 
of which it could fairly and responsibly be concluded by such experts 
that the drug will have the effect it purports or is represented to 
have under the conditions of use prescribed, recommended, or suggested 
in the labeling or proposed labeling thereof.'').
---------------------------------------------------------------------------
    The FDCA and its implementing regulations ensure that a 
manufacturer shares risk information with the FDA. \167\ Post-
marketing surveillance consists of two primary components--
reports of individual adverse experiences and epidemiologic 
studies. Serious reactions must be reported within fifteen 
working days of receipt of the information. \168\ A 
comprehensive, post-marketing system of reporting and record-
keeping requirements ensures that the manufacturer reports 
adverse drug experiences discovered in clinical, 
epidemiological, or surveillance studies, through review of the 
medical literature, or otherwise. \169\ Post-marketing 
reporting obligations include the disclosure of data regarding 
adverse reactions outside the United States.
---------------------------------------------------------------------------
    \167\ See 21 C.F.R. Sec. 314.80.
    \168\ See 21 C.F.R. Sec. 314.80(c)(1).
    \169\ See 21 C.F.R. Sec. Sec. 310.303(a), 314.80(c).
---------------------------------------------------------------------------
    The FDCA regulatory scheme in the end confers upon the FDA 
final regulatory authority for a pharmaceutical product's 
labeling. Due to the FDA's experience and expertise, initial 
labeling and post-marketing drug labeling determinations are 
ultimately made by the FDA, an agency with a high degree of 
institutional competence.
    A few states have specifically focused on pharmaceuticals 
and punitive damages and statutorily provide an FDA regulatory 
compliance defense against such damages. \170\
---------------------------------------------------------------------------
    \170\ The five states that have proscribed punitive damages where 
the manufacturer has complied with the FDCA are Arizona, 
Az.Rev.State.Ann. Sec. 12-701; New Jersey, N.J.Sata.Ann. Sec. 2A:58C-
5(c); Ohio, Ohio.Rev.Code Ann. Sec. 2307.80(c); Oregon, Or.Rev.Stat. 
Sec. 30.927; and Utah, Utah Code Ann. Sec. 78-18-2.
---------------------------------------------------------------------------
  The award of punitive damages against pharmaceutical companies who 
have complied with the FDCA is quite rare. See Product Liability 
Government Standards Defense Proposal, 53 F-D-C REP. (The Pink Sheet), 
Sept. 23, 1991, at 6 (quoting Northeastern University Law Professor 
Michael Rustad) (``[A]lmost all the [punitive damages] drug cases we 
studied involved either fraudulent test results, suppression of 
negative impacts or withholding information from the Food and Drug 
Administration . . .''). However, the availability of punitive damages 
undoubtedly has untoward effects on the course of pharmaceutical 
litigation. According to some commentators: ``The mere presence of 
punitive damage counts has an undesirable effect on the course of drug 
product liability litigation. As is true for punitive damage claims 
involving other products, these counts are only rarely dismissed on 
summary judgment. . . . Punitive damage claims, therefore, have caused 
substantial increases in settlement and litigation costs for 
pharmaceutical manufacturers.'' Bruce N. Kuhlik & Richard F. Kingham, 
The Adverse Effects of Standardless Punitive Damage Awards on 
Pharmaceutical Development and Availability, 45 Food Drug Cosm.L.J. 
693, 697 (1990). This effect alone warrants preclusion of punitive 
damages where there has been regulatory compliance.
    Where the FDA has approved a pharmaceutical for marketing, 
the agency has made an explicit judgment that the product will 
aid the public health. This judgment should be respected absent 
fraud or the provision of false information, the failure to 
include material safety information in the NDA, or the failure 
to provide post-marketing information which would have led to 
withdrawal of the product or changes in the approved uses of 
the product. The requirements for an NDA are so extensive 
however that, at the margin, punitive damages will not provide 
additional societal benefits beyond those achieved by the 
FDCA's rules and regulations.
    Opponents of the HEALTH Act often cite litigation 
surrounding the Dalkon Shield and Copper-7 IUD's as examples of 
harmful products the FDA did not find harmful. However, at the 
time Dalkon Shield and Copper-7 IUD's that were the subject of 
litigation were sold, the Food, Drug, and Cosmetic Act did not 
require approval by the FDA before a medical device could be 
marketed and the FDA could initiate enforcement action against 
a device only if it could be established that the device was 
adulterated or misbranded. \171\ However, in 1976, Congress 
enacted amendments which require premarket approval for medical 
devices such as the Dalkon Shield. \172\ Both the Senate and 
House Committee Reports specifically mention the Dalkon Shield 
as a product which had caused harm that could have been 
prevented if the new law had been in effect when it was first 
marketed. \173\ Consequently, the FDA approval process is much 
more extensive today than it was at the time Dalkon Shield and 
Copper-7 IUD's that have been the subject of litigation were 
sold.
---------------------------------------------------------------------------
    \171\ See 21 U.S.C. Sec. Sec. 331(a)-(c), 351, 352 (1970).
    \172\ See Pub. L. No. 94-295, 90 Stat. 539 (codified at 21 U.S.C. 
Sec. Sec. 360-360K (1976)).
    \173\ See S. Rep. No. 33, 94th Cong., 1st Sess. 1 (1975); H.R. Rep. 
No. 853, 94th Cong., 2d Sess. 8 (1976).
---------------------------------------------------------------------------
    The HEALTH Act also provides that, in a health care lawsuit 
for harm which is alleged to relate to the adequacy of the 
packaging or labeling of a drug required to have tamper-
resistant packaging under Department of Health and Human 
Services regulations, including labeling regulations related to 
such packaging, the manufacturer or drug seller may not be held 
liable for punitive damages unless the packaging or labeling is 
found by clear and convincing evidence to be substantially out 
of compliance with such regulations.

 PROVIDING FOR PERIODIC PAYMENTS PRESERVES PLAINTIFFS' FUNDS AND MAKES 
  FULL COMPENSATION MORE LIKELY BY MAKING IT EASIER FOR DEFENDANTS TO 
                                 AFFORD

    The HEALTH Act provides that in any health care lawsuit, if 
an award for future damages, without reduction to present 
value, equaling or exceeding $50,000 is made against a party 
with sufficient insurance or other assets to fund a periodic 
payment of such a judgment, the court shall, at the request of 
any party, enter a judgment ordering that the future damages be 
paid by periodic payments in accordance with the Uniform 
Periodic Payment of Judgments Act (``UPPJA'') promulgated by 
the National Conference of Commissioners on Uniform State Laws. 
\174\ The periodic payment system recommended by the National 
Conference of Commissioners on Uniform State Laws calls for 
payment of such damages as they accrue, periodically, rather 
than for payment of a lump sum all at one time following the 
award of damages. The Uniform Law Commissioners contributed to 
this evolution with the Model Periodic Payment of Judgments Act 
in 1980. In 1990, this earlier act was replaced by an updated 
Uniform Periodic Payment of Judgments Act. The advantages of 
this system are, one, a periodic payment system removes the 
risk that the money will be lost by either improper expenditure 
or bad investment before it is needed to pay for actual loss. A 
periodic payment award of damages is usually funded through the 
purchase of an annuity from an insurance company or other 
similar system of secured payment. The obligation of payment is 
secured without burdening the injured person with the 
responsibility for keeping and investing the damage award. 
Second, the defendant is able to acquire the annuity or similar 
system of secured payment at a price less than the aggregate 
amount of the damages that must be paid to the plaintiff. This 
is an immediate savings to the defendant--or more properly the 
defendant's casualty insurer--who is obligated to pay the 
damages. This savings is obtained without depriving the 
plaintiff of any damages to which he or she is entitled and 
without risking insolvency on the part of the defendant, which 
would result in victims receiving mere pennies on the dollar.
---------------------------------------------------------------------------
    \174\ Further, the ability of the defendant to obtain a savings is 
translated into lower premium costs for casualty insurance. Anything 
that lowers casualty insurance rates or that retards the inflation of 
those rates, benefits anyone who has some exposure to liability for 
personal injury of another person, and buys insurance to cover 
potential loss if there is such an injury.
---------------------------------------------------------------------------
  Under UPPJA, either party to a tort action involving bodily injury 
may elect to have the award of future damages for economic loss be in 
periodic form. The other party may contest such an election by showing 
that the time period for periodic payment is too short or the amount of 
damages too small to make periodic payment an advantage over a lump sum 
award, or by showing that a periodic payment judgment cannot be 
properly and securely funded. If an election is effective, UPPJA then 
requires a specific sequence of findings pertaining to damages that 
lead to a declaration of a periodic payment award. Initially, both past 
and future damages are stated separately in lump sum form. Deductions 
are then made in specific order for pro rata shares of such things as 
prior settlements with joint tortfeasors, and comparative fault 
determinations, followed by setoffs or credits. After dealing with 
these issues, the court then allocates attorneys' fees. They must be 
taken insofar as possible from future, non-economic damages. The 
remainder of such fees are taken proportionally from the other 
categories of damages, if future non-economic damages are insufficient. 
After all of the deductions, the court lastly determines punitive 
damages, if any, in a lump sum. The periodic payment of future damages 
is then set out, literally year by year. This is how a periodic payment 
award is established under UPPJA.
  In establishing a periodic payment award, the court may receive 
evidence of future changes in the purchasing power of the dollar, and 
the trier of fact may factor such evidence into the allocation of 
damages or make separate findings upon the annual rates of change that 
must be applied to the actual damage figure. In this way a judgment can 
be created that takes inflation into account over the life of the 
judgement.
  Before a periodic payment award is made, the defendant must provide a 
qualified funding plan. A qualified plan can take several forms, 
including an annuity from a qualified insurance company. The essential 
characteristic for each form is adequate security to assure payment of 
the award over its lifetime to the injured person. Part of that 
assurance is reliance upon what UPPJA calls a qualified insurer.
  UPPJA requires the state insurance commissioner to keep a list of 
qualified insurers. These are insurers that meet standards of 
reliability and financial quality as expressed in common industry 
rating systems. A qualified funding plan cannot be effected without 
reliance upon a qualified insurer in some fashion either to provide the 
plan or guarantee the obligation. The list maintained by the insurance 
commissioner assures that there will be a reliable pool of qualified 
insurers from which plans can be obtained to fund periodic payment 
judgments. The UPPJA provides assurances to those who suffer bodily 
injury that funds will be available to pay the damages while reducing 
the costs of such damage awards. Its adoption uniformly will be of 
great benefit to both defendants and plaintiffs.
    As the Reagan Administration's Tort Policy Working Group 
reported in its seminal study of the effects of tort laws on 
insurance premiums, ``Periodic payments, as noted, are not 
unfair to plaintiffs because the payments would be scheduled to 
be made as the damages are in fact incurred (that is, as 
earnings are actually lost, or as certain expenses actually 
occur).'' \175\
---------------------------------------------------------------------------
    \175\ Report of the Tort Policy Working Group on the Causes, Extent 
and Policy Implications of the Current Crisis in Insurance Availability 
and Affordability (February 1986) at 70.
---------------------------------------------------------------------------

                         STATUTE OF LIMITATIONS

    The best way to allow every patient her day in court while 
preventing prejudice to health care providers is to codify a 
reasonable statute of limitations, along with a statute of 
repose, which the HEALTH Act does. Statutes of limitation 
define the time period following an injury in which a suit must 
be brought. Their purpose is to protect defendants from 
prejudicially stale claims by requiring trials to be conducted 
while the best evidence is still available and, at the same 
time, encouraging patients to have themselves checked for any 
illnesses that may result from negligent medical care sooner 
rather than later. Statutes of limitations are particularly 
important for ob-gyns, because without reasonable statutes of 
limitation they remain subject to lawsuits even decades after 
they deliver a child. The HEALTH Act provides that a medical 
malpractice lawsuit must be filed no later than 1 year after a 
person discovers an injury, and in any case within 3 years of 
an injury. The HEALTH Act makes an exception for minors under 
the age of 6, extending the time within which a suit must be 
filed to the longer of 3 years or the date on which the minor 
reaches the age of 8. These provisions are based on 
California's MICRA law. \176\
---------------------------------------------------------------------------
    \176\ See Cal.C.C.P. Sec. 340.5.
---------------------------------------------------------------------------

                                SUMMARY

    A national insurance crisis is ravaging the nation's health 
care system. Skyrocketing insurance rates have caused major 
insurers to drop coverage, decimated the ranks of doctors and 
other health care providers by forcing them to abandon patients 
and practices, particularly in high-risk specialties such as 
obstetrics and emergency medicine. The problem is particularly 
acute for practitioners in managed care, where prescribed fixed 
costs prevent them from recouping insurance costs. The HEALTH 
Act, modeled after California's quarter-century old and highly 
successful health care litigation reforms, addresses the 
current crisis and will make health care delivery more 
accessible and cost-effective in the United States. Its time-
tested reforms will make medical malpractice insurance 
affordable again, encourage health care practitioners to 
maintain their practices, reduce health care costs for 
patients, and save billions of dollars a year in Federal 
taxpayer dollars by significantly reducing the incidence of 
wasteful ``defensive medicine'' without increasing the 
incidence of adverse health outcomes. Its enactment will 
particularly help traditionally under-served rural and inner 
city communities, and women seeking obstetrics care. It will 
create a ``fair share'' rule, by which damages are allocated 
fairly, in direct proportion to fault, reasonable guidelines--
but not caps--on the award of punitive damages, and a rule 
preventing unfair and wasteful windfall double-recoveries. 
Finally, it will accomplish reform without in any way limiting 
compensation for 100% of plaintiffs' economic losses, their 
medical costs, their lost wages, their future lost wages, 
rehabilitation costs, and any other economic out of pocket loss 
suffered as the result of a health care injury. The HEALTH Act 
also does not preempt any State law that caps non-economic 
damages, such as those for pain and suffering.
    Many opponents of the legislation make two fundamental 
errors. First, they think that when friends or loved ones 
suffer serious injuries requiring immediate medical attention, 
Americans will think first about lawyers and lawsuits, not 
doctors and healing. And second, they assume that when friends 
or loved ones suffer serious injuries, there will be a doctor 
to sue in the first place. But we know just the opposite is 
true. Americans want most to see their friends and loved ones 
receive the best and most accessible health care available, but 
with greater and greater frequency doctors are not there to 
deliver it. To be clear, with or without the HEALTH Act, 
wrongfully injured victims can receive unlimited awards to 
cover their medical costs--including the costs of pain relief 
medication--their lost wages, their future lost wages, 
rehabilitation costs, and any other quantifiable losses. The 
difference is that without the HEALTH Act, there will be no 
doctors to potentially sue because there will be no doctors 
administering care because they will have been priced out of 
the healing profession by unaffordable professional liability 
insurance rates.
    The American Bar Association estimates there are 1 million 
lawyers in America. But all of us--all 287 million Americans--
are patients. As patients, and for patients, the Committee 
recommends that the House pass the HEALTH Act.

                                Hearings

    On June 12, 2002, the Subcommittee on Commercial and 
Administrative Law held a hearing on ``Health Care Litigation 
Reform: Does Limitless Litigation Restrict Access to Health 
Care?'' Testimony was received from Donald J. Palmisano, M.D., 
J.D., Secretary-Treasurer of the American Medical Association; 
Joanne Doroshow, Executive Director of the Center for Justice & 
Democracy; Danielle Walters, Executive Vice President of 
Californians Allied for Patient Protection; and Lawrence E. 
Smarr, President of the Physician Insurers Association of 
America, with additional material submitted by other 
individuals and organizations.

                        Committee Consideration

    On September 10, 2002, the Committee met in open session 
and ordered favorably reported the bill H.R. 4600 with 
amendment by a voice vote, a quorum being present.

                         Vote of the Committee

    1. Mr. Nadler offered an amendment that would have adjusted 
the $250,000 cap on noneconomic damages annually according to 
adjustments made in the consumer price index. By a rollcall 
vote of 14 yeas to 14 nays, the amendment was defeated.

                                                   ROLLCALL NO. 1
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................                              X
Mr. Gekas.......................................................                              X
Mr. Coble.......................................................                              X
Mr. Smith (Texas)...............................................                              X
Mr. Gallegly....................................................                              X
Mr. Goodlatte...................................................                              X
Mr. Chabot......................................................              X
Mr. Barr........................................................                              X
Mr. Jenkins.....................................................              X
Mr. Cannon......................................................
Mr. Graham......................................................
Mr. Bachus......................................................              X
Mr. Hostettler..................................................                              X
Mr. Green.......................................................              X
Mr. Keller......................................................                              X
Mr. Issa........................................................                              X
Ms. Hart........................................................                              X
Mr. Flake.......................................................                              X
Mr. Pence.......................................................
Mr. Forbes......................................................                              X
Mr. Conyers.....................................................              X
Mr. Frank.......................................................              X
Mr. Berman......................................................              X
Mr. Boucher.....................................................
Mr. Nadler......................................................              X
Mr. Scott.......................................................              X
Mr. Watt........................................................              X
Ms. Lofgren.....................................................              X
Ms. Jackson Lee.................................................
Ms. Waters......................................................
Mr. Meehan......................................................
Mr. Delahunt....................................................
Mr. Wexler......................................................              X
Ms. Baldwin.....................................................              X
Mr. Weiner......................................................
Mr. Schiff......................................................              X
Mr. Sensenbrenner, Chairman.....................................                              X
                                                                 -----------------------------------------------
    Total.......................................................             14              14
----------------------------------------------------------------------------------------------------------------

    2. Mr. Nadler offered an amendment that would have allowed 
courts to make public court records when specified criteria 
were met. By a rollcall vote of 6 yeas to 16 nays, the 
amendment was defeated.

                                                   ROLLCALL NO. 2
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Gekas.......................................................                              X
Mr. Coble.......................................................                              X
Mr. Smith (Texas)...............................................                              X
Mr. Gallegly....................................................                              X
Mr. Goodlatte...................................................                              X
Mr. Chabot......................................................                              X
Mr. Barr........................................................                              X
Mr. Jenkins.....................................................                              X
Mr. Cannon......................................................                              X
Mr. Graham......................................................
Mr. Bachus......................................................                              X
Mr. Hostettler..................................................                              X
Mr. Green.......................................................                              X
Mr. Keller......................................................                              X
Mr. Issa........................................................                              X
Ms. Hart........................................................                              X
Mr. Flake.......................................................                              X
Mr. Pence.......................................................
Mr. Forbes......................................................
Mr. Conyers.....................................................
Mr. Frank.......................................................
Mr. Berman......................................................              X
Mr. Boucher.....................................................
Mr. Nadler......................................................              X
Mr. Scott.......................................................              X
Mr. Watt........................................................
Ms. Lofgren.....................................................
Ms. Jackson Lee.................................................              X
Ms. Waters......................................................
Mr. Meehan......................................................
Mr. Delahunt....................................................
Mr. Wexler......................................................              X
Ms. Baldwin.....................................................              X
Mr. Weiner......................................................
Mr. Schiff......................................................
Mr. Sensenbrenner, Chairman.....................................                              X
                                                                 -----------------------------------------------
    Total.......................................................              6              17
----------------------------------------------------------------------------------------------------------------

    3. Mr. Nadler offered an amendment that would have provided 
that the provisions of the HEALTH Act would not apply to State 
laws regarding the liability of health maintenance 
organizations. By a rollcall vote of 7 yeas to 15 nays, the 
amendment was defeated.

                                                   ROLLCALL NO. 3
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Gekas.......................................................                              X
Mr. Coble.......................................................              X
Mr. Smith (Texas)...............................................                              X
Mr. Gallegly....................................................                              X
Mr. Goodlatte...................................................                              X
Mr. Chabot......................................................                              X
Mr. Barr........................................................                              X
Mr. Jenkins.....................................................                              X
Mr. Cannon......................................................
Mr. Graham......................................................
Mr. Bachus......................................................                              X
Mr. Hostettler..................................................                              X
Mr. Green.......................................................                              X
Mr. Keller......................................................                              X
Mr. Issa........................................................                              X
Ms. Hart........................................................                              X
Mr. Flake.......................................................                              X
Mr. Pence.......................................................
Mr. Forbes......................................................
Mr. Conyers.....................................................
Mr. Frank.......................................................
Mr. Berman......................................................              X
Mr. Boucher.....................................................
Mr. Nadler......................................................              X
Mr. Scott.......................................................              X
Mr. Watt........................................................
Ms. Lofgren.....................................................
Ms. Jackson Lee.................................................              X
Ms. Waters......................................................
Mr. Meehan......................................................
Mr. Delahunt....................................................
Mr. Wexler......................................................              X
Ms. Baldwin.....................................................              X
Mr. Weiner......................................................
Mr. Schiff......................................................
Mr. Sensenbrenner, Chairman.....................................                              X
                                                                 -----------------------------------------------
    Total.......................................................              7              15
----------------------------------------------------------------------------------------------------------------

    4. Mr. Nadler offered an amendment that would have added a 
provision to the HEALTH Act providing that nothing in the Act 
would reduce the liability of a tax haven corporation to any 
person on any claim. By rollcall vote of 6 yeas to 16 nays, the 
amendment was defeated.

                                                   ROLLCALL NO. 4
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Gekas.......................................................                              X
Mr. Coble.......................................................                              X
Mr. Smith (Texas)...............................................                              X
Mr. Gallegly....................................................                              X
Mr. Goodlatte...................................................                              X
Mr. Chabot......................................................                              X
Mr. Barr........................................................                              X
Mr. Jenkins.....................................................                              X
Mr. Cannon......................................................
Mr. Graham......................................................
Mr. Bachus......................................................                              X
Mr. Hostettler..................................................
Mr. Green.......................................................                              X
Mr. Keller......................................................                              X
Mr. Issa........................................................                              X
Ms. Hart........................................................                              X
Mr. Flake.......................................................                              X
Mr. Pence.......................................................
Mr. Forbes......................................................
Mr. Conyers.....................................................
Mr. Frank.......................................................
Mr. Berman......................................................                              X
Mr. Boucher.....................................................
Mr. Nadler......................................................              X
Mr. Scott.......................................................              X
Mr. Watt........................................................
Ms. Lofgren.....................................................
Ms. Jackson Lee.................................................              X
Ms. Waters......................................................
Mr. Meehan......................................................
Mr. Delahunt....................................................
Mr. Wexler......................................................              X
Ms. Baldwin.....................................................              X
Mr. Weiner......................................................              X
Mr. Schiff......................................................
Mr. Sensenbrenner, Chairman.....................................                              X
                                                                 -----------------------------------------------
    Total.......................................................              6              16
----------------------------------------------------------------------------------------------------------------

    5. Ms. Jackson Lee offered an amendment that would have 
exempted persons who had not attainted the age of 12 years at 
the time a claim arose from the provisions imposing a cap on 
noneconomic damages. By rollcall vote of 6 yeas to 14 nays, the 
amendment was defeated.

                                                   ROLLCALL NO. 5
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Gekas.......................................................                              X
Mr. Coble.......................................................                              X
Mr. Smith (Texas)...............................................                              X
Mr. Gallegly....................................................                              X
Mr. Goodlatte...................................................
Mr. Chabot......................................................                              X
Mr. Barr........................................................                              X
Mr. Jenkins.....................................................                              X
Mr. Cannon......................................................                              X
Mr. Graham......................................................
Mr. Bachus......................................................                              X
Mr. Hostettler..................................................                              X
Mr. Green.......................................................                              X
Mr. Keller......................................................                              X
Mr. Issa........................................................
Ms. Hart........................................................                              X
Mr. Flake.......................................................                              X
Mr. Pence.......................................................                              X
Mr. Forbes......................................................
Mr. Conyers.....................................................
Mr. Frank.......................................................
Mr. Berman......................................................              X
Mr. Boucher.....................................................
Mr. Nadler......................................................              X
Mr. Scott.......................................................              X
Mr. Watt........................................................
Ms. Lofgren.....................................................
Ms. Jackson Lee.................................................              X
Ms. Waters......................................................
Mr. Meehan......................................................
Mr. Delahunt....................................................
Mr. Wexler......................................................
Ms. Baldwin.....................................................              X
Mr. Weiner......................................................              X
Mr. Schiff......................................................
Mr. Sensenbrenner, Chairman.....................................                              X
                                                                 -----------------------------------------------
    Total.......................................................              6              16
----------------------------------------------------------------------------------------------------------------

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

                    Performance Goals and Objectives

    H.R. 4600 does not authorize funding. Therefore, clause 
3(c) of rule XIII of the Rules of the House of Representatives 
is inapplicable.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of House rule XIII is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 4600, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 24, 2002.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4600, the Help 
Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act 
of 2002.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Alexis 
Ahlstrom (for Federal revenues and spending), who can be 
reached at 226-9010, and Stuart Hagen (for private-sector 
impact) who can be reached at 226-6666.
            Sincerely,
                                  Dan L. Crippen, Director.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member
H.R. 4600--Help Efficient, Accessible, Low Cost, Timely Healthcare 
        (HEALTH) Act of 2002.

                                SUMMARY

    H.R. 4600 would impose limits on medical malpractice 
litigation in State and Federal courts by capping awards and 
attorney fees, reducing the statute of limitations, eliminating 
joint and several liability, and changing the way collateral-
source benefits are treated.
    Those changes would lower the cost of malpractice insurance 
for physicians, hospitals, and other health care providers and 
organizations. That reduction in insurance costs would, in 
turn, lead to lower charges for health care services and 
procedures, and ultimately, to a decrease in rates for health 
insurance premiums.
    Because employers would pay less for health insurance for 
employees, more of their employees' compensation would be in 
the form of taxable wages and fringe benefits. As a result, CBO 
estimates that enacting H.R. 4600 would increase Federal 
revenues by $40 million in 2003 and by $2.4 billion over the 
2003-2012 period.
    Enacting H.R. 4600 also would reduce 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. CBO estimates that direct spending would decline by 
$11.3 billion over the 2004-2012 period. Because the bill would 
affect revenues and direct spending, pay-as-you-go procedures 
would apply.
    Federal spending for active workers participating in the 
FEHB program is included in the appropriations for Federal 
agencies, and therefore is discretionary. CBO estimates that 
enactment of H.R. 4600 would reduce discretionary spending for 
the FEHB program by about $400 million over the 2004-2012 
period.
    The bill would preempt State laws that provide less 
protection for health care providers and organizations from 
liability, loss, or damages (other than caps on awards for 
damages). That preemption would be an intergovernmental mandate 
as defined in the Unfunded Mandates Reform Act (UMRA). Such a 
preemption would limit the application of State law, but it 
would require no action by States that would result in 
additional spending or a loss of revenue. Thus, the threshold 
established by UMRA for intergovernmental mandates ($58 million 
in 2002, adjusted annually for inflation) would not be 
exceeded.
    H.R. 4600 would impose a private-sector mandate on 
attorneys in malpractice cases by limiting the size of the 
awards they could receive. CBO estimates that the direct cost 
of that mandate would exceed the annual threshold specified in 
UMRA ($115 million in 2002, adjusted annually for inflation) in 
each of the first 5 years the mandate would be effective.

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    The estimated budgetary impact of H.R. 4600 is shown in the 
following table. The effects of this legislation on direct 
spending fall within budget functions 550 (health) and 570 
(Medicare). The effects on spending subject to appropriation 
fall within multiple budget functions.


                           BASIS OF ESTIMATE

    This estimate assumes that H.R. 4600 will be enacted in 
October 2002. It would apply to lawsuits initiated on or after 
the date of enactment.
Major Provisions of the Bill
    H.R. 4600 would place caps on awards by limiting non-
economic damages, such as pain and suffering, to $250,000, and 
punitive damages to twice the amount of economic damages or 
$250,000, whichever is greater. Punitive damages would be 
further constrained by limiting the circumstances under which 
they may be sought. Economic, or compensatory, damages would 
not be limited. Attorney fees would be restricted as follows: 
40 percent of the first $50,000 of the award, 33.3 percent of 
the next $50,000 of the award, 25 percent of the next $500,000, 
and 15 percent of that portion of the award in excess of 
$600,000. The caps on attorney fees would apply regardless of 
whether the award was determined in the courts or settled 
privately, and could be reduced further at the discretion of 
the court. (The court could not, however, increase attorney 
fees beyond the caps.) For awards of future damages equal to or 
exceeding $50,000, any party to the lawsuit could request that 
future damages be paid by periodic payments.
    The bill would impose a statute of limitations requiring 
that lawsuits begin within 3 years after the injury alleged to 
have happened as a result of malpractice occurs or 1 year after 
the claimant discovers, or should have discovered, the injury, 
whichever occurs first. Under the joint and several liability 
provisions of current law, defendants found negligent in a 
lawsuit are each liable for the full amount of damages, 
regardless of their proportionate share of responsibility for 
the injury. H.R. 4600 would limit the liability of each 
defendant to the share of damages attributable to his or her 
responsibility.
    Collateral-source benefits are other sources of 
compensation a claimant may have access to in the event of an 
injury. A common source of such benefits is the claimant's 
health insurance, which would likely pay for a portion of the 
medical costs arising from the injury. Other sources include 
disability insurance payments, workers' compensation, and life 
insurance payments. The bill would allow evidence of such 
benefits to be introduced at trial by either claimants or 
defendants. In addition, providers of collateral-source 
benefits would not be allowed to place a lien on the claimant's 
award or recover any amount from the claimant, whether or not 
the case goes to trial.
Impact on Medical Malpractice Insurance Premiums
    CBO's estimate of the impact of this bill is based on a 
statistical analysis of historical premiums for medical 
malpractice insurance coverage in States that have and have not 
enacted medical malpractice tort limitations. We conducted 
another analysis using medical malpractice claims data provided 
by the Physician Insurers Association of America. CBO also 
considered the impact of factors not directly related to trends 
in malpractice claim payments that may have contributed to 
recent increases in medical malpractice premiums. Those factors 
include reduced investment income of insurers, the need of 
insurers to replenish depleted reserves, and recent increases 
in reinsurance costs for all types of insurance.
    CBO's analysis indicated that certain tort limitations, 
primarily caps on awards and rules governing offsets from 
collateral-source benefits, effectively reduce average premiums 
for medical malpractice insurance. Consequently, CBO estimates 
that, in States that currently do not have controls on 
malpractice torts, H.R. 4600 would significantly lower premiums 
for medical malpractice insurance from what they would 
otherwise be under current law. That effect would increase 
somewhat over the 10-year time horizon of this estimate because 
caps on awards would not be indexed to increase with inflation. 
As a result, the caps on awards would become more constraining 
in later years.
    CBO estimates that, under this bill, premiums for medical 
malpractice insurance ultimately would be an average of 25 
percent to 30 percent below what they would be under current 
law. However, other factors discussed above may exert upward 
pressure on future premiums, possibly obscuring at least some 
of the anticipated effect of the legislation. The effect of 
H.R. 4600 would vary substantially across States, depending on 
the extent to which a State already limits malpractice 
litigation. There would be almost no effect on malpractice 
premiums in about one-quarter of the States, while reductions 
in premiums would be substantially larger than the overall 
average in about one-third of the States.
Impact on Health Insurance Premiums
    The percentage effect of H.R. 4600 on overall health 
insurance premiums would be far smaller than the percentage 
impact on medical malpractice insurance premiums. Malpractice 
costs account for a very small fraction of total health care 
spending; even a very large reduction in malpractice costs 
would have a relatively small effect on total health plan 
premiums. In addition, some of the savings leading to lower 
medical malpractice premiums--those savings arising from 
changes in the treatment of collateral-source benefits--would 
represent a shift in costs from medical malpractice insurance 
to health insurance. Because providers of collateral-source 
benefits would be prevented from recovering their costs arising 
from the malpractice injury, some of the costs that would be 
borne by malpractice insurance under current law would instead 
be borne by the providers of collateral-source benefits. Most 
such providers are health insurers.
    CBO's estimate does not include savings from reductions in 
the practice of defensive medicine--services and procedures 
that are provided largely or entirely to avoid potential 
liability. Estimating the amount of health care spending 
attributable to defensive medicine is difficult. Most estimates 
are speculative in nature, relying, for the most part, on 
surveys of physicians' responses to hypothetical clinical 
situations, and clinical studies of the effectiveness of 
certain intensive treatments. Compounding the uncertainty about 
the magnitude of spending for defensive medicine, there is 
little empirical evidence on the effect of medical malpractice 
tort controls on spending for defensive medicine and, more 
generally, on overall health care spending.
    A small number of studies have observed reductions in 
health care spending correlated with changes in tort law, but 
that research was based largely on a narrow part of the 
population and considered only hospital spending for a small 
number of ailments that are disproportionately likely to 
experience malpractice claims. Using broader measures of 
spending, CBO's initial analysis could find no statistically 
significant connection between malpractice tort limits and 
overall health care spending. Although the provisions of H.R. 
4600 could result in the initiation of fewer lawsuits, the 
economic incentives for individual physicians or hospitals to 
practice defensive medicine would appear to be little changed.
    Nonetheless, while there is insufficient evidence to 
justify including a defensive medicine adjustment in the 
estimate, the promising nature of the studies' results merits 
further analysis. CBO has obtained a person-based longitudinal 
database that contains detailed claims information on Medicare 
spending for covered services used by a random sample of fee-
for-service beneficiaries between 1989 and 1997. Using these 
data, CBO hopes to expand the analysis of earlier researchers 
to include broader measures of spending (including hospital 
services, physician care, post-acute care, and ancillary 
services) and a larger number of conditions, to help determine 
the extent to which the results of the earlier studies may 
apply to overall health care spending.
Federal Revenues
    CBO estimates that, over a 3-year period, enacting H.R. 
4600 would lower the price employers, State and local 
governments, and individuals pay for health insurance by about 
0.4 percent, before accounting for the responses of health 
plans, employers, and workers to the lower premiums. Those 
responses would include an increase in the number of employers 
offering insurance to their employees and in the number of 
employees enrolling in employer-sponsored insurance, changes in 
the types of health plans that are offered, and increases in 
the scope or generosity of health insurance benefits. CBO 
assumes that these behavioral responses would offset 60 percent 
of the potential impact of the bill on the total costs of 
health plans.
    The remaining 40 percent of the potential reduction in 
premium costs, or about 0.2 percent of group health insurance 
premiums, would occur in the form of lower spending for health 
insurance. Those savings would be passed through to workers, 
increasing both their taxable compensation and other fringe 
benefits. For employees of private firms, CBO assumes that all 
of that savings would ultimately be passed through to workers. 
We assume that State, local, and tribal governments would 
absorb 75 percent of the decrease and would increase their 
workers' taxable income and other fringe benefits to offset the 
remaining one-quarter of the decrease. CBO estimates that the 
resulting increase in taxable income would grow from $126 
million in calendar year 2003 to $1.1 billion in 2012.
    Those increases in workers' taxable compensation would lead 
to more Federal tax revenues. The estimate assumes an average 
marginal rate of about 20 percent for income taxes and the 
current-law rates for the Hospital Insurance and Social 
Security payroll taxes (2.9 percent and 12.4 percent, 
respectively). CBO further assumes that 15 percent of the 
change in taxable compensation would not be subject to the 
Social Security payroll tax. As a result, we estimate that 
Federal tax revenues would increase by $40 million in 2003 and 
by a total of $2.4 billion over the 2003-2012 period if H.R. 
4600 were enacted. Social Security payroll taxes, which are 
off-budget, account for about 30 percent of those totals.
Federal Spending
    CBO estimates that H.R. 4600 would reduce direct spending 
for Federal health insurance programs by $11.3 billion over the 
2004-2012 period. Those totals reflect reductions in spending 
resulting from the effect of lower premiums for malpractice 
insurance, partially offset by increases in direct spending 
because Federal programs could no longer collect collateral-
source benefits.
    CBO estimates that premiums for the Federal Employees 
Health Benefits (FEHB) program would decline by the same 0.4 
percent as the estimated average change in premiums for private 
health insurance. (That estimate includes the effects of H.R. 
4600 on both premiums for malpractice insurance and the 
collection of collateral-source benefits.) We assume that 
participants in the FEHB program would offset 60 percent of 
that reduction by choosing more expensive plans, so that 
spending for the FEHB program would decline by about 0.2 
percent. The 2003 premiums for FEHB plans have already been 
announced, so there would be no effect on FEHB spending in 
2003.
    Federal spending for annuitants in the FEHB program is 
considered direct spending. CBO estimates that H.R. 4600 would 
reduce direct spending for annuitants in FEHB by $270 million 
over the 2004-2012 period. Federal spending for active workers 
participating in the FEHB program is included in the 
appropriations for Federal agencies, and therefore is 
discretionary. CBO estimates that enactment of H.R. 4600 would 
reduce discretionary spending for FEHB by about $400 million 
over the 2004-2012 period. Spending for postal workers and 
postal annuitants participating in the FEHB program is off-
budget. CBO estimates that changes in spending for Postal 
Service participants would be offset by changes in the prices 
of postal services, and therefore would net to zero.
    Each year, the Centers for Medicare & Medicaid Services 
sets Medicare payment rates for physician services and hospital 
services that include explicit adjustments for changes in the 
cost of malpractice premiums. CBO estimates that H.R. 4600 
would have no effect on Medicare spending in 2003, because 
payment rates have already been set for hospital services and 
will be set for physician services before the effects of the 
bill could be incorporated in the rate-setting process. CBO 
estimates that incorporating lower malpractice premiums in 
Medicare payment rates would reduce Medicare spending by $10.8 
billion over the 2004-2012 period.
    CBO assumes that the rates that State Medicaid programs pay 
for hospital and physician services would change in proportion 
to the changes in Medicare payments. In addition, lower 
Medicare payment rates would result in lower payments by 
beneficiaries for cost sharing and premiums. Therefore, H.R. 
4600 would reduce spending by Federal programs that pay 
premiums and cost sharing for certain Medicare beneficiaries--
Medicaid and the Tricare for Life program of the Department of 
Defense (DoD). CBO estimates that H.R. 4600 would reduce direct 
spending for Medicaid and DoD by $3.6 billion over the 2004-
2012 period.
    Under current law, Medicare and Medicaid pay the medical 
costs arising from medical malpractice injuries. In the event 
that a patient wins a settlement, the programs require 
reimbursement for the costs they incurred. H.R. 4600 would 
prohibit Medicare and Medicaid from making any future 
collections. CBO estimates that implementing this provision 
would increase outlays by $3.4 billion over the 2004-2012 
period.

                      PAY-AS-YOU-GO CONSIDERATIONS

    The Balanced Budget and Emergency Deficit Control Act sets 
up pay-as-you-go procedures for legislation affecting direct 
spending or receipts. The net changes in outlays and 
governmental receipts that are subject to pay-as-you-go 
procedures are shown in the following table. For the purposes 
of enforcing pay-as-you-go procedures, only the effects through 
2006 are counted.


             INTERGOVERNMENTAL AND PRIVATE SECTOR IMPACTS:

    The Unfunded Mandates Reform Act defines a mandate as 
legislation that ``would impose an enforceable duty'' upon the 
private sector or a State, local, or tribal government. CBO 
believes that UMRA's definition of a mandate does not include 
legislation that would, for example, impose requirements or 
limitations on recoveries, address burdens of proof, or modify 
evidentiary rules because such changes would be methods of 
enforcing existing duties, rather than new duties themselves as 
contemplated by UMRA. The provisions of H.R. 4600 would not 
impose or change the underlying enforceable duties or standards 
of care applicable to those providing medical items and 
services under current law. Rather, they would address the 
enforcement of existing standards of professional behavior 
through tort litigation procedures.
    Clearly, a cap on recoveries of damages from medical 
malpractice would lower recoveries by future plaintiffs while 
reducing the costs borne by potential defendants. This cost 
effect, however, would not itself establish a new mandate. It 
would be more reasonably viewed as part of the process for 
enforcing the professional duties of medical providers, rather 
than an enforceable duty as defined by UMRA.
Intergovernmental Mandates and Other Public-Sector Impacts
    Intergovernmental Mandates. The bill would preempt State 
laws that would prevent the application of any provisions of 
the bill, but it would not preempt any State law that provides 
greater protections for health care providers and organizations 
from liability, loss, or damages. Those that provide a lesser 
degree of protection would be preempted. (State laws governing 
damage awards would not be preempted, regardless of whether 
they were higher or lower than the caps provided for in the 
bill.) These preemptions would limit the application of State 
law, but they would require no action by States that would 
result in additional spending or a loss of revenue. Thus, the 
threshold established by UMRA for intergovernmental mandates 
($58 million in 2002, adjusted annually for inflation) would 
not be exceeded.
    Other Public-Sector Impacts. State, local, and tribal 
governments would realize net savings as a result of provisions 
of H.R. 4600. State, local, and tribal governments that assess 
income taxes also would realize increased tax revenues as a 
result of increases in workers' taxable income. CBO has not 
estimated the magnitude of those increased revenues.
    State, local, and tribal governments would save money as a 
result of lower health insurance premiums precipitated by the 
bill. Based on information from the Bureau of the Census and 
the Joint Committee on Taxation and on our estimates of the 
effect of the bill on health care premiums, CBO estimates that 
State and local governments would save about $5 billion over 
the 2003-2012 period as a result of lower premiums for health 
care benefits they provide to their employees. That figure is 
based on estimates of State and local spending for health care 
growing from about $95 billion in 2003 to $189 billion in 2012 
and an expectation that savings would phase in over a 3-year 
period. The estimate accounts for some loss in receipts because 
State health, sickness, income-disability, accident, and 
workers' compensation programs would no longer be able to 
recover a share of malpractice damage awards.
    State and local governments also would save Medicaid costs 
as a result of lower health care spending. CBO estimates that 
State Medicaid spending would decrease by about $2 billion over 
the 2003-2012 period.
Private-Sector Mandates and Other Impacts
    The bill would impose a private-sector mandate on attorneys 
in malpractice cases by limiting the size of the awards they 
could receive. CBO estimates that the direct cost of that 
mandate to affected attorneys would amount to about $140 
million in 2003, rising to about $320 million in 2007. Those 
costs would exceed the annual threshold specified in UMRA ($115 
million in 2002, adjusted annually for inflation) in each of 
the first 5 years the mandate would be effective.

                         ESTIMATE PREPARED BY:

Federal Revenues: Alexis Ahlstrom (226-9010)
Federal Outlays: Medicaid--Jeanne De Sa and Eric Rollins; 
    Medicare--Julia Christensen and Alexis Ahlstrom; and FEHB--
    Alexis Ahlstrom (226-9010).
Impact on State, Local, and Tribal Governments: Leo Lex (225-
    3320)
Impact on the Private Sector: Stuart Hagen (226-2666)

                         ESTIMATE APPROVED BY:

    Robert A. Sunshine
    Assistant Director for Budget Analysis

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in article I, section 8, clause 3 of the 
Constitution.

               Section-by-Section Analysis and Discussion

Section 1. Short Title.
    This section provides that the Act may be cited as the 
``Help Efficient, Accessible, Low-cost, Timely, Healthcare 
(HEALTH) Act of 2002.''
Section 2. Findings and Purpose.
    This section sets out Congressional findings and the 
purposes of the Act.
Section 3. Encouraging Speedy Resolution of Claims.
    This section provides for a 3-year statute of limitations 
with exception for minors. It provides that a health care 
lawsuit may be commenced no later than 3 years after the date 
of injury or 1 year after the claimant discovers, or through 
the use of reasonable diligence should have discovered, the 
injury, whichever occurs first. In no case can a lawsuit be 
brought after 3 years, expect for those regarding alleged 
injuries sustained by a minor before the age of 6, in which 
case a health care lawsuit may be commenced by or on behalf of 
the minor until the later of 3 years from the date of injury, 
or the date on which the minor attains the age of 8.
Section 4. Compensating Patient Injuries.
    Subsection (a) of this section provides that any economic 
damages (that is, any damages to which a receipt can be 
attached) are unrestricted. It provides that the full amount of 
a claimant's economic loss, including their medical costs, the 
costs of pain relief medication, their lost wages, their future 
lost wages, rehabilitation costs, and any other economic out of 
pocket loss suffered as the result of a health care injury, may 
be fully recovered without limitation.
    Subsection (b) of this section provides that ``pain and 
suffering'' and other noneconomic damages are capped at 
$250,000. It provides that the amount of noneconomic damages 
recovered may be as much as $250,000, regardless of the number 
of parties against whom the action is brought or the number of 
separate claims or actions brought with respect to the same 
occurrence.
    Subsection (c) of this section provides that in any health 
care lawsuit, an award for future noneconomic damages shall not 
be discounted to present value. An award for noneconomic 
damages in excess of $250,000 shall be reduced either before 
the entry of judgment, or by amendment of the judgment after 
entry of judgment.
    Subsection (d) of this section provides that defendants 
should only be liable for the percentage of damages for which 
they are at fault. It provides that each party shall be liable 
only for the amount of damages allocated to such party in 
direct proportion to their percentage of fault.
Section 5. Maximizing Patient Recovery.
    Subsection (a) of this section limits on attorneys' fees. 
It provides that in no event shall the total of all attorneys 
fees for representing all claimants in a health care lawsuit 
exceed the following limits: (1) 40% of the first $50,000 
recovered by the claimants; (2) 33.3% percent of the next 
$50,000 recovered by the claimants; (3) 25% of the next 
$500,000 recovered by the claimants; and (4) 15% of any amount 
by which the recovery by the claimants is in excess of 
$600,000.
    Subsection (b) of this section provides that in a health 
care lawsuit involving a minor or incompetent person, a court 
retains the authority to authorize or approve a fee that is 
less than the maximum permitted under this section.
Section 6. Additional Health Benefits.
    This section provides that a jury can hear evidence of 
payments received by plaintiffs from other sources. It provides 
that any party may introduce evidence of collateral source 
benefits received or reasonably likely to be received from 
other sources (and which benefits would cover the same 
injuries) in order to prevent double recoveries.
Section 7. Punitive Damages.
    This section provides guidelines for punitive damages.
    Subsection (a) of this section provides that punitive 
damages may, if otherwise permitted by applicable State or 
Federal law, be awarded against any person in a health care 
lawsuit only if it is proven by clear and convincing evidence 
that such person acted with malicious intent to injure the 
claimant, or that such person deliberately failed to avoid 
unnecessary injury that such person knew the claimant was 
substantially certain to suffer; provides that where no 
judgment for compensatory damages is rendered against a 
defendant, no punitive damages may be awarded; provides that 
for a ``bifurcated'' punitive damages trial in which a claimant 
may request punitive damages upon a motion and after a finding 
by the court, upon review of supporting and opposing affidavits 
or after a hearing, that the claimant has established by a 
substantial probability that the claimant will prevail on the 
claim for punitive damages; if a such separate proceeding is 
requested, evidence relevant only to the claim for punitive 
damages, as determined by applicable State law, shall be 
inadmissible in any proceeding to determine whether 
compensatory damages are to be awarded.
    Subsection (b) of this section sets out the criteria the 
trier of fact may use to award punitive damages. This 
subsection also provides that in determining the amount of 
punitive damages, the amount of punitive damages awarded may be 
up to as much as two times the amount of economic damages 
awarded or $250,000, whichever is greater.
    Subsection (c) of this section provides a safe harbor from 
punitive damages for manufacturers of products that are FDA-
approved, with an exception for those who give false or 
incomplete information or who make illegal payments. It 
provides that no punitive damages may be awarded against the 
manufacturer or distributor of a medical product based on a 
claim that such product caused the claimant's harm where (A) 
such medical product was subject to premarket approval or 
clearance by the FDA with respect to the safety of the 
formulation or performance of the aspect of such medical 
product which caused the claimant's harm or the adequacy of the 
packaging or labeling of such medical product; and such medical 
product was so approved or cleared; or (B) such medical product 
is generally recognized among qualified experts as safe and 
effective pursuant to conditions established by the FDA and 
applicable FDA regulations, including without limitation those 
related to packaging and labeling. Also provides that in a 
lawsuit for harm which is alleged to relate to the adequacy of 
the packaging or labeling of a drug which is required to have 
tamper-resistant packaging under regulations of the Secretary 
of Health and Human Services (including labeling regulations 
related to such packaging), the manufacturer or product seller 
of the drug shall not be held liable for punitive damages 
unless such packaging or labeling is found by the trier of fact 
by clear and convincing evidence to be substantially out of 
compliance with such regulations. These provisions regarding 
drugs and medical devices shall not apply in any lawsuit in 
which (A) a person, before or after premarket approval or 
clearance of such medical product, knowingly misrepresented to 
or withheld from the FDA information that is required to be 
submitted under the Federal Food, Drug, and Cosmetic Act or 
section 351 of the Public Health Service Act (42 U.S.C. 262) 
that is material and is causally related to the harm which the 
claimant allegedly suffered; or (B) a person made an illegal 
payment to an FDA official for the purpose of either securing 
or maintaining approval or clearance of such medical product.
Section 8. Authorization of Payment of Future Damages to Claimants in 
        Health Care Lawsuits.
    This section allows periodic payments of future awards over 
time. It provides that, if an award of future damages equaling 
or exceeding $50,000 is made against a party with sufficient 
insurance or other assets to fund a periodic payment of such a 
judgment, the court shall, at the request of any party, enter a 
judgment ordering that the future damages be paid by periodic 
payments in accordance with the Uniform Periodic Payment of 
Judgments Act promulgated by the National Conference of 
Commissioners on Uniform State Laws.
Section 9. Definitions.
    This sections provides the definitions of terms used in the 
Act.
Section 10. Effects on Other Laws.
    Subsection (a) of this section provides that to the extent 
that title XXI of the Public Health Service Act establishes a 
Federal rule of law applicable to a civil action brought for a 
vaccine-related injury or death, this Act does not affect the 
application of the rule of law to such an action; and any rule 
of law prescribed by this Act in conflict with a rule of law of 
such title XXI shall not apply to such action. This section 
also provides that if there is an aspect of a civil action 
brought for a vaccine-related injury or death to which a 
Federal rule of law under title XXI of the Public Health 
Service Act does not apply, then this Act or otherwise 
applicable law (as determined under this Act) will apply to 
such aspect of such action.
    Subsection (b) of this section provides that except as 
provided in this section, nothing in this Act shall be deemed 
to affect any defense available to a defendant in a health care 
lawsuit or action under any other provision of Federal law.
Section 11. State Flexibility and Protection of States' Rights.
    Subsection (a) of this section provides that the provisions 
governing health care lawsuits set forth in this Act preempt, 
subject to subsections (b) and (c), State law to the extent 
that State law prevents the application of any provisions of 
law established by or under this Act. The provisions governing 
health care lawsuits set forth in this Act supersede chapter 
171 of title 28, United States Code, to the extent that such 
chapter provides for a greater amount of damages or contingent 
fees, a longer period in which a health care lawsuit may be 
commenced, or a reduced applicability or scope of periodic 
payment of future damages, than provided in this Act; or 
prohibits the introduction of evidence regarding collateral 
source benefits, or mandates or permits subrogation or a lien 
on collateral source benefits.
    Subsection (b) of this section provides that any issue that 
is not governed by any provision of law established by or under 
this Act (including State standards of negligence) shall be 
governed by otherwise applicable State or Federal law. This Act 
does not preempt or supersede any law that imposes greater 
protections (such as a shorter statute of limitations) for 
health care providers and health care organizations from 
liability, loss, or damages than those provided by this Act.
    Subsection (c) of this section provides that no provision 
of this Act shall be construed to preempt any State statutory 
limit (whether enacted before, on, or after the date of the 
enactment of this Act) on the amount of compensatory or 
punitive damages (or the total amount of damages) that may be 
awarded in a health care lawsuit, whether or not such State 
limit permits the recovery of a specific dollar amount of 
damages that is greater or lesser than is provided for under 
this Act or any defense available to a party in a health care 
lawsuit under any other provision of State or Federal law.
Section 12. Applicability; Effective Date.
    This section provides that this Act shall apply to any 
health care lawsuit brought in a Federal or State court, or 
subject to an alternative dispute resolution system, that is 
initiated on or after the date of the enactment of this Act, 
except that any health care lawsuit arising from an injury 
occurring prior to the date of the enactment of this Act shall 
be governed by the applicable statute of limitations provisions 
in effect at the time the injury occurred.

                           Markup Transcript



                            BUSINESS MEETING

                         TUESDAY, JULY 23, 2002

                  House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:00 a.m., in 
Room 2141, Rayburn House Office Building, Hon. F. James 
Sensenbrenner, Jr. [Chairman of the Committee] presiding.

           *       *       *       *       *       *       *

    Now, one note on process on where we go from here: It is 
the intention of the Chair to call up the medical malpractice 
bill. The Chair will give an opening statement. Mr. Conyers 
will then be recognized for an opening statement. The Chair 
will ask unanimous consent that all Members may place opening 
statements in the record. The Chair will then call if there are 
any amendments, and then we will immediately adjourn and mark 
the bill up after we get back following the August recess. So 
we've had our last vote for the day.
    Now, pursuant to notice, I call up the bill H.R. 4600, the 
``Help Efficient, Accessible, Low Cost, Timely Health Care Act 
of 2002,'' for purposes of markup and move its favorable 
recommendation to the House. Without objection, the bill will 
be considered as read and open for amendment at any point.
    [The bill, H.R. 4600, follows:]
      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


    Chairman Sensenbrenner. And the Chair recognizes himself 
for 5 minutes to explain the bill.
    A national insurance crisis is ruining the Nation's 
essential health care system. Medical professional liability 
rates have soared, causing major insurers to either drop 
coverage or raise premiums to unaffordable levels.
    Doctors and other health care providers are being forced to 
abandon patients and practices, particularly in high-risk 
specialties such as emergency medicine and obstetrics and 
gynecology.
    This has hit home to my family. The vascular surgeon who 
corrected my mother's carotid artery and gave her several more 
years of good, quality life before she passed away has 
abandoned his vascular surgery practice to go into something 
that is less risky and has a lower malpractice premium.
    Women are being particularly hard hit, as are low-income 
neighborhoods and rural areas and medical schools large and 
small.
    When California faced a similar crisis 25 years ago, its 
Democratic Governor, Jerry Brown, enacted the Medical Injury 
Compensation Reform Act, the so-called MICRA act. MICRA's 
reforms included a $250,000 cap on non-economic damages, limits 
on contingency fees lawyers can charge, and provisions that 
prevent double recoveries.
    According to the L.A. Times, because of 1975 tort reform, 
doctors in California are largely unaffected by increasing 
insurance rates. But the situation is dire in other States.
    Exhaustive research by two Stanford University economists 
has confirmed that direct medical care litigation reforms, 
including caps on non-economic damage awards, generally reduce 
malpractice claims rates, insurance premiums, and other 
stresses on doctors that may impair the quality of medical 
care.
    The HEALTH Act includes MICRA's reforms while also creating 
a fair-share rule by which damages are allocated fairly in 
direct proportion to fault, and reasonable guidelines but not 
caps on punitive damages.
    The HEALTH Act will accomplish reform without in any way 
limiting compensation for 100 percent of plaintiffs' economic 
losses, their medical costs, their lost wages, their future 
lost wages, rehabilitation costs, and any other economic out-
of-pocket loss suffered as a result of a health care injury. 
The HEALTH Act also does not preempt any State law that 
otherwise caps damages.
    A recent survey conducted for the bipartisan legal reform 
organization Common Good, whose board of advisers includes 
former Clinton administration Deputy Attorney General Eric 
Holder and former Democratic Senator Paul Simon, reveals the 
dire need for regulating the current medical tort system in 
America.
    According the survey, which was conducted by the reputable 
Harris Organization, more than three-fourths of the physicians 
feel their concern about malpractice litigation has hurt their 
ability to provide quality care in recent years. Seventy-nine 
percent of the physicians report the fear of malpractice claims 
causes them to order more tests than they would based only on 
professional judgment of what is medically needed.
    As former Democratic Senator and presidential candidate 
George McGovern and former Republican Senator Alan Simpson have 
written, legal fear drives doctors to prescribe medicines and 
order tests, even invasive procedures, that they feel are 
unnecessary. Reputable studies estimate that this defensive 
medicine squanders $50 billion a year.
    The Common Good survey also asked physicians the following 
question: Generally speaking, how much do you think that fear 
of liability discourages medical professionals from openly 
discussing and thinking of ways to reduce medical errors?
    An astonishing 59 percent of the respondents replied: A 
lot.
    So it's apparent that doctors themselves, who are the most 
keenly aware of the litigation threats they face, are not 
blaming insurance companies for high premiums, because they 
know the problem lies in an unregulated medical litigation 
system.
    Some of opponents of reforms that reasonably limit the 
currently unregulated health care litigation system make two 
fundamental errors.
    First, they think that when friends or loved ones suffer 
serious injuries requiring immediate medical attention, 
Americans will think first about lawyers and lawsuits, not 
about doctors and healing.
    And second, some opponents of reform assume that when 
friends or loved ones suffer serious injury, there will be a 
doctor to sue in the first place. But just the opposite is 
increasingly true.
    Americans want most to see their friends and loved ones 
receive the best and most accessible health care available, but 
with greater and greater frequency, doctors aren't there to 
deliver it, because they have been priced out of the healing 
profession by unaffordable professional liability insurance 
rates. Sound policy does not favor supporting people's abstract 
ability to sue a doctor for unlimited and unquantifiable 
damages when doing so means that there's no doctor to treat 
people in the first place.
    The gentleman from Michigan, Mr. Conyers.
    Mr. Conyers. Thank you, Mr. Chairman.
    I was going to yield our Member from California, Mr. 
Berman, some time during my opening remarks, but I think he's 
going to need a lot more time than I could yield him.
    This could also be called the ``product liability and 
medical malpractice markup.'' We have more than a dozen 
sections that seem to combine many of the issues we've been 
examining for many years into one bill.
    Now, all of us recognize that the medical profession has 
been experiencing difficulties obtaining malpractice insurance 
as malpractice insurers are abandoning the market, and the ones 
that aren't are raising the premiums. This presents, clearly, a 
problem.
    We've seen in the past that the insurance industry goes 
through boom and bust cycles with premiums ebbing and flowing 
as companies enter and exit the market and investment incomes 
rise and fall. We know from past experience that the insurance 
industry, which, by the way, is largely exempt from antitrust 
laws, is not itself immune from collusion, price-fixing, and 
other anticompetitive circumstances.
    So we approach this legislation--and I'm happy that we're 
taking it up early. But it's just occurred to perhaps more than 
one Member of the Committee that possibly the premiums for some 
reasons have increased because more members of the medical 
profession have been forced to work longer hours, some have 
grown careless, and are working under terrible working 
conditions.
    Fact: Nearly 100,000 people die in this country every year 
from medical malpractice. It is the third leading cause of 
preventable deaths. Overworked resident physicians, inadequate 
nursing support staff are all contributing causes for these 
deaths.
    Now, it's also clear to me that a legislative solution that 
is largely focused on limiting the victims, the patients who 
have suffered, limiting their rights available under State tort 
law, may not do much to change this situation other than to 
increase the incidents of medical malpractice in the country.
    As a matter of fact today, this measure before us presents 
us with solutions that make the malpractice provisions that 
were within the Contract with America pale by comparison.
    So I think that giving us time, Mr. Chairman, to examine 
this bill more carefully will be very important, and I ask 
unanimous consent to include the rest of my statement in the 
record.
    Chairman Sensenbrenner. Without objection, so ordered.
    [The prepared statement of Mr. Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative 
                  in Congress From the State of chigan
    It is clear to me that the medical profession has been experiencing 
difficulties obtaining medical malpractice insurance as malpractice 
insurers are abandoning the market and raising premiums.
    We have seen in the past that the insurance industry goes through 
boom and bust cycles, with premiums ebbing and flowing as companies 
enter and exit the market and investment income rises and falls. We 
also know from past experience that the insurance industry--which is 
largely exempt from the antitrust laws--is not immune from collusion, 
price fixing and other anticompetitive problems.
    It is also clear to me that a legislative solution largely focused 
on limiting victims rights available under our state tort system will 
do little other than increase the incidence of medical malpractice in 
our nation. As a matter of fact, the bill before us today is the most 
far reaching and dangerous malpractice bill before Congress and is far 
worse than previous malpractice provisions passed during the ``Contract 
with America.''
    Under this proposal, Congress would be saying to the American 
people that we don't care if you lose your ability to bear children, we 
don't care if you are forced to bear excruciating pain for the 
remainder of your life, and we don't care if you are permanently 
disfigured or crippled.
    The proposed new statute of limitations takes absolutely no account 
of the fact that many injuries caused by malpractice or faulty drugs 
take years or even decades to manifest themselves. Under the proposal, 
a patient who is negligently inflicted with HIV-infected blood and 
develops AIDs six years later would be forever barred from filing a 
liability claim.
    The so-called periodic payment provisions are nothing less than a 
federal installment plan for HMO's. The bill would allow insurance 
companies teetering on the verge of bankruptcy to delay and then 
completely avoid future financial obligations. And they would have no 
obligation to pay interest on amounts they owe their victims.
    And guess who else gets a sweetheart deal under this legislation? 
The drug companies. The producers of killer devices like the Dalkon 
Shield, the Cooper-7 IUD, high absorbency tampons linked to toxic shock 
syndrome, and silicone gel implants all would have completely avoided 
billions of dollars in damages had this bill been law.
    Nearly 100,000 people die in this country each and every year from 
medical malpractice. It's the third leading cause of preventable deaths 
in America. The last thing we need to do is exacerbate this problem, 
while ignoring the true causes of the medical malpractice crisis in 
America. I urge my colleagues to reject this anti-patient, anti-victim 
legislation.

    Chairman Sensenbrenner. Without objection, all Members may 
insert opening statements in the record.
    [The prepared statement of Ms. Jackson Lee follows:]
    
    
    Chairman Sensenbrenner. Let me say, the gentleman from 
Michigan had a very good suggestion, and the Chair is prepared 
to adjourn this markup until after we get back from the August 
recess, which will give people plenty of time to look at this 
legislation as well as perhaps relax a bit.
    Let me just say, are there amendments?
    And we've now gotten to the point of amending the bill, and 
the Committee is adjourned.
    [Whereupon, at 11:36 a.m., the Committee was adjourned.]

           *       *       *       *       *       *       *

    The Committee met, pursuant to notice, at 10:00 a.m., in 
Room 2141, Rayburn House Office Building, Hon. F. James 
Sensenbrenner, Jr. [Chairman of the Committee] presiding.
    Chairman Sensenbrenner. The Committee will be in order, and 
a working quorum is present.
    [Intervening business.]
    Chairman Sensenbrenner. The next bill will be H.R. 4600. 
When we last met, the Chair moved the favorable recommendation 
of H.R. 4600, the ``Help Efficient, Accessible, Low-cost, 
Timely Health Care Act of 2002,'' to the full House. Pursuant 
to the order of the Committee, the bill has been considered as 
read and open for amendment at any point.
    Chairman Sensenbrenner. Are there amendments?
    The gentleman from Virginia.
    Mr. Scott. I have an amendment at the desk, number 1.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R. 4600, offered by Mr. Scott. On 
page 4, strike all of section 3.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. The gentleman from Virginia is 
recognized for 5 minutes.
    Mr. Scott. Thank you, Mr. Chairman.
    Mr. Chairman, the bill preempts State statute of 
limitations on health care lawsuits and sets a national 
standard statute of limitations of 1 year from the time the 
person knows or should have known of the injury, with a maximum 
period in any case of 3 years from the date of injury. This 
would not only limit most cases to a 1-year statute of 
limitations for filing suit but it would also invoke litigation 
over whether or not someone not filing within a year should 
have know that they had injuries.
    Consider the case of a foreign object left in a person from 
an operation where the impact was not manifested until 2 or 3 
years later, or the case of a hemophiliac who contracted AIDS 
with tainted blood who didn't learn they had the disease until 
much later.
    In none of these cases was the victim able to detect the 
problem within the period of time, if it goes more than 3 
years, but the bill provides a basis for arguing the person 
should have known.
    The bill also sets a national standard statute of 
limitations on how minors are to file suits for injuries with 
severe limitations.
    This amendment would strike the section.
    Mr. Chairman, most people who practice law practice in 
State courts. And when you have a Federal statute of 
limitations preempting State law, all you've done is transfer 
the medical malpractice to legal malpractice, because a lot of 
lawyers will think they have a 2-year statute of limitations on 
a personal injury suit and wait for a year and a half, file 
suit, and then find out there's a Federal preemption. I think 
the States have worked on this for years, and I don't see any 
reason for the Federal Government to preempt what is 
essentially State law.
    And I yield back the balance of my time.
    Chairman Sensenbrenner. The Chair recognizes himself for 5 
minutes.
    This amendment should be opposed because it weakens the 
statute of limitations provisions in the bill. Statutes of 
limitations define the time period following an injury in which 
a suit must be brought in order to protect the defendants from 
the prejudice of stale claims by requiring trials while the 
best evidence is still available while at the same time 
encouraging the patients to have themselves checked for any 
injuries that may have resulted from negligent medical care 
sooner rather than later.
    The best way to allow every patient her or his day in court 
while preventing prejudice to health care providers is to 
codify a reasonable statute of limitation, which the bill does.
    The HEALTH Act provides that a medical malpractice lawsuit 
must be filed no later than a year after the person discovers 
an injury or within 3 years at the latest. The HEALTH Act makes 
an exception for minors under the age of 6, extending the time 
within which a suit must be filed to the longer of 3 years or 
the date when the minor reaches the age of 8. These provisions 
are based upon California's MICRA law.
    The HEALTH Act statutes of limitations are designed to 
protect, for example, OB/GYNs, who are particularly hard hit by 
high medical malpractice insurance rates because they currently 
have to worry about being sued a decade or more after they have 
delivered a baby.
    I would urge opposition to the amendment and yield back the 
balance of my time.
    The question is on the amendment offered by the gentleman 
from Virginia, Mr. Scott.
    Those in favor will say aye.
    Opposed, no.
    The noes appear to have it. The noes have it, and the 
amendment is not agreed to.
    Are there further amendments?
    Mr. Frank. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from Massachusetts.
    Mr. Frank. Mr. Chairman, I have an amendment that's just 
being delivered to the desk.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R. 4600, offered by Mr. Frank. 
Mr. Frank moves to strike on page 2, line 3, the words ``cost'' 
and ``care.''
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. The gentleman from Massachusetts is 
recognized for 5 minutes.
    Mr. Frank. Mr. Chairman, this is a grammatical amendment. I 
have become increasingly unhappy with the acronym fever that 
has broken out here. I think we are doing the language a great 
disservice by our list of acronyms. It kind of peaked with the 
``USA PATRIOT Act,'' but we're keeping it going.
    But if we are going to have acronyms, it seems to me we 
ought to at least spell them correctly. So since none of these 
words really make any sense anyway, we might as well go for 
correct spelling. We can at least be autographic role models to 
the young people of America.
    So on line 3, I move to strike the words ``cost'' and 
``care,'' because otherwise it would be the HEALCTHC Act---- 
[Laughter.]
    Mr. Frank.--which sounds like something we should have been 
saying on Rosh Hashanah. [Laughter.]
    Chairman Sensenbrenner. Will the gentleman yield?
    Mr. Frank. Yes.
    Chairman Sensenbrenner. Maybe the doctor ought to check 
your throat out, if---- [Laughter.]
    Mr. Frank. No, Mr. Chairman, the ``kh'' sound is a long-
standing sound of great religious significance. [Laughter.]
    Chairman Sensenbrenner. So noted.
    Mr. Frank. But ``cost'' and ``care''--and I think it would 
spell better and make no less sense. So I offer that amendment.
    Chairman Sensenbrenner. The question is on agreeing to the 
amendment of the gentleman from Massachusetts.
    All those in favor will say aye.
    Opposed, no.
    The aye appears to have it. [Laughter.]
    Chairman Sensenbrenner. The aye has it, and the amendment 
is agreed to.
    Are there further amendments?
    The gentleman from Virginia, Mr. Scott.
    Mr. Scott. Mr. Chairman, I have an amendment at the desk, 
number 3.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R. 4600, offered by Mr. Scott. On 
page 5, strike all of section 4.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Scott. Mr. Chairman, this bill eliminates section 4 of 
the bill. This would have the effect of trusting States to be 
able to continue to strike the balance between appropriate 
compensation systems for negligently injured victims and any 
impact such a system has on tort-feasors. Section 4 of the bill 
limits noneconomic damages to a total of $450,000, no matter 
the number of counts or causes, no matter how severe the 
injury, no matter how much the pain and suffering, no matter 
how much the loss of reproductive capacity, and so forth.
    This would exact a grossly discriminatory impact on poor 
people and children. With such a limitation on noneconomic 
damages, ironically, for poor people, the bulk of whom will be 
women and children, the more egregious the negligence, the 
bigger break for the tort-feasor.
    This section also eliminates the possibility of having 
awards reflect the impact of inflation. To match the buying 
power of a 1975 award of $250,000 today, one would need $1.5 
million. Then $40,000 would buy what $250,000 buys today. So 
inflation is important to a victim being made whole.
    This section also, Mr. Chairman, gives tort reform 
advocates one of the crown jewels of tort reform; it eliminates 
joint and several liability. This would have the effect of 
first invoking excess litigation over which of several tort-
feasors is liable for what amount of the award, and then affect 
the shifting of burden of collecting each portion from each 
guilty tort-feasor.
    Joint and several liability means that guilty parties will 
work out contributions amongst themselves and generally means 
that they will insure themselves, based on those contributions. 
That is, one insurance company will take the burden, or they'll 
insure themselves such that they all have insurance with one 
policy. This ensures that an innocent victim, after 
establishing the amount of compensation owed for injuries, will 
be made whole by one person, and then that person can go chase 
after everybody else.
    The lack of joint and several liability, Mr. Chairman, also 
guarantees that some health professionals that are not 
generally roped in to malpractice cases will be, like nurses. 
If they are 2 percent liable, they're going to be part of the 
lawsuit, and you have establish what all they did. So the 
doctor, instead of paying the damage, might be able to shift 2 
percent, 5 percent, 10 percent onto a nurse. That will increase 
litigation, increase malpractice costs for people who are not 
paying very much right now, because they're not on the barrel 
end of malpractice suits.
    Mr. Chairman, I would hope that we would adopt the 
amendment and not federalize what is essentially State law.
    I yield back.
    Chairman Sensenbrenner. The Chair recognizes himself.
    This amendment strikes at two very important parts of the 
bill, the cap on noneconomic damages and the change on joint 
and several liability.
    I just want to have a couple of quotes.
    Cruz Reynoso, the Democratic vice chairman of the U.S. 
Commission on Civil Rights and a former justice of the 
California Supreme Court, said this about caps, quote, 
``Medical insurance has been going up. I think there's no 
question that what the Legislature did and continues to do has 
had an influence on keeping those expenses down, and that's a 
very important public policy. Publicly funded medical centers 
were very supportive of continued protection of MICRA because 
if their own insurance rates would go up, they would be less 
able to serve the poor.''
    ``I personally have favored having as much access to the 
courts as possible, but at the same time, you have to be 
careful that it doesn't do so in a way that is destructive; for 
example, in the medical field, destructive of the ability of 
society to respond to the medical needs of the people,'' 
unquote.
    Nancy Sasaki, president and CEO of Planned Parenthood of 
Los Angeles, said, quote, ``If the caps on noneconomic damages 
in MICRA were to be increased, you actually would begin to see 
a kind of domino effect. If insurance costs for physicians go 
up, they typically will then, as any business would, look at 
what services are their highest risks, which services are 
costing them the most, then they'd no longer provide that. 
That's what has happened in the past, where physicians have 
stopped providing obstetric care because of the costs.''
    That's on noneconomic damages. On the fair share rule, or 
the joint and several liability, although it's motivated by a 
desire to ensure that plaintiffs are made whole, it leads to a 
search by plaintiffs' attorneys for deep pockets and a 
proliferation of lawsuits against those minimally liable or not 
liable at all. The HEALTH Act, by providing a fair share rule, 
it apportions damages in proportion to a defendant's degree of 
fault and prevents unjust situations in which hospitals can be 
forced to pay for all damages for an injury, even when the 
hospital is minimally at fault.
    For example, a drug dealer staggers into the emergency room 
with a gunshot wound after a deal goes bad. The surgeon that 
works on him does the best he can, but it's not perfect. The 
drug dealer sues. The jury finds that the drug dealer is 99 
percent responsible for his own injury, but also finds the 
hospital 1 percent responsible because the physician was 
fatigued after working too long. Today the hospital can be made 
to pay 100 percent of the damages, and that's unfair.
    As Senator Lieberman has observed, the joint and several 
liability rule now has grown to a point where it really means 
that somebody who is not liable or liable very little, if they 
happen to have deep pockets, they can be held fully liable. 
That is the wrong message to send.
    If you hurt somebody, you have to pay. If you do not, you 
should not have to pay. And this was said by Senator Lieberman 
on the Senate floor.
    I yield back the balance of my time.
    Mr. Gekas. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from California, Mr. 
Berman.
    Mr. Berman. Mr. Chairman, I believe the gentleman from 
Virginia indicated he's eliminating the cap of $450,000. But as 
I read it in here, it's $250,000.
    Mr. Scott. I was reading ``$250.'' I thought I said 
``$250,'' so if I said ``$450,'' that was a mistake.
    Mr. Berman. Mr. Chairman, I'm quite sure I am the only 
Member of this Committee that was a member of the California 
Legislature when MICRA passed. I had the wonderful pleasure of 
being the chairman of the Select Committee on Medical 
Malpractice during that time, supported the legislation when it 
went through the Assembly, did not like the final product that 
came out of the conference committee but supported the--filed 
briefs in support of upholding the provisions of MICRA, which 
were upheld in the California Supreme Court.
    A couple of points. This amendment addresses the heart of 
my concern about this bill.
    First of all, the $250,000 cap on economic damages was a 
cap put in 1975. If you allowed and measured any kind of cost-
of-living factor from that time, that cap would be much closer 
to $1 million at this time than it would be to $250,000. This 
bill, an effort to copy the provisions of MICRA, simply takes 
that $250,000, makes no allowance for the fact that it was a 
figure deemed to be a reasonable cap in 1975, and now imposes 
it in 2002, and, at least as I understand it, has no provision 
for future cost-of-living increases on that cap. So that's one 
reason why I think going with a bill that has a cap like this 
is much too low, even if you accept the premise that we should 
cap noneconomic damages and pain and suffering recoveries in 
medical malpractice cases.
    Secondly, it raises the larger issue. There's no doubt 
MICRA has helped substantially in keeping down medical 
malpractice premiums in California. There's also no doubt that 
California is plagued with serious, severe medical cost 
problems that threaten its entire public health care delivery 
system, leave physicians feeling adequately undercompensated in 
the context of both insurance and Medicare reimbursements, and 
has the highest penetration of HMO participation because of the 
high cost of medical care in California.
    In other words, my point is, dealing with this one part of 
the problem does not in any sense deal with the more 
substantial issue of health care costs and the cost of 
delivering health care in California.
    Moreover, if ever there were a situation where you would 
think the battle, the fight over how to deal with medical 
malpractice premiums, and the balance between patient rights 
and maintaining reasonable malpractice premiums should be left 
to a State-by-State basis, it's in this particular area, where 
you don't have--this is not product liability, a manufacturer 
in one area is delivering a product to 50 different States and 
faced with 50 different laws and trying to figure out 50 
different standards. This is uniquely--you're licensed to 
practice in a particular State, and it should be a matter of 
State law.
    And finally, on the issue of the pain and suffering, over 
and over again, the majority party, since 1995, has always 
sought to eliminate joint and several liability and, as a 
result, has never achieved its goal in a variety of different 
areas, when the more reasonable approach is to say, since one 
way or another somebody loses, if you eliminate the recoveries 
of the people who can't afford to pay, then the plaintiff is 
not going to be made whole. If you leave the people who are 
partially liable but not fully liable to pay the whole thing, 
then you're putting an unfair burden on them.
    It seems to me an appropriate balance here is for the 
smaller tort-feasors, the people who are liable for, say, less 
than 15 or 20 percent, to restrict their liability to that 
percentage of a liability that they have found to have been 
guilty of and then to allow the joint and several principle to 
apply for the larger tort-feasors, to make sure the plaintiff 
isn't totally left out of any meaningful portion of his 
recovery.
    So once again, an approach that seems to copy a law that 
was made in 1975, that while it's had a beneficial effect on 
the size of medical malpractice premiums, has not addressed the 
fundamental problem of health care costs in California. Copying 
that without the flexibility----
    Chairman Sensenbrenner. The gentleman's time has expired.
    Mr. Berman.--I think is a mistake. I think, while there's 
an area between this amendment and the present bill, on 
balance, I think this amendment makes sense, and I would urge 
support for it.
    Chairman Sensenbrenner. The gentleman from Pennsylvania.
    Mr. Gekas. I thank the Chair. I rise to move to strike the 
last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Gekas. This Committee has received testimony on this 
subject in which the California experience of course was the 
basis for the movement in which we find ourselves today.
    We were struck, many of us, by the fact that even with the 
restrictions on damages that appear in the California 
experience, the costs of health care kept on rising even within 
medical malpractice on the economic damages. In other words, 
the costs that were recoverable always showed an upward trend, 
except for noneconomic losses, which were capped at $250,000. 
The point is that even with the restrictions of the California 
experience, costs still go up.
    To now tinker with the noneconomic damage cap would render 
the whole exercise futile on our part and make it not 
worthwhile for us to pursue it. We ought to stick to the 
premise that is found in the basis of the bill, to allow--of 
course, we have to allow the economic losses to appear as they 
might, but to preserve the cap on noneconomic damages.
    Mr. Berman. Will the gentleman yield?
    Mr. Gekas. Yes.
    Mr. Berman. I understand the gentleman's point, but the 
economic damages are about wages lost, about health care costs 
expended and incurred. Of course they're going to rise. Wages 
have risen since 1975; health care costs have risen since 1975. 
Why the notion--when you maintain a $250,000 cap that was 
appropriate in 1975, in 2002, you are decreasing the recovery 
for pain and suffering every single year by the percentage of 
the cost-of-living. By any measurement, it is a decrease. To 
simply graft that figure onto here without making any 
compensation for 27 years of time, and without including some 
kind of cost-of-living factor for the future, is not 
maintaining the equilibrium of the California law at the time 
it passed. It's imposing a serious cut.
    Mr. Gekas. Seizing back the remainder of my time, the only 
real discipline we have in this bill, if we're seeking 
discipline to try to help in the area of medical malpractice, 
is the cap on noneconomic damages. We must stay with it.
    I yield back the balance of my time.
    Chairman Sensenbrenner. The gentleman from New York, Mr. 
Nadler.
    Mr. Nadler. Mr. Chairman, I'm opposed to the notion of this 
cap, as I'm sure you know.
    I think the point the gentleman from California makes about 
an inflation factor is undeniable.
    I had a college scholarship when I went to college. It was 
established by the will of Joseph Pulitzer in, I think, 1902 or 
something. It provided the recipients of this scholarship $250 
a year to any college in the country, which was a lot of money 
when they did this. By the time I went to college, it wasn't a 
lot of money, and today it's a pittance, in light of tuition 
costs.
    It also adds that if the recipient of the scholarship goes 
to Columbia, he's exempt from tuition.
    When that scholarship was first established by the will of 
Joseph Pulitzer, the $250 to any college in the country would 
have paid all the costs. The exemption from tuition if you went 
to Columbia was a minor little add-on. Today, of course, the 
exemption from tuition is the only thing that matters, because 
that $250 is a minor pittance.
    This $250,000, which may have been an appropriate amount, 
perhaps, in 1975 is certainly an inadequate amount now and 
certainly will be a much more inadequate amount 20 years from 
now.
    I fail to see how you can put any limit on real damages. 
They're not economic damages. Pain and suffering are real 
damages, though hard to quantity. But how you can put an 
absolute limit without providing any inflation factor--we take 
for granted that we put COLAs, cost-of-living adjustments, in 
Social Security. We put them in pensions. We put them in 
congressional salaries. We put them in Federal salaries. How 
can you not have at least an inflation factor, cost-of-living 
adjustment, whatever you want to call it? Unless you want to 
say that what you really want to do is say no noneconomic 
damages eventually, because that's what this does. It reduces 
it to insignificance, ultimately.
    It seems to me that any hard-dollar amount in legislation 
has to have an inflation factor in it. And if you don't put 
that in what you're really saying, and maybe that's the will of 
the Republicans, that we don't want people to get compensation 
for noneconomic damages. We don't dare say it, but that's what 
we want. So we set up an amount that was appropriate in 1975 
and by 2000, it's inadequate, and by 2025, no one will even 
care about it anymore, because it's a pittance.
    It's unfair. It's unjust. And frankly, it's totally 
indefensible not to have an inflation factor in a limit like 
this.
    Mr. Coble. Mr. Chairman?
    Mr. Nadler. I yield back.
    Chairman Sensenbrenner. The gentleman from the North 
Carolina, Mr. Coble.
    Mr. Coble. I move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Coble. Mr. Chairman, this is an issue, it seems to me, 
that involves compelling arguments on either side. I have 
consistently, with rare exceptions, voted against the 
imposition of caps. I believe when State Legislatures and the 
Congress insert their oars into the juries' waters, we're 
invading the province of the jury. I feel very strongly about 
that.
    Having said that, I think this issue does, however, deserve 
full House floor attention. I have at least implied to the 
sponsor of the bill that I would not stand in the way of this 
bill going to the floor and would hopefully get it to the floor 
in its present form. But I do--if this bill is reported out 
from this Committee, Mr. Chairman, and does go to the House 
floor, at that point, I'm going to have more flexibility in 
expressing my views about this because, I reiterate, I just 
believe that damages is an issue that ought to be exclusively 
reserved for juries.
    Mr. Nadler. Will the gentleman yield for a question?
    Mr. Coble. Let me continue just a minute, and then I'll 
yield to the gentleman from New York.
    I just believe that that province is sacred. Again, with 
rare exceptions--there are always exceptions to every rule. But 
compelling arguments have been presented on both sides.
    And that's my posture for the moment, and we'll see how 
this plays out as we go along. But I thank the Chairman for 
having recognized me. And I yield to the gentleman from New 
York.
    Mr. Nadler. Thank you. I just wish to ask the gentleman if 
he really believes that there are any odds at all that the 
Rules Committee will allow and amendment on the floor to change 
the $250,000 question. It seems to me now is the only chance we 
have to do it.
    Mr. Coble. Let me reclaim my time, and I say to the 
distinguished gentleman from New York, I am not blessed with a 
prophetic crystal ball, so I can't speak for the Rules 
Committee.
    And I'll be glad to yield--I'm going to reluctantly yield 
to the gentleman from Massachusetts, because I can't match wits 
with him.
    Mr. Frank. I just want to say, I was interested to hear my 
friend describe his posture. And he's been my friend, and we've 
collaborated. But I just want to express some concern for his 
posture. I think bent over that way, it's not good for your 
posture. And I hope the gentleman will get a little more 
upright, less he suffer some permanent curvature. [Laughter.]
    Mr. Coble. I thank the gentleman.
    Chairman Sensenbrenner. Without objection, Committee 
contingency funds will be appropriated to buy a new chair for 
the gentleman from North Carolina. [Laughter.]
    Mr. Coble. I thank the gentleman. I yield back my time.
    Chairman Sensenbrenner. The gentleman from Alabama, Mr. 
Bachus.
    Mr. Bachus. Thank you. Mr. Chairman, Mr. Berman has, I 
think, offered a good point, and that's that this cap was 
established some 25 years ago. So I think we do want to look at 
it in today's terms.
    But Mr. Nadler has said it's mainly Republicans who want to 
keep this cap on and Democrats who want to raise it. In that 
regard, I want to read a statement from someone that I don't 
think is--I don't know if they're Republican. I don't think 
they're typical Republican, if they are. But they certainly 
made that settlement just recently.
    And it's Donna Stidham, who is the director of managed care 
and patient services for the AIDS Healthcare Foundation. And 
here's what she said: ``An increase in the noneconomic cap 
would increase our premiums phenomenally. In a single clinic 
setting, it would probably increase premiums maybe $20,000 or 
$30,000. For multiple physicians, I'd hate to even guess, but 
it would be in the hundreds of thousands, which would take away 
from direct patient care, so it would directly take away from 
care for the patients. You'd see us perhaps not being able to 
admit all types of patients. Right now, we can take any kind of 
patient, whether they have the ability to pay or not.''
    So this director of the AIDS Healthcare Foundation, at 
least her statement seems to indicate that----
    Mr. Berman. Where?
    Mr. Bachus. I'll find out where. But, I mean, it's in--
you've also got Senator Lieberman, who is very much for these 
caps. And I don't think--unless he's switched parties recently, 
he's still a Democratic. In fact, I think he was the vice 
presidential nominee.
    I'll also offer a third reason. I think the fair share 
rule, without the fair share rule, you have a situation--one of 
the hypotheticals that we heard earlier was somebody challenged 
it as being--that things like that really never happen. They 
were just offering hypotheticals, because if a drug dealer gets 
shot in a drug deal gone bad and he walks in a hospital, he 
receives treatment from a doctor who is somewhat fatigued, and 
the jury finds that the drug dealer is 99 percent at fault for 
his injuries, but the hospital is 1 percent at fault for his 
injuries, yet the hospital could be required to pay 100 percent 
of the damages for his injuries.
    Mr. Scott. Would the gentleman yield?
    Mr. Bachus. Yes.
    Mr. Scott. On those States that have comparative 
negligence, Virginia doesn't, if the person is 1 percent at 
fault, and somebody else is 99 percent at fault, they lose 
altogether. But even with comparative negligence, you only have 
to pay for that 1 percent.
    Mr. Bachus. All right, let me say that that's what was said 
earlier, and I was hoping that I'd get the response that you 
gave, that, no, that's not true. That's what was said a few 
weeks ago. When someone else on the Committee offered this 
analogy, they were told, no, it doesn't apply to 1 percent.
    However, at least the staff of this Committee has offered 
us the fact that, yes, and I'll give the decision, Walt Disney 
World v. Wood, a 1987 Florida case, unless the law has been 
changed. Disney was required to pay an entire damages award 
even though it was found only 1 percent at fault for the 
claimant's harm.
    Mr. Scott. Would the gentleman yield?
    Mr. Bachus. So unless that case has been reversed----
    Mr. Scott. Will the gentleman yield?
    Mr. Bachus. Yes.
    Mr. Scott. In that case, the other 99 percent wasn't the 
plaintiff. That was other people.
    Mr. Bachus. But what you just said is if you're 1 percent 
at fault, and what was said a few weeks ago--and it wasn't as a 
result of something I said--if you're only 1 percent at fault, 
you can't be required to pay 100 percent of the damages; in 
fact, you can.
    Mr. Scott. And in this case, if the gentleman would be kind 
enough to yield, in this case, when you buy insurance, if the 
nurse was 50 percent at fault, if the hospital was 25 percent 
at fault, if everybody else in the health care industry was at 
fault, when they buy their insurance, they know that they're 
going to be on the hook for the whole 100 percent. And if you 
find one that's at fault, you don't have to show that he is 1, 
the nurse is 25, that this was that, that that was the other.
    Mr. Bachus. My point, and I----
    Mr. Scott. It's not up to----
    Mr. Bachus.--is that if somebody is 1 percent at fault, 
there's nothing fair about making them pay 100 percent of the 
damages. And, yes, in fact, those cases exist. I just----
    Mr. Scott. If the gentleman would yield one more time----
    Chairman Sensenbrenner. The gentleman's time has expired.
    Mr. Frank. Mr. Chairman?
    Mr. Scott. Would the gentleman----
    Mr. Frank. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from Massachusetts.
    Mr. Frank. Mr. Chairman, I yield first to the gentleman 
from Virginia.
    Mr. Scott. Thank you.
    The question is, if you go to the hospital and you know 
that malpractice has been committed upon you, and you find one 
that has 1 percent fault, then that person, right, will have to 
pay the whole thing. And then they will go back and find out 
all of whatever else happened.
    The alternative is that the plaintiff--all you know is that 
they left something after the surgery in your stomach. That's 
all you know. And then the surgeon says, ``Well, it was 
probably my fault. Okay. But only 1 percent. But it's somebody 
else's fault.'' The plaintiff then has to go chasing after 
everybody in the hospital.
    Now, which is more fair? For the hospital to decide to 
apportion all of that amongst itself, which is all insured 
anyway? Or have the plaintiff have that possibility and lose 1 
percent there because they couldn't find that one, or 2 percent 
there, and they collect all from this one and a little bit--
this one goes bankrupt? Which is more fair? You've got somebody 
with a $100,000 judgment and 50 people, possibly, at fault.
    Mr. Frank. Let me----
    Mr. Bachus. But I think, if you----
    Mr. Frank. Excuse me, it's my time, I would say to the 
gentleman from Alabama. And I will do something that he has 
told me he would never do for me: I'll yield to him.
    Mr. Bachus. Well, I think we both arrived at what you said; 
who would pay is whoever had insurance. So if one party who is 
1 percent liable, if they were responsible enough to take out 
insurance, those that there were the other collection of 99 
percent--say somebody was 40 percent liable, somebody else 40 
percent liable, someone 15 percent liable, some 4 percent 
liable. But the person that had high coverage or multimillion 
dollar coverage, they end up paying--they could end up paying--
--
    Mr. Frank. I'll take back my time, Mr. Chairman, to stress 
the major point I wanted to make, which was that the 
gentleman's example, the gentleman from Alabama, was totally 
misleading, and he's trying to, I think, obscure the point, 
which was he came forward with an example, and that's when the 
gentleman from Virginia talked about the comparative 
negligence, where the plaintiff was himself mostly responsible 
for the injury. He dropped that and, in fact, in his response 
to the gentleman from Virginia, left out that crucial point.
    That's what the gentleman from Virginia was talking about. 
He was talking about the situation, the hypothetical, where the 
plaintiff himself was responsible for almost all the injury.
    Mr. Bachus. No, I said----
    Mr. Frank. Excuse me, I didn't yield.
    Mr. Bachus. I said----
    Mr. Frank. Mr. Chairman, please, get a copy of the rules, 
the gentleman from----
    Chairman Sensenbrenner. The time belongs to the gentleman 
from Massachusetts.
    Mr. Frank. And I stress this because there ought to be some 
kind of outer limit on exactly how bizarre examples can be. I 
know that there is apparently a lack of faith in the jury 
system, but the notion that a jury would tell a criminal that 
he was 99 percent responsible for the problem but that he was 
going to get 100 percent recovery, it seems to me highly 
unlikely, sufficiently unlikely that with all of the diligent 
searching that the majority staff has done, apparently there is 
no such example.
    So what the gentleman gave us was a very hypothetical 
hypothetical. He gave us the situation of Disney, but we 
weren't talking about a drug dealer who was suing Disney 
because the needle jumped on Space Mountain. What we are 
talking about is a qualitatively different issue. And that 
invalidates entirely the example.
    So I would be interested, if anyone had an example----
    Mr. Scott. Will the gentleman yield?
    Mr. Frank. Yes, I would yield to the gentleman from 
Virginia.
    Mr. Scott. When we had the example of 40 percent here, 40 
percent there, 15 percent here, 4 percent there, and 1 percent 
there, the question is, where do you get those numbers? You get 
those numbers because you have to go chasing after everybody, 
trying to----
    Mr. Frank. I would----
    Mr. Scott.--and you can never get to the end of litigation.
    Mr. Frank. I would tell the gentleman, I think he said 40 
percent here and 40 percent there and----
    Mr. Scott. If you have a situation where you go in the 
hospital and the doctor is 40 percent, the hospital is 40 
percent----
    Mr. Frank. They're two separate issues, and I appreciate 
that. But I did want to make clear that the effort to kind of 
appeal to, well, the outrageousness of a criminal being 99 
percent responsible and getting a recovery, that was the 
example given. I don't think that----
    Mr. Bachus. I did not say that.
    Mr. Frank.--kind of example----
    Mr. Bachus. I did not say it was----
    Mr. Frank. Does the gentleman not understand the rules of 
the House?
    Chairman Sensenbrenner. The Committee will be in order. The 
time is controlled by the gentleman from Massachusetts, Mr. 
Frank.
    Mr. Frank. That was the example given, a drug dealer who 
was shot and was 99 percent responsible and recovered. And that 
is the sort of example that makes no constructive contribution 
to the debate.
    I would yield back.
    Chairman Sensenbrenner. The gentleman from Illinois, Mr. 
Hyde.
    Mr. Hyde. I ask leave to strike the last word----
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Hyde.--and yield to the gentleman from Alabama.
    Mr. Bachus. I did not say that the drug dealer was 99 
percent responsible. What I said, and I'll say it again, I said 
that he was shot in a drug deal gone bad. Now, you can assume 
two different things. You can assume that he shot himself in a 
drug deal gone bad, or you can assume that another person shot 
him. And I don't know how many people in drug deals that get 
shot are shot by themselves, in a self-inflicted wound. I would 
assume that someone else shot him and that he was shot in a 
drug deal gone bad. People get shot all the time.
    In fact, in my experience, I don't think I've ever seen a 
drug dealer shoot himself in a drug deal gone bad. I would 
think somebody else probably shot him, and he was taken to the 
hospital. And in fact, the hospital could be required to pay 
100 percent of the damages.
    And it's been said on more than one occasion in this 
Committee that if a party is only 1 percent responsible, they 
can't--they don't have to pay, and that's just not true. I've 
cited one recent Federal case where they were 1 percent 
responsible; they paid 100 percent of the damages.
    Yes, in a case where a drug dealer shot himself and then 
was brought to the hospital, then Mr. Frank and the gentleman 
from Virginia would be correct. But if someone else shot him, 
which is much more likely, and what I thought when I said he 
was shot in a drug deal gone bad----
    Mr. Scott. Would the gentleman----
    Mr. Bachus. I certainly didn't mean to imply that he shot 
himself.
    Mr. Scott. Would the gentleman yield?
    Mr. Bachus. Yes.
    Mr. Scott. I think in your case, the jury concluded that 
the drug dealing had contributed 99 percent of the problem.
    But in any case, the medical malpractice wouldn't have 
anything to do with the bullet wound, the damage done by the 
bullet wound. If the medical malpractice came after the fact, 
he would be liable for the damage done by the medical 
malpractice.
    The problem is that all of the litigation--without joint 
and several liability, all of the litigation is going to be on 
which member of the hospital did what. All the patient knows 
is, he's lying up there unconscious and was inflicted with 
malpractice and had $100,000 worth of damage.
    Now, if it was a doctor, he doesn't know; he was 
unconscious. They bought insurance to cover whatever the damage 
was. That's an easy transaction. But the doctor is going to be 
cross-claiming the hospital, make them pay 40 percent. The 
anesthesiologist, we'll make him pay. And they're going to be 
arguing it's not 15 percent; it ought to be 20 percent.
    And this is the extent--if you're trying to reduce the 
aggravation of litigation, this doesn't do anything except the 
possibility of the plaintiff having a more complicated case and 
somebody not paying their little share.
    When you go to the hospital, the hospital has already 
worked out how the deal is going to be. If anybody is liable, 
the hospital malpractice coverage will cover. And then they 
don't worry about anything else. They don't worry whether it's 
40 percent or 35 percent or 20 percent.
    How do you settle with anybody?
    Mr. Bachus. Well, reclaiming my time, I would just simply 
say----
    Chairman Sensenbrenner. The time belongs to the gentleman 
from Illinois.
    Mr. Bachus. Is that--but he yielded to me.
    Anyway, I would just close by saying, we keep saying--we're 
getting around to this--is, that's what you have insurance for. 
And I would say you really don't have insurance to pay claims 
for injuries or for percentage of injuries that you didn't 
cause. If you're 1 percent at fault, I don't think you 
anticipated having to pay 100 percent of the cost. And I think 
that's why Senator Lieberman is right on this, and why this 
bill is right. I just don't think that we ought to be getting 
insurance to pay for what we've done and also pay for those who 
have failed to get insurance or have no insurance.
    Chairman Sensenbrenner. Does the gentleman from Illinois 
yield back?
    Mr. Hyde. I yield back.
    Chairman Sensenbrenner. The question is on the amendment 
offered by the gentleman from Virginia, Mr. Scott.
    Those in favor will say aye.
    Opposed, no.
    The noes appear to have it. The noes have it. The amendment 
is not agreed to.
    [Intervening business.]
    We will now resume consideration of H.R. 4600, the HEALTH 
Act, which is open for amendment at any point.
    Are there further amendments?
    The gentleman from New York, Mr. Nadler.
    Mr. Nadler. Mr. Chairman, I have three amendments at the 
desk. I ask that number 3 be called up.
    Chairman Sensenbrenner. The clerk will report amendment 3.
    The Clerk. Amendment to H.R. 4600, offered by Mr. Nadler. 
On page 5, on line 10, 19, and page 6, line 1, after 
``$250,000,'' add ``adjusted annually, according to the 
adjustments in the consumer price index.''
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Nadler. Thank you, Mr. Chairman. This will not take 5 
minutes.
    This amendment actually came out of a discussion we were 
having a little while ago. Accepting the figure of $250,000 as 
a limit on noneconomic damages, even though it's worth much 
less than when it was first enacted in California in 1975, I 
think Mr. Berman said. But accepting that now, we certainly 
ought to put in an inflation adjustment for the future. If 
noneconomic damages are to be held to $250,000, there ought to 
be a real $250,000 5 years from now, 10 years from now, and so 
forth, and shouldn't be reduced in amount every year by 
inflation.
    Failure to adopt this amendment would say that what we 
really want to do is, for all practical purposes, to eliminate 
noneconomic damages gradually altogether. Or, I should say, to 
eliminate noneconomic damages altogether, gradually.
    We put in inflation adjustments for almost everything else 
we do, as I said, for salaries, for pensions, for Social 
Security, and so forth. And if we're going to have an absolute 
limit on noneconomic damages--unless we want to eliminate 
noneconomic damages, which would be grossly unfair, because I 
think everybody concedes that noneconomic damages are real 
damages. I mean, if you're crippled for life, that's real 
damage even though--in addition to your lost of wages and so 
forth.
    So I hope that, in the spirit of reasonableness, people 
will support this amendment to add an inflation adjustment in 
the future, not in the past, but in the future, to the $250,000 
limit.
    I yield back.
    Chairman Sensenbrenner. The Chair recognizes himself for 5 
minutes.
    Much has been stated about the lack of an inflation 
adjustment. The California Legislature has got the power and 
has had the power since they passed the MICRA law to increase 
the $250,000 cap in that State. They have failed to do so.
    And I believe one of the reasons they have failed to do so 
is that an increase in the cap is going to be directly 
reflected in increased medical malpractice insurance rates, 
which have to be passed on to consumers--meaning their health 
insurance premiums, or in the case of Medi-Cal or title XIX, to 
the taxpayers. Or alternatively, the consequence is that the 
provider will simply stop providing services to high-risk 
patients.
    Now, the cap has worked in California since MICRA was 
passed. According to data of the National Association of 
Insurance Commissioners, the rate of increase in medical 
professional liability premiums in California since the 
enactment of MICRA in 1976 has been 167 percent, whereas the 
rest of the United States has experienced a 505 percent rate of 
increase, which is 300 percent larger than that which was 
experienced in California.
    Perhaps at some time the future an adjustment should be 
made. But I think that should be determined in the future by 
Congress, based upon economic conditions and an assessment how 
this law, if it is enacted, works, rather than an automatic 
increase based upon some type of index.
    I would urge opposition to the amendment. I yield back the 
balance of my time.
    Mr. Berman. Mr. Chairman? Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from California, Mr. 
Berman.
    Mr. Berman. I am actually moved by the deference, the 
respect given to the California Legislature. It's well-
deserved.
    The California Legislature has passed legislation giving 
the farm workers the right to organize and join unions. The 
U.S. Congress hasn't.
    The California Legislature has passed minimum wage laws 
significantly more protective of low-income workers than the 
U.S. Government.
    The California Legislature has legislated higher air 
quality standards, stronger coastal protection, and a variety 
of consumer rights legislation that goes far beyond anything 
that we've done at the Federal level.
    The California Legislature has done more to ensure the 
privacy of its individuals, both constitutionally and 
statutorily, than anything that has come out of this Committee.
    I just wish that this respect for the Legislature, as shown 
by its close tracking of its work on this issue, was reflected 
in other actions by the Congress. I think the real thing here 
is, where we like what the Legislature has done--and by the 
way, I've noticed that, by and large, this majority doesn't 
like most of that Legislature has done. But in those rare 
instances where we do like it, we will praise it, respect it, 
and honor it with high praise. Otherwise, we'll ignore it.
    Mr. Frank. Would the gentleman yield?
    Mr. Berman. I'd be happy to.
    Mr. Frank. Well, I would ask the gentleman to be a little 
more optimistic, because as he noted, we are here being asked 
to emulate what the California Legislature did 27 years ago. So 
maybe 27 years from now, in the areas the gentleman mentioned--
the rights of farm workers, domestic partnerships, clean air--
maybe 27 years from now there will be similar progress. It will 
be outdated, but given what we're working with, it's probably 
better than nothing.
    Mr. Bachus. Mr. Chairman?
    Chairman Sensenbrenner. Does the gentleman from California 
wish to use the remainder of his time?
    Mr. Bachus. Mr. Chairman?
    Chairman Sensenbrenner. For what purpose does the gentleman 
from Alabama, Mr. Bachus, seek recognition?
    Mr. Bachus. Mr. Chairman, I'd like to really pose some 
questions to the author of the amendment.
    Mr. Chairman, Mr. Coble earlier mentioned that what we are 
doing here is we are putting limitations on the jury's right to 
make an award. And that does give me some concern. But we are 
limiting it, and I feel that limitations are appropriate.
    Secondly, I'm mindful--but I think we should be cautious in 
doing so. We should be mindful of inflation and that inflation 
does eat away at these caps.
    Third, I think we're all mindful that once we set a cap, 
that it's easier to resistance to ever changing it, even if 
inflation erodes it.
    So I will say that, at some point, whether it's on the 
floor or whatever, I, for one--a carefully constructed 
adjustment using the consumer price index, it's something I 
would certainly consider.
    I would say this, I would ask the gentleman at some point 
to consider something that adjusts to the nearest $10,000, say 
every 5 years or something of that nature, because here you're 
going to have something that would be $250,000, and then it 
would adjust every year. You know, so it may $251,814.08 the 
next year. And as we do other things, I think it would be 
prudent to limit the adjustments to at least maybe every 5 
years and at that time to round them to at least to the nearest 
$1,000, if not $5,000.
    Mr. Nadler. Will the gentleman yield?
    Mr. Bachus. I'd yield.
    Mr. Nadler. Well, I appreciate the gentleman's comments. I 
don't know why we would want to limit it to every 5 years. It's 
easy enough to do.
    And I certainly--especially if it'll get the gentleman's 
vote--but I certainly would have no objection to amending the 
amendment by adding the phrase ``to the nearest $1,000.'' I 
mean, in the word of $253,234.85 is not--I don't care, frankly. 
It doesn't make a difference. It's easy to do it either way.
    But I would ask unanimous consent to add the phrase to the 
amendment ``to the nearest $1,000.''
    Chairman Sensenbrenner. Without objection. Without 
objection, the amendment is modified.
    Mr. Nadler. Thank you.
    Let me just go further. I think we have to do this, in 
fairness. I don't like the limitation at all. I'll be frank; I 
won't vote for a limitation. But if we're going to have a 
limitation, unless we really want to eliminate noneconomic 
damages altogether, gradually, we have to have an inflation 
clause.
    We decided--I heard the distinguished Chairman say, well, 
maybe Congress every few years can adjust this. Well, we used 
to do that for Social Security, and we found out that the 
exigencies of budgets and politics and other things made it 
grossly unfair. And so we put in an annual inflation adjustor. 
We have annual inflation adjustors in for a host of things. And 
frankly, we ought to have it in for anyplace where you write a 
figure into the law, I think.
    But certainly here, where someone is injured and is getting 
a recovery to make them whole, and we're putting a limitation 
on how much the jury can say, we have to put an inflation 
adjustment in that.
    And frankly, yes, I understand, it may mean the malpractice 
insurance will cost more, and the whole purpose of the bill is 
to make it cost less. But the purpose of the bill should not be 
to make it cost less by doing things that are manifestly unfair 
and cause grievous injury to someone who is injured, which is 
what a limitation without an inflation adjustment would do.
    So I certainly hope the gentleman will consider voting for 
this amendment.
    And let me add one other thing on the gentleman's time, if 
I may, very briefly. We all know--I mean, Mr. Coble says you 
can't predict the Rules Committee, but we all know that the 
odds of the Rules Committee allowing substantive amendments of 
this nature on the floor are very small. So if we think it is 
right to do something like this, we really ought to do it here. 
And then, if other powers that be don't like it, they can deal 
with it in conference. But if we want to put our opinion in, we 
should do it here and not wait for the floor, because we won't 
get a chance to. The odds are, heavily, we will not get a 
chance to consider these kinds of amendments on the floor.
    I yield back, and I thank the gentleman.
    Chairman Sensenbrenner. The time of the gentleman from 
Alabama has expired.
    The question is on the Nadler amendment.
    Those in favor will say aye.
    Opposed, no.
    The noes appear to have it.
    Mr. Nadler. Mr. Chairman, I ask for a rollcall.
    Chairman Sensenbrenner. rollcall is ordered.
    The question is on the amendment offered by the gentleman 
from New York, Mr. Nadler, as modified.
    Those in favor will, as your names are called, answer aye. 
Those opposed, no. And the clerk will call the role.
    The Clerk. Mr. Hyde?
    Mr. Hyde. No.
    The Clerk. Mr. Hyde, no. Mr. Gekas?
    Mr. Gekas. No.
    The Clerk. Mr. Gekas, no. Mr. Coble?
    Mr. Coble. No.
    The Clerk. Mr. Coble, no. Mr. Smith?
    Mr. Smith. No.
    The Clerk. Mr. Smith, no. Mr. Gallegly?
    [No response.]
    The Clerk. Mr. Goodlatte?
    Mr. Goodlatte. No.
    The Clerk. Mr. Goodlatte, no. Mr. Chabot?
    Mr. Chabot. Aye.
    The Clerk. Mr. Chabot, aye. Mr. Barr?
    Mr. Barr. No.
    The Clerk. Mr. Barr, no. Mr. Jenkins?
    Mr. Jenkins. Aye.
    The Clerk. Mr. Jenkins, aye. Mr. Cannon?
    [No response.]
    The Clerk. Mr. Graham?
    [No response.]
    The Clerk. Mr. Bachus?
    Mr. Bachus. Aye.
    The Clerk. Mr. Bachus, aye. Mr. Hostettler?
    Mr. Hostettler. No.
    The Clerk. Mr. Hostettler, no. Mr. Green?
    Mr. Green. Pass.
    The Clerk. Mr. Green, pass. Mr. Keller?
    Mr. Keller. No.
    The Clerk. Mr. Keller, no. Mr. Issa?
    [No response.]
    The Clerk. Ms. Hart?
    Ms. Hart. No.
    The Clerk. Ms. Hart, no. Mr. Flake?
    Mr. Flake. No.
    The Clerk. Mr. Flake, no. Mr. Pence?
    [No response.]
    The Clerk. Mr. Forbes?
    Mr. Forbes. No.
    The Clerk. Mr. Forbes, no. Mr. Conyers?
    Mr. Conyers. Aye.
    The Clerk. Mr. Conyers, aye. Mr. Frank?
    Mr. Frank. Aye.
    The Clerk. Mr. Frank, aye. Mr. Berman?
    Mr. Berman. Aye.
    The Clerk. Mr. Berman, aye. Mr. Boucher?
    [No response.]
    The Clerk. Mr. Nadler?
    Mr. Nadler. Aye.
    The Clerk. Mr. Nadler, aye. Mr. Scott?
    Mr. Scott. Aye.
    The Clerk. Mr. Scott, aye. Mr. Watt?
    Mr. Watt. Aye.
    The Clerk. Mr. Watt, aye. Ms. Lofgren?
    Ms. Lofgren. Aye.
    The Clerk. Ms. Lofgren, aye. Ms. Jackson Lee?
    [No response.]
    The Clerk. Ms. Waters?
    [No response.]
    The Clerk. Mr. Meehan?
    [No response.]
    The Clerk. Mr. Delahunt?
    [No response.]
    The Clerk. Mr. Wexler?
    Mr. Wexler. Aye.
    The Clerk. Mr. Wexler, aye. Ms. Baldwin?
    Ms. Baldwin. Aye.
    The Clerk. Ms. Baldwin, aye. Mr. Weiner?
    [No response.]
    The Clerk. Mr. Schiff?
    Mr. Schiff. Aye.
    The Clerk. Mr. Schiff, aye. Mr. Chairman?
    Chairman Sensenbrenner. No.
    The Clerk. Mr. Chairman, no.
    Chairman Sensenbrenner. Are there additional Members who 
wish to cast or change their votes?
    The gentleman from California, Mr. Issa.
    Mr. Issa. No.
    The Clerk. Mr. Issa, no.
    Chairman Sensenbrenner. The gentleman from California, Mr. 
Gallegly.
    Mr. Gallegly. No.
    The Clerk. Mr. Gallegly, no.
    Chairman Sensenbrenner. The gentleman from Wisconsin, Mr. 
Green.
    Mr. Green. Aye.
    The Clerk. Mr. Green, aye.
    Chairman Sensenbrenner. Further Members who wish to cast or 
change their votes?
    If not, the clerk will report.
    The Clerk. Mr. Chairman, there are 14 ayes and 14 nays.
    Chairman Sensenbrenner. And the amendment is not agreed to.
    Before getting to the next amendment, the Chair will say we 
will come back after these votes. There are three votes. Would 
it be okay--the Chair is trying to get a consensus. Would it be 
okay if we came back at 12:30 p.m. promptly and started again? 
We do have to finish this entire schedule today.
    Mr. Watt. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from North Carolina.
    Mr. Watt. I understand--there are some of us who have 
primaries in our States and are trying to get out of here this 
afternoon to go and do that.
    Chairman Sensenbrenner. The last vote is scheduled between 
3 and 4 this afternoon. And if we come back at 12:30, I hope it 
would be possible that we would finish this bill and then do 
the other three bills, which are nowhere near as controversial.
    Mr. Nadler. Mr. Chairman?
    Chairman Sensenbrenner. Yes, the gentleman from New York.
    Mr. Nadler. The Democratic whip windup I think said the 
last bill is scheduled for, the last vote, 1 to 2 p.m. today.
    Chairman Sensenbrenner. Well, let's come back at 12:30. 
That gives everybody an hour for lunch and everything else. And 
we will complete the business today.
    The Committee is recessed until 12:30, and please be 
prompt.
    [Recess.]
    Chairman Sensenbrenner. The Committee will be in order. A 
working quorum is present. When the Committee recessed, pending 
was a motion to report the bill H.R. 4600 favorably to the full 
House. The bill was considered as read and open for amendment 
at any point.
    Are there amendments?
    Mr. Nadler. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from New York.
    Mr. Nadler. 4600 is the medical mal bill?
    Chairman Sensenbrenner. Yes.
    Mr. Nadler. Yes, we have amendments.
    Chairman Sensenbrenner. Does the gentleman from New York 
have an amendment at the desk?
    Mr. Nadler. Yes, I have----
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    Mr. Nadler. Well, wait a minute. Report amendment number 2, 
please.
    The Clerk. Amendment to H.R. 4600, offered by Mr. Nadler. 
On page 4, strike line 20 and line 21 through the word ``in.'' 
Substitute ``whichever of these events occurs last.''
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Nadler. Thank you. I won't take 5 minutes. It's a very 
simple amendment, Mr. Chairman. This bill says that a health 
care lawsuit may be commenced no later than 3 years after the 
date of injury--reasonable--or 1 year after the claimant 
discovers, or, through the use of reasonable diligence, should 
have discovered the injury, whichever occurs first. The problem 
is the ``whichever occurs first.''
    Now, let's say that someone negligently gave someone blood 
which hadn't been tested properly, and there was HIV virus in 
the blood, and, thus, the person contracted AIDS. And let's say 
that this is a normally healthy person. There'd be no way of 
knowing, no way through diligence of knowing, that he had HIV 
until symptoms began showing up 8, 9 years later.
    Now, most times where we have a statute of limitations, you 
say something like 3 years, or 4 years or whatever it is, or 
within a year after he knew or should have known of the injury, 
whichever occurs last. And that's all this amendment does. It 
makes a read: ``A health care lawsuit may be commenced no later 
than 3 years after the date of injury or 1 year after the 
claimant discovers, or, through the use of reasonable 
diligence, should have discovered the injury, whichever of 
these events occurs last.''
    So that if there are injuries, malpractice, no matter how 
flagrant, which you cannot possibly discover until after 3 
years, under the bill as written, there would be no way of 
suing for that. And that's just wrong.
    If someone was terribly damaged by someone's negligence, he 
should, assuming he shows due diligence in filing the lawsuit 
within a reasonable time of when he knew or could have known of 
it, he should not be deprived of his day in court. The bill as 
written, without this amendment, is, frankly, against our 
entire legal system by saying that, through no fault of the 
plaintiff's, through no fault of the victim's, he can't sue at 
all.
    So this simply makes what I assume is a technical--I can't 
believe they mean ``whichever is first,'' because, as I said, 
most statutes are written the other way, and this would conform 
it to most statutes, so people could sue, if they knew about it 
right away, they've got 3 years, and if not, within a year of 
when they learned of it, or should have learned of it with 
proper diligence.
    I yield back.
    Chairman Sensenbrenner. The Chair recognizes himself in 
opposition to the amendment.
    This amendment makes the statute of limitations completely 
open-ended. For example, it exposes OB/GYNs to lawsuit decades 
after they delivered a baby. And this specialty is particularly 
hard hit by the current medical professional liability 
insurance crisis.
    Let me say that looking at it from the insurance carrier's 
perspective, one of the things that an insurance carrier must 
do is to set aside reserves to pay claims that they are 
obligated to pay. If you reduce the certainty in when a lawsuit 
can be filed, then the insurance company prudently is going to 
have increase its reserves to a higher level. And that is 
funded by higher premiums.
    So by having an open-ended statute of limitations, we are 
guaranteeing an increase in medical malpractice insurance 
premiums, simply so that the insurance companies can protect 
themselves from bankruptcy by having adequate and maybe even 
more than adequate reserves, since they never know when the 
claim will be filed.
    For the same reasons we voted down the Scott amendment, I 
would hope we would vote down this amendment. And I yield back 
the balance of my time.
    Mr. Scott. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from Virginia.
    Mr. Scott. Mr. Chairman, I would hope that we would adopt 
the amendment. It's not as--it doesn't go as far as the 
amendment that it had introduced. But if you'll notice on line 
19 on page 4, it says ``through the use of reasonable diligence 
should have discovered.'' You're dealing with people--if it's 
after 3 years, you can't sue at all, or if you should have 
discovered, it's even less than that.
    This is a--you don't even get the 3 years.
    I would hope that we would adopt this amendment. It's fair. 
It doesn't have people losing their cases on technicalities, 
and also, it doesn't get people roped up in the difference 
between State and Federal in this Federal preemption. A lot of 
people will be losing their cases because the lawyers who do 
most of this in State court will miss this 1-year statute of 
limitations.
    And I yield to the gentleman from New York.
    Mr. Nadler. Thank you.
    Mr. Chairman, the distinguished Chairman says that an open-
ended statute reduces certainty, and the malpractice premiums, 
therefore, would not be as low as they otherwise might be.
    First of all, it's not open-ended. It's not totally open-
ended. If it's more than 3 years, you have to show that you 
only discovered it now and that you could not have discovered 
it earlier. And that's a burden you have to bear, to show that 
you could not have discovered it earlier. And secondly--so it's 
not totally open.
    But secondly, I will concede or admit or agree that 
premiums will be somewhat higher than under the draconian 
statute in the bill, but that's only fair because we have to 
balance--the aim of our tort system cannot be only to reduce 
insurance premiums. It also has to be give some elementary 
justice to victims. If someone was really injured, he should 
not be barred from recovering for his injury, for his lost 
wages, for his medical expenses, because it was impossible to 
discover the torts, the injury, within the 1 year or within the 
3 years. You have to have some modicum of fairness.
    And that may cost some money. Fine. There are other 
provisions in the bill designed to reduce the cost of money--
the cost of malpractice premiums.
    But if your only goal is reducing malpractice premiums no 
matter what that does to our justice system, no matter what it 
does to fairness, then I suppose there's nothing wrong with 
this provision as written.
    But if there's any conception of fairness to someone who 
may have been severely injured, and any attitude other than 
``tough luck, go jump in a lake'' because you didn't discover 
it in a year because it was undiscoverable, then you have to 
provide some provisions such as what I wrote, which is in the 
law in many States, in order to enable a victim to bring a 
lawsuit when or shortly after the injury is first discovered or 
discoverable.
    It's a question of elementary fairness, Mr. Chairman. I 
yield back.
    Mr. Bachus. Mr. Chairman?
    Chairman Sensenbrenner. Does the gentleman from Virginia 
yield back?
    Mr. Scott. I yield back.
    Chairman Sensenbrenner. The gentleman from Alabama, Mr. 
Bachus.
    Mr. Bachus. Mr. Chairman, Mr. Nadler offering this 
amendment sort of points out something to me that I really 
wasn't aware of. I'm not sure that, the way it's presently 
drafted, won't mislead some people into waiting, thinking 
they've got 3 years. You know, if I were just to read it, at 
first blush, I'd think this was a 3-year statute of 
limitations.
    But it does appear, when it says 3 years after the date of 
injury or 1 year after the claimant discovers the injury, 
whichever occurs first, in most cases you're going to discover 
that injury a week after it happens or a day or 2 after it 
happens you probably should have known if they took off--and so 
that's a 1-year statute of limitations, or, it would be a 1-
year, 5-day statute of limitations.
    And I know in Alabama, we went from 1 year to 2 years 
statute of limitations to try to help avoid lawsuits.
    So this is sort of--I think the way it's drafted is going 
to mislead some people into thinking there's a 3-year statute 
of limitations, and they're going to come walking in after they 
can't work it out over a year and a half.
    My question would be, what does California--is this 
identical to the California statute? But I think there's a 
serious problem here.
    Mr. Issa. Would the gentleman yield?
    Mr. Bachus. Yes.
    Mr. Issa. I can't speak to it being exactly the same as 
California. What I will say is that ordinary tort in California 
is 1 year. And it is pretty common, although I know Alabama is 
a special case--and to be honest, Alabama has been a special 
case of a great deal of concern at times.
    Mr. Bachus. Well, you know, we like Alabama. I haven't 
moved to California.
    Mr. Issa. No, no. And I was stationed in Alabama, and it's 
a wonderful place. Although your supreme court justices did 
need a little reworking to make it a perfect place. [Laughter.]
    Mr. Bachus. It's been reworked now.
    Mr. Issa. It is reworked now. It's a much better perfect 
place.
    But the fact is that it's routine, when you know that 
somebody has done you wrong, to have 1 year to bring that.
    Mr. Bachus. I think 2 years is much more routine in 
lawsuits.
    Mr. Nadler. Will the gentleman yield?
    Mr. Bachus. I would yield. I don't know--what I'm saying is 
I almost think that if you had a solid 1 year, it's better than 
this 3 years after you're injured or 1 year after you should 
have discovered it. That's going to normally be a 1-year-and-5-
day--you know, if you have an operation and you start having 
trouble 3 days later, then is that a 1-year-and-3-days?
    I mean, this is just a little unclear, is what I'm saying.
    Mr. Issa. I thought it was clearly giving, if the gentleman 
would continue yielding, it's clearly giving 3 years from the 
date, presuming you didn't know, which does increase the period 
of time to make a discovery.
    The one thing about medical that I think makes that 3 years 
very reasonable, to extend what would otherwise be normally 1 
year, is the fact that in medicine, you often don't discover 
it.
    The gentleman on the other side of the aisle specifically 
mentioned tainted blood. I mean, there is a good example of 
something that does take a little while sometimes to discover. 
On the other hand, you can't leave it ad infinitum. I mean, you 
have to set a date, and 3 years seems to be quite a generous 
extension, three times what would be an ordinary tort period of 
time in most States and under the normal Federal rule.
    Mr. Bachus. I would just use a personal analogy, and I 
don't mean to take any more time. About a year and a half ago, 
I was hit by a tractor-trailer truck, which went out of 
control. And I did not--we're still trying to figure out--the 
doctors haven't told me whether I'm going to need another 
operation. So I have not filed a lawsuit. The insurance company 
and I both want to settle it, but I would have had to file a 
lawsuit if we had a year statute of limitations.
    Chairman Sensenbrenner. Does the gentleman yield back?
    Mr. Bachus. I yield back.
    Chairman Sensenbrenner. The question is on the amendment 
offered by the gentleman from New York, M. Nadler.
    Those in favor will say aye.
    Opposed, no.
    The noes appear to have it. The noes have it, and the 
amendment in not agreed to.
    Are there further amendments?
    Mr. Nadler. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from New York.
    Mr. Nadler. Mr. Chairman, I have an amendment, the first 
one, at the desk.
    Chairman Sensenbrenner. The clerk will report the 
unnumbered ``first one'' amendment.
    The Clerk. Amendment to H.R. 4600, offered by Mr. Nadler. 
After section 11, insert the following new section and 
redesignate the succeeding section----
    Mr. Nadler. Mr. Chairman, I move to waive the reading.
    Chairman Sensenbrenner. Without objection, the amendment is 
considered as read.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. And the gentleman is recognized for 
5 minutes.
    Mr. Nadler. Thank you, Mr. Chairman.
    Mr. Chairman, this amendment is designed to prevent the 
sealing of information from medical malpractice lawsuits that 
could be used and have been used to protect the health and 
safety of others.
    I've been concerned for a number of years about records 
from lawsuits that affect public health and safety being sealed 
by court order. I see little justification for this practice. 
Too often, a doctor who may have been guilty of malpractice 
settles a lawsuit with a plaintiff and places a restriction in 
the settlement that all details of the case must remain secret. 
This ensures that no one else will ever know of the harm he or 
she has inflicted upon the victim.
    Take the case of Judy Fernandez. She went into the hospital 
for plastic surgery and never came out, having bled to death. 
Had she known that her doctor had settled a malpractice suit 3 
years earlier and been sued since then four times, she might 
have seen a different doctor. His license has since been 
revoked, 22 incidents and $1.5 million in malpractice payments 
later. But that's little comfort to Judy's husband.
    In some cases, secrecy costs lives. If we really want to 
reduce malpractice lawsuits, the place to begin would be to 
reduce the incidents of malpractice. Without full disclosure of 
these cases, medical boards will not know who to monitor and 
patients will not know who to avoid.
    Furthermore and more dangerously, we run the risk of 
doctors and insurance companies regarding lawsuits as merely 
the cost of doing business. Given the strict caps on liability 
that would be in place if this bill were to pass, what would 
stop a doctor with poor practices from budgeting for one or two 
lawsuits a year rather than changing the dangerous practices 
that lead to these suits. This should, obviously, be 
unacceptable.
    It's important for people to be aware of the health and 
safety hazards that may exist in the medical profession so that 
other people can make informed choices about their lives and, I 
might add, so that public agencies and professional 
organizations can crack down on such dangers. Too often, 
critical information is sealed from the public, and other 
people may be harmed as a result.
    Just last week, South Carolina's Federal judges recognized 
the dangers inherent in sealed settlements and moved to end 
this practice except in extraordinary circumstances in the 
Federal courts in South Carolina.
    I ask unanimous consent to enter into the record an 
editorial from the New York Times praising this decision.
    Chairman Sensenbrenner. Without objection.
    [The information follows:]
    
    
    Mr. Nadler. Thank you.
    I hope that this will signal a beginning of a trend to an 
openness in courts across the country. But we should take this 
step today to protect the public health and safety by passing 
this amendment.
    Let me add that this amendment is reasonably drafted to 
protect for gag orders, to allow for gag orders, when a judge 
finds that it's appropriate. The amendment is written in such a 
way that the judge must make a finding of fact where a gag 
order is requested. If the judge finds that the privacy 
interests in the case is broader than the public interest, the 
judge must issue the gag order. If the judge finds the public 
interest in the health and safety outweighs the privacy 
interest asserted, the judge may not issue the gag order. The 
judge also has to make sure the gag order is drafted as tightly 
as possible, in order to prevent the unnecessary disclosure of 
confidential information, but will not allow the sealing of 
information that may harm the public.
    I would also note that during floor debate on the Class 
Action Fairness Act, which capped liability in class action 
lawsuits in a similar manner as the bill before us, an almost 
identical amendment was accepted by the majority of the House, 
and I would hope that the same would occur in this Committee 
today.
    When it comes to health and safety, public access to 
malpractice lawsuit information is absolutely essential. I hope 
my colleagues will support this amendment. I thank you, and I 
yield back the balance of my time.
    Chairman Sensenbrenner. The Chair recognizes himself for 5 
minutes in opposition to the amendment.
    First, this amendment should be opposed because it governs 
a vaguely defined but no doubt very large category of 
documents, namely court records, which could mean just about 
anything, including, according to the amendment, any record 
obtained through discovery whether or not formally filed with 
the court.
    The amendment then makes these documents subject to public 
exposure by stating that public access to such documents can 
only be restricted under a dramatically lower threshold than 
they're currently protected by. The amendment would eviscerate 
the protection of documents from public disclosure simply 
because the documents could be arguably be described as simply 
relevant to public health and safety. These provisions threaten 
to eviscerate the attorney-client privilege.
    The amendment also eviscerates protective orders that are 
now routinely and appropriately applied to documents to the 
benefit of both sides in a health care lawsuit. Because 
protective orders offer defendants protections when they 
disclose documents that they are not legally bound to disclose, 
plaintiffs get access to a much broader range of information 
and documents that will help resolve claims without wasteful, 
costly, and time-consuming discovery disputes. In fact, most 
protective orders are mutually agreed upon when submitted for 
approval by the court.
    Likewise, because the court is not restricted as to when it 
can approve such protective orders, they are often granted 
without delay, giving the patient and his attorney access to 
the important information.
    The amendment, if adopted, would result in an additional 
layer of costly and time-consuming litigation simply to 
establish protective orders and afford the plaintiff access to 
information important to their own case. It would mire the 
courts in a blizzard of documents that would have to be 
considered by the court individually and delay the resolution 
of the plaintiff's initial claim and increase legal costs for 
everyone.
    The amendment also should be opposed because it takes the 
unprecedented step of federalizing the rules of State court 
regarding the confidentiality of documents and eliminating the 
many and varied protections State court procedures now afford 
both plaintiffs and defendants.
    Finally, a recent survey conducted by the bipartisan legal 
reform organization Common Good, whose board of advisers 
includes former Senator George McGovern, former Deputy Attorney 
General Eric Holder, who served during the Clinton 
administration, and former Senator Paul Simon, found that more 
than three-quarters of the physicians feel a concern about 
malpractice litigation has hurt their ability to provide 
quality care in recent years.
    When physicians were asked, ``Generally speaking, how much 
do you think fear of liability discourages medical 
professionals from openly discussing and thinking of ways to 
reduce medical errors?'' an astonishing 59 percent of 
physicians replied ``a lot.''
    The HEALTH Act would dispel the fear and allow doctors to 
freely suggest improvements in medical care. Just this summer 
the medical journal Annals of Medicine is beginning to detail 
reports on medical errors over the next year. In an editorial 
about the new series, the author of the study and his 
colleagues write that ``the medical profession, for reasons 
that include liability issues, is not discussing mistakes and 
harnessing the full power of errors to teach and, thereby, 
reduce errors,'' unquote.
    I would hope that, for these reasons, that this amendment 
would be opposed and that the State courts would continue to 
have the discretion to enter protective orders that the 
original bill allows them to.
    I yield back the balance of my time.
    The question is on the Nadler amendment.
    Those in favor will say aye.
    Opposed, no.
    The noes appear to have it. The noes have it, and the 
amendment is not agreed to.
    The gentleman from New York.
    Mr. Nadler. Mr. Chairman, I ask for a recorded vote.
    Chairman Sensenbrenner. A recorded vote is requested.
    The question is on agreeing to the amendment offered by the 
gentleman from New York. Those in favor will, as your names are 
called, answer aye. Those opposed, no. And the clerk will call 
the role.
    The Clerk. Mr. Hyde?
    [No response.].
    The Clerk. Mr. Gekas?
    [No response.]
    The Clerk. Mr. Coble?
    Mr. Coble. No.
    The Clerk. Mr. Coble, no. Mr. Smith?
    [No response.]
    The Clerk. Mr. Gallegly?
    Mr. Gallegly. No.
    The Clerk. Mr. Gallegly, no. Mr. Goodlatte?
    Mr. Goodlatte. No.
    The Clerk. Mr. Goodlatte, no. Mr. Chabot?
    Mr. Chabot. No.
    The Clerk. Mr. Chabot, no. Mr. Barr?
    Mr. Barr. No.
    The Clerk. Mr. Barr, no. Mr. Jenkins?
    [No response.]
    The Clerk. Mr. Cannon?
    Mr. Cannon. No.
    The Clerk. Mr. Cannon, no. Mr. Graham?
    [No response.]
    The Clerk. Mr. Bachus?
    Mr. Bachus. No.
    The Clerk. Mr. Bachus, no. Mr. Hostettler?
    Mr. Hostettler. No.
    The Clerk. Mr. Hostettler, no. Mr. Green?
    Mr. Green. No.
    The Clerk. Mr. Green, no. Mr. Keller?
    Mr. Keller. No.
    The Clerk. Mr. Keller, no. Mr. Issa?
    Mr. Issa. No.
    The Clerk. Mr. Issa, no. Ms. Hart?
    Ms. Hart. No.
    The Clerk. Ms. Hart, no. Mr. Flake?
    Mr. Flake. No.
    The Clerk. Mr. Flake, no. Mr. Pence?
    [No response.]
    The Clerk. Mr. Forbes?
    [No response.]
    The Clerk. Mr. Conyers?
    [No response.]
    The Clerk. Mr. Frank?
    [No response.]
    The Clerk. Mr. Berman?
    Mr. Berman. Aye.
    The Clerk. Mr. Berman, aye. Mr. Boucher?
    [No response.]
    The Clerk. Mr. Nadler?
    Mr. Nadler. Aye.
    The Clerk. Mr. Nadler, aye. Mr. Scott?
    Mr. Scott. Aye.
    The Clerk. Mr. Scott, aye. Mr. Watt?
    [No response.]
    The Clerk. Ms. Lofgren?
    [No response.]
    The Clerk. Ms. Jackson Lee?
    Ms. Jackson Lee. Aye.
    The Clerk. Ms. Jackson Lee, aye. Ms. Waters?
    [No response.]
    The Clerk. Mr. Meehan?
    [No response.]
    The Clerk. Mr. Delahunt?
    [No response.]
    The Clerk. Mr. Wexler?
    Mr. Wexler. Aye.
    The Clerk. Mr. Wexler, aye. Ms. Baldwin?
    Ms. Baldwin. Aye.
    The Clerk. Ms. Baldwin, aye. Mr. Boucher?
    [No response.]
    The Clerk. Mr. Nadler?
    Mr. Nadler. Aye.
    The Clerk. Mr. Nadler, aye. Mr. Scott?
    Mr. Scott. Aye.
    The Clerk. Mr. Scott, aye. Mr. Watt?
    [No response.]
    The Clerk. Ms. Lofgren?
    [No response.]
    The Clerk. Ms. Jackson Lee?
    Ms. Jackson Lee. Aye.
    The Clerk. Ms. Jackson Lee, aye. Ms. Waters.
    [No response.]
    The Clerk. Mr. Meehan?
    [No response.]
    The Clerk. Mr. Delahunt?
    [No response.]
    The Clerk. Mr. Wexler?
    Mr. Wexler. Aye.
    The Clerk. Mr. Wexler, aye. Ms. Baldwin?
    Ms. Baldwin. Aye.
    The Clerk. Ms. Baldwin, aye. Mr. Weiner?
    [No response.]
    The Clerk. Mr. Schiff?
    [No response.]
    The Clerk. Mr. Chairman?
    Chairman Sensenbrenner. No.
    The Clerk. Mr. Chairman, no.
    Chairman Sensenbrenner. Are there Members in the chamber 
who wish to cast or change their vote? The gentleman from 
Texas, Mr. Smith.
    Mr. Smith. Mr. Chairman, I vote no.
    The Clerk. Mr. Smith, no.
    Chairman Sensenbrenner. The gentleman from Tennessee, 
Mr.Jenkins?
    Mr. Jenkins. Mr. Chairman, I vote no.
    The Clerk. Mr. Smith, no.
    Chairman Sensenbrenner. The gentlemen from Tennessee, Mr. 
Jenkins.
    Mr. Jenkins. No.
    The Clerk. Mr. Jenkins, no.
    Chairman Sensenbrenner. The gentleman from Pennsylvania, 
Mr. Gekas.
    Mr. Gekas. No.
    The Clerk. Mr. Gekas, no.
    Chairman Sensenbrenner. Are there further Members in the 
chamber who wish to cast or change their votes? If not, the 
clerk will report.
    The Clerk. Mr. Chairman, there are six ayes and seventeen 
noes.
    Chairman Sensenbrenner. The amendment is not agreed to.
    Are there further amendments? The gentleman from New York, 
Mr. Nadler.
    Mr. Nadler. Mr. Chairman, I have an amendment. I have an 
amendment which I am offering, originally drafted for Mr. 
Conyers. It is Conyers 120, I think you have it there.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R.4600 offered by Mr. Nadler. 
Page 22, Line 1, strike subsection----
    Mr. Nadler. Mr. Chairman, I move to waive the reading.
    Chairman Sensenbrenner. Without objection, it is so 
ordered. The gentleman is recognized for 5 minutes.
    [The amendment follows:]
    
    
    Mr. Nadler. Thank you. Mr. Chairman, as currently drafted, 
this bill, perhaps intentionally, perhaps not, guts HMO reform 
laws that many States have passed in the last eight or 9 years.
    On Pages 17 and 18 of the bill, the bill defines the health 
care liability claim as ``based upon the provision of, use of, 
or payment for or the failure to provide user pay for health 
care services or medical products.''
    The rest of the bill sets caps on non-economic damages and 
punitive damages for health care liability claims among other 
things. Those limits are far less friendly to consumers and 
patients injured by HMOs than the patient protection laws 
enacted in recent years by the various States.
    I offer this amendment because we have reached a national 
consensus that for too long the law has been on the side of 
HMOs and big insurance companies and it is time we gave power 
back to patients and families and doctors.
    Both parties in this house and in the other body, Mr. 
Chairman, would share in that consensus. There are rival HMO 
reform bills, but they all have the same basic goal. Now, many 
of the States have passed such bills, but this bill would gut 
them.
    It can be life-threatening when an HMO refuses to authorize 
a visit to a specialist or the nearest emergency room or denies 
treatment that is desperately needed by a patient or refuses to 
be held accountable for any of the decisions that it makes.
    These decisions which are medical decisions, really, should 
not be made by HMOs and insurance companies concerned only 
about the bottom line. That is why at least eight States have 
enacted laws specifying that when the HMO steps in and inserts 
itself into the process of exercising medical judgment, their 
case goes to State court just as a medical negligence case 
would go to State court.
    Those States have reached consensus on what limits should 
apply in those cases, if any. I believe the HMO law enacted in 
Texas, for example, when George W. Bush was Governor, the bill 
he bragged about during the debate with Vice President Gore, 
should be respected and not superceded.
    That law has a higher cap on punitive damages than this 
bill, $750,000 and no caps on non-economic damages for suits 
against HMOs.
    The Arizona law has no limits on damages for HMO lawsuits. 
This bill caps punitive damages at $250,000 and non-economic 
damages at $250 and would gut the Arizona law.
    The California law has no HMO caps. The California law has 
been repeatedly referred to, but with respect to HMO there are 
no caps. This bill would undo that provision of the California 
law. The Georgia law does not allow any punitive damages, but 
does allow all non-economic damages against HMOs. This bill 
undoes that State legislative determination.
    The list goes on and on. My amendment, Mr. Chairman, would 
protect these laws and the other HMO laws that have been passed 
by the States. I hope that this bill is not intended to gut the 
protections that various States have enacted, given the failure 
of Congress to act in this area.
    States have stepped into the breach and enacted various 
laws and we should not interfere with those laws and undo what 
they have done recently to protect patients against HMOs.
    So, I urge my colleagues to vote yes on this amendment. I 
yield back.
    Chairman Sensenbrenner. The chair recognizes himself for 5 
minutes in opposition to the amendment. There is a simple 
reason why this amendment should be opposed. That is that 
courts have declared HMOs to be practicing medical when they 
make decisions about what is and is not covered by their plans.
    If HMOs are practicing medical, then it is only fair that 
they receive the same protections and have the same obligations 
that physicians who are not in an HMO receive under the bill.
    Also, if this amendment is adopted, the cost of joining an 
HMO will go up. That, too, decreases access to health care for 
everyone.
    Now, I would hope that we would have some kind of HMO 
reform passed by the Congress, but it seems to me that in the 
context of this bill the medical malpractice laws that apply to 
physicians ought to apply to HMOs since the courts have 
determined them to be practicing medicine and the Nadler 
amendment undoes that. That's why it should be voted down.
    I yield back the balance of my time.
    Mr. Berman. Mr. Chairman.
    Chairman Sensenbrenner. The gentlemen from California, Mr. 
Berman.
    Mr. Berman. Thank you, Mr. Chairman. I yield to the 
gentleman from New York.
    Mr. Nadler. Thank you, Mr. Berman.
    Mr. Chairman, I could not disagree with your reasoning 
more. Yes, the courts have held in some cases that the HMOs, 
when they make these decisions on what treatment you can have, 
et cetera, are practicing medical.
    I do not draw the conclusion, therefore that there 
liability should be limited to the liability of doctors. Their 
liability should be 1,000 times it because they have no 
business practicing medicine. They are insurance companies. 
Doctors should practice medicine. Maybe nurses should practice 
medicine. Health care professionals should practice medicine.
    Insurance companies should be squashed when they try to 
practice medicine. That is the purpose of what the States have 
done and that is the purpose of the HMO legislation pending in 
the House and the Senate, that HMOs have no business practicing 
medicine and when they do, they ought to get their hand slapped 
and hard.
    I thank the gentleman and I yield back
    Chairman Sensenbrenner. The question is on the Nadler 
amendment. Those in favor will say ``aye.''
    Opposed, no.
    The noes appear to have it.
    Mr. Nadler. Mr. Chairman, I ask for the ayes and nays.
    Chairman Sensenbrenner. A rollcall will be ordered. The 
question is on the amendment offered by the gentleman from New 
York, Mr. Nadler.
    Those in favor will, when your name is called, answer aye. 
Those opposed, no. The Clerk will call the role.
    The Clerk. Mr. Hyde?
    [No response.]
    The Clerk. Mr. Gekas?
    [No response.]
    The Clerk. Mr. Coble.
    Mr. Coble. Aye.
    The Clerk. Mr. Coble, aye. Mr. Smith?
    [No response.]
    The Clerk. Mr. Gallegly?
    Mr. Gallegly. No.
    The Clerk. Mr. Gallegly, no. Mr. Goodlatte?
    [No response.]
    The Clerk. Mr. Chabot?
    Mr. Chabot. No.
    The Clerk. Mr. Chabot, no. Mr. Barr?
    Mr. Barr. No.
    The Clerk. Mr. Barr, no. Mr. Jenkins?
    [No response.]
    The Clerk. Mr. Cannon?
    [No response.]
    The Clerk. Mr. Graham?
    [No response.]
    The Clerk. Mr. Bachus?
    Mr. Bachus. No.
    The Clerk. Mr. Bachus, no. Mr. Hostettler?
    [No response.]
    The Clerk. Mr. Green?
    Mr. Green. No.
    The Clerk. Mr. Green, no. Mr. Keller?
    Mr. Keller. No.
    The Clerk. Mr. Keller, no. Mr. Issa?
    Mr. Issa. Absolutely, positively no.
    The Clerk. Mr. Issa, no. Ms. Hart?
    Ms. Hart. No.
    The Clerk. Ms. Hart, no. Mr. Flake?
    [No response.]
    The Clerk. Mr. Pence?
    [No response.]
    The Clerk. Mr. Forbes?
    [No response.]
    The Clerk. Mr. Conyers?
    [No response.]
    The Clerk. Mr. Frank?
    [No response.]
    The Clerk. Mr. Berman?
    Mr. Berman. Aye.
    The Clerk. Mr. Berman, aye. Mr. Boucher?
    [No response.]
    The Clerk. Mr. Nadler.
    Mr. Nadler. Aye.
    The Clerk. Mr. Nadler, aye. Mr. Scott.
    Mr. Scott. Aye.
    The Clerk. Mr. Scott, aye. Mr. Watt?
    [No response.]
    The Clerk. Ms. Lofgren?
    [No response.]
    The Clerk. Ms. Jackson Lee?
    Ms. Jackson Lee. Aye.
    The Clerk. Ms. Jackson Lee, aye. Ms. Waters?
    [No response.]
    The Clerk. Mr. Meehan?
    [No response.]
    The Clerk. Mr. Delahunt?
    [No response.]
    The Clerk. Mr. Wexler?
    Mr. Wexler. Aye.
    The Clerk. Mr. Wexler, aye. Ms. Baldwin?
    Ms. Baldwin. Aye.
    The Clerk. Ms. Baldwin, aye. Mr. Weiner?
    [No response.]
    The Clerk. Mr. Schiff?
    [No response.]
    The Clerk. Mr. Chairman?
    Chairman Sensenbrenner. No.
    The Clerk. Mr. Chairman, no.
    Chairman Sensenbrenner. Are there Members who wish to cast 
or change their votes?
    The gentleman from Virginia, Mr. Goodlatte?
    Mr. Goodlatte. No.
    The Clerk. Mr. Goodlatte, no.
    Chairman Sensenbrenner. The gentleman from Tennessee, Mr. 
Jenkins.
    Mr. Jenkins. No.
    The Clerk. Mr. Jenkins, no.
    Chairman Sensenbrenner. The gentleman from Pennsylvania, 
Mr. Gekas.
    Mr. Gekas. No.
    The Clerk. Mr. Gekas, no.
    Chairman Sensenbrenner. The gentleman from Indiana, Mr. 
Hostettler?
    Mr. Hostettler. No.
    The Clerk. Mr. Hostettler, no.
    Chairman Sensenbrenner. Are there further Members who wish 
to change? The gentleman from Arizona, Mr. Flake.
    Mr. Flake. No.
    The Clerk. Mr. Flake, no.
    Chairman Sensenbrenner. The gentleman from Texas, Mr. 
Smith.
    Mr. Smith. Mr. Chairman, I vote no.
    The Clerk. Mr. Smith, no.
    Chairman Sensenbrenner. Are there further Members who wish 
to cast or change their votes? If not, the clerk will report.
    The Clerk. Mr. Chairman, there are seven ayes and fifteen 
nays.
    Chairman Sensenbrenner. And the amendment is not agreed to.
    Are there further amendments? The gentleman from New York.
    Mr. Nadler. Thank you, Mr. Chairman. I have----
    Chairman Sensenbrenner. Do you have an amendment at the 
desk?
    Mr. Nadler. Yes. I was about to say that. Actually, I have 
an amendment labeled Conyers 111 at the desk.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R.4600 offered by Mr. Nadler. Add 
at the end the following new section: Section 13, Liability.
    Mr. Nadler. Mr. Chairman, waive the reading?
    [The amendment follows:]
    
    
    Mr. Coble. Point of order.
    Chairman Sensenbrenner. The gentleman from North Carolina 
reserves a point of order. Without objection the amendment is 
considered as read and the gentleman from New York is 
recognized for 5 minutes.
    Mr. Nadler. Thank you, Mr. Chairman. Mr. Chairman, this is 
a common sense amendment which will send a message that the 
U.S. Congress will not condone the practice of U.S. 
corporations re-incorporating abroad in order to avoid tax and 
other liabilities.
    It does this by providing that U.S. firms which re-
incorporate in tax havens abroad cannot benefit from the legal 
liability protections in this bill. The amendment uses the very 
same definition of foreign tax traitor that was included in the 
motion to recommit to the Homeland Security Bill, a motion that 
passed by a vote of 318 to 110.
    With increasing frequency, companies are setting up shell 
companies in places such as Bermuda while the company continues 
to be owned by U.S. shareholders and continues to do business 
in American locations, the new foreign-located company escapes 
substantial that is liability.
    These companies are eager to put ``Made in the U.S.'' on 
their products while they avoid U.S. taxes and minimize legal 
liability after shuffling some corporate documents. The actions 
of these companies, besides increasing taxes for everybody 
else, obviously, are slaps in the face of every citizen who 
works hard and pays his or her taxes to this country.
    This amendment responds to this egregious behavior by 
telling these companies that they cannot receive any liability 
benefits under this bill. This is not a hypothetical concern, 
Mr. Chairman. The bill before us is so broad that it would 
benefit not just doctors and hospitals; it would also insulate 
the manufacturers of medical and drug devices from liability.
    And guess what, one of the very largest manufacturers of 
medical devices is the U.S. Surgical Corporation, a wholly 
owned subsidiary of the notorious Tyco Corporation. Tyco has 
its headquarters in New Hampshire, but is treated as a Bermuda 
corporation for tax purposes.
    Under this legislation, U.S. Surgical would be largely 
insulated from punitive damages, even though essentially it 
evades all U.S. taxes. That strikes me as wrong. This is an 
opportunity to let corporations know that it is wrong to claim 
U.S. citizenship when you are incorporated in Bermuda. It is 
wrong to seek the benefits of corporate citizenship without the 
responsibility and it is wrong to engage in sham off-shore 
transactions which leave hard-working U.S. citizens hanging out 
to dry.
    So, this amendment would say that if you are going to do 
all those things you don't get the benefits of the legal 
liability provisions in this bill. It is a simple amendment, 
Mr. Chairman, I should hope an obvious one. I urge my 
colleagues to support it. I yield back.
    Chairman Sensenbrenner. Does the gentleman from North 
Carolina insist on his point of order?
    Mr. Coble. I do, indeed, Mr. Chairman.
    Chairman Sensenbrenner. The gentleman will state his point 
of order.
    Mr. Coble. Rule 10, Mr. Chairman, places tax matters in the 
jurisdiction of the House Committee on Ways and Means.
    Mr. Nadler. Mr. Chairman.
    Chairman Sensenbrenner. The gentleman from New York.
    Mr. Nadler. This amendment does not affect tax matters. It 
does not increase or decrease the tax on anybody. All it says 
is if you do certain things the legal liability provisions of 
this bill, the legal liability limitations of this bill don't 
apply.
    The corporation will continue to pay exactly the same tax. 
This does not affect the tax in any way. Therefore, the point 
of order is not well taken. This amendment only deals with the 
legal liability limitations in the bill. It does not change the 
tax law in any way, does not change the tax liability of any 
corporation in any way.
    It simply says if you do certain things, then the legal 
liability provisions of this bill, which are within the 
jurisdiction of this Committee and within the purview of this 
bill, do not apply.
    Chairman Sensenbrenner. The chair is prepared to rule on 
the point of order. For the reasons stated by the gentleman 
from New York that that amendment deals with the legal 
liability of the corporations rather than the taxes that the 
corporations either pay or don't pay, the chair believes that 
the amendment is germane and thus the point of order made by 
the gentleman from North Carolina is not well taken.
    The question is on the amendment offered by the gentleman 
from New York. Those in favor will say aye.
    Opposed no.
    The Chair is in doubt. Those in favor will say aye.
    Opposed, no.
    The Chair is in doubt. Those in favor will raise your hand 
and be counted. The Chair will order a division. One, two, 
three four. The ayes will put their hands down and those 
opposed will raise their hands. One, two, three, four, five, 
six, seven, eight, nine, ten, eleven.
    The noes will put their hands down. There were four ayes 
and eleven noes. The amendment is not agreed to.
    Mr. Nadler. Mr. Chairman, I ask for a rollcall vote.
    Chairman Sensenbrenner. The question is on the amendment 
offered by the gentleman from New York, Mr. Nadler. Those in 
favor will, as your names are called answer aye. Those opposed, 
no. The clerk will call the role.
    The Clerk. Mr. Hyde?
    [No response.]
    The Clerk. Mr. Gekas?
    Mr. Gekas. No.
    The Clerk. Mr. Gekas, no. Mr. Coble.
    Mr. Coble. No.
    The Clerk. Mr. Coble, no. Mr. Smith?
    Mr. Smith. No.
    The Clerk. Mr. Smith, no. Mr. Gallegly?
    Mr. Gallegly. No.
    The Clerk. Mr. Gallegly, no. Mr. Goodlatte?
    Mr. Goodlatte. No.
    The Clerk. Mr. Goodlatte, no. Mr. Chabot?
    Mr. Chabot. No.
    The Clerk. Mr. Chabot, no. Mr. Barr?
    Mr. Barr. No.
    The Clerk. Mr. Barr, no. Mr. Jenkins?
    [No response.]
    The Clerk. Mr. Cannon?
    [No response.]
    The Clerk. Mr. Graham?
    [No response.]
    The Clerk. Mr. Bachus?
    Mr. Bachus. Aye.
    The Clerk. Mr. Bachus, aye. Mr. Hostettler?
    [No response.]
    The Clerk. Mr. Green?
    Mr. Green. No.
    The Clerk. Mr. Green, no. Mr. Keller?
    Mr. Keller. No.
    The Clerk. Mr. Keller, no. Mr. Issa?
    Mr. Issa. No.
    The Clerk. Mr. Issa, no. Ms. Hart?
    Ms. Hart. No.
    The Clerk. Ms. Hart, no. Mr. Flake?
    Mr. Flake. No.
    The Clerk. Mr. Flake, no. Mr. Pence?
    [No response.]
    The Clerk. Mr. Forbes?
    [No response.]
    The Clerk. Mr. Conyers?
    [No response.]
    The Clerk. Mr. Frank?
    [No response.]
    The Clerk. Mr. Berman?
    Mr. Berman. No.
    The Clerk. Mr. Berman, no. Mr. Boucher?
    [No response.]
    The Clerk. Mr. Nadler.
    Mr. Nadler. Aye.
    The Clerk. Mr. Nadler, aye. Mr. Scott?
    Mr. Scott. Aye.
    The Clerk. Mr. Scott, aye. Mr. Watt?
    [No response.]
    The Clerk. Ms. Lofgren?
    [No response.]
    The Clerk. Ms. Jackson Lee?
    Ms. Jackson Lee. Aye.
    The Clerk. Ms. Jackson Lee, aye. Ms. Waters?
    [No response.]
    The Clerk. Mr. Meehan?
    [No response.]
    The Clerk. Mr. Delahunt?
    [No response.]
    The Clerk. Mr. Wexler?
    Mr. Wexler. Aye.
    The Clerk. Mr. Wexler, aye. Ms. Baldwin?
    Ms. Baldwin. Aye.
    The Clerk. Ms. Baldwin, aye. Mr. Weiner?
    Mr. Weiner. Aye.
    The Clerk. Mr. Weiner, aye. Mr. Schiff?
    [No response.]
    The Clerk. Mr. Chairman?
    Chairman Sensenbrenner. No.
    The Clerk. Mr. Chairman, no.
    Chairman Sensenbrenner. Are there Members in the room who 
wish to cast or change their votes? The gentleman from 
Tennessee, Mr. Jenkins.
    Mr. Jenkins. No.
    The Clerk. Mr. Jenkins, no.
    Chairman Sensenbrenner. The gentleman from Alabama, Mr. 
Bachus.
    Mr. Bachus. No.
    The Clerk. Mr. Bachus, no.
    Chairman Sensenbrenner. Are there further Members who wish 
to cast or change their votes? If not, the clerk will report.
    The Clerk. Mr. Chairman, there are six ayes and sixteen 
noes.
    Chairman Sensenbrenner. And the amendment is not agreed to. 
Are there further amendments? From Virginia, Mr. Scott.
    Mr. Scott. Mr. Chairman, I have an amendment at the desk, 
number three.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R.4600 offered by Mr. Scott. On 
Page 6, strike all of Section 5.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Scott. Mr. Chairman, this strikes the limitation on 
attorney's fees. If we are talking about malpractice costs, I 
would like to note that the plaintiff pays his attorneys fees 
out of the award. The amount is not paid for by the defendant.
    If you want to reduce malpractice costs, you should limit 
defense attorney's fees which are paid out of the malpractice 
premiums. The plaintiff pays the awards, not the defendant. If 
there is a $100,000 award, the malpractice insurance company or 
the defendant will pay $100,000. If the attorney fee is 50 
percent, the malpractice insurance company or the defendant 
will pay the same $100,000. If it is 25 percent attorney's 
fees, they will pay $100,000. If there is no fee at all, they 
will pay $100,000.
    The amount paid for in the award by the defendant is not 
affected by attorney's fees. If there is a contingent fee, if 
it is a frivolous or losing case, the attorney will get 
nothing, in addition to subject to rule 11 for filing the 
frivolous case.
    The plaintiff can always choose, if he wants, to not do a 
contingent or percentage fee, but on an hourly rate, $100 an 
hour, win or lose, or one-third or forty percent of the total 
if you win.
    When I was practicing law, I don't know anybody that wanted 
to pay the hourly rate. Lawyers would rather get the hourly 
rate. That is how defenses lawyers are paid. Win or lose you 
get paid. That's a much easier thing than only getting paid 
when you win.
    But unfortunately most plaintiffs can't afford the upfront 
costs and can't afford to pay the lawyer unless they win. 
Therefore, that is why the percentage fees are so popular with 
plaintiffs.
    This provision is particular egregious, Mr. Chairman, 
because we, in the same bill, are eliminating joint and several 
liability which means that the plaintiff's attorney not only 
has to prove negligence generally, but then has to go and find 
each and every person in the hospital that committed some 
negligence, the nurse, the doctor, the assistant physician, the 
anesthesiologist, the hospital itself and then go and try to 
assign what percentage went to who and try to guess to make 
sure they don't under-estimate and settle for the wrong amount.
    There is a lot more work that has to be done, so the 
limitation on attorney's fees is even more egregious because of 
the other provisions in the bill.
    I would hope, Mr. Chairman, that we would defeat this 
provision. It does nothing to reduce malpractice costs.
    Chairman Sensenbrenner. The chair recognizes himself for 5 
minutes in opposition to the amendment.
    This amendment on attorney's fees is the same as the 
California MICRA law. The way the contingency fee system works 
is that it gives a lawyer an incentive to ask for an outrageous 
judgment because the higher the judgment, the more the lawyer 
gets.
    Now, the provisions in this bill provide for limitations on 
attorney's fees to give more money to injured plaintiffs and 
less to the plaintiff's bar. The large the victim's 
demonstrable, real life, quantifiable economic damages, the 
more they will receive under the bill because the lawyers will 
only be allowed to take 15 percent of awards over $600,000.
    Should the amendment be defeated and the provisions of the 
bill passed, victims would get 75 percent, approximately, of 
awards under $600,000 and about 85 percent, approximately, of 
awards over $600,000. So, if we really want to compensate 
injured plaintiffs, we ought to vote this amendment down.
    I yield back the balance of my time.
    Mr. Berman. Mr. Chairman.
    Chairman Sensenbrenner. The gentleman from California.
    Mr. Berman. Once again the argument is used that this is in 
the California law. So, I think it pays to take a moment to 
talk about what is in H.R.4600 that is not in the California 
law. The $250,000 cap on non-economic damages in California 
applies to medical malpractice cases only.
    In H.R.4600, the $250,000 cap on uneconomic damages not 
only applies to all medical malpractice cases in all 50 States, 
as well as at the Federal level, but also to product liability 
cases against drug and medical device manufacturers and civil 
actions against nursing homes, HMOs and insurance companies, 
way beyond the California law.
    This is not about dealing with a medical malpractice 
insurance crisis. This is far more than that. Non-economic 
damages compensate injured patients for real injuries. MICRA, 
California law, eliminates joint liability for non-economic 
damages, for pain and suffering.
    H.R.4600, this bill, eliminates joint liability for non-
economic and economic injury so that if a party responsible 50 
percent of the injury is the only party which can provide the 
compensation for the loss of wages and the costs of the medical 
care as a result of the negligence, the plaintiff doesn't 
become whole as a result of this amendment.
    It goes far beyond the California law, not just in the pain 
and suffering, but on the economic damages as well. In cloaking 
this with a notion of trying to do here what we are doing in 
California we are going far beyond it with H.R.4600.
    My only final point specifically related to this amendment 
is that there is no greater equalizer in terms of wealth and 
income than the plaintiff-attorney contingency fee.
    In the effort to bash the plaintiff's bar, those who seek 
to do the bashing make a mockery of the system of equal justice 
because there is no other way in which many of the cases 
involving negligence and which provide recoveries to people 
without regard to their wealth or ability for staying power.
    The only way they can come into court is through the 
contingency fee. When you start putting on price controls on 
that in a way to dissuade plaintiff's attorneys from taking the 
case, who you are hurting are lower-income plaintiffs and only 
lower-income plaintiffs.
    I think it is a good amendment. I think this bill goes far 
beyond the California law in its effort to sweep in caps and 
other limitations on liability.
    Chairman Sensenbrenner. The question is on the amendment 
offered by the gentlemen from Virginia, Mr.Scott. Those in 
favor will say aye.
    Opposed no.
    The noes appear to have it. The noes have it and the 
amendment is not agreed to.
    Are there further amendments? The gentleman from Virginia, 
Mr. Scott.
    Mr. Scott. The amendment at the desk, number four.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R.4600 offered by Mr. Scott. On 
page 7, strike all of Section 6.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Scott. Thank you, Mr. Chairman. This amendment would 
remove Section 6 which eliminates the collateral source rule. 
The collateral source rule guarantees that injured victims who 
are prudently invested in insurance receive the benefits of 
their thrift.
    Section 6 would guarantee that the wrong-doer would benefit 
from the victim's thrift. Mr. Chairman, when you have 
collateral sources you have three parties at interest. For 
example, if you have Blue Cross Blue Shield paying the hospital 
bill, you have the injured party who has insurance who ought to 
be better off because of the insurance than someone without 
insurance and you have the wrong-doer.
    Now, you can make an argument that the person who has 
insurance ought to benefit from their insurance. And if there 
happens to be a double payment, well, that's what they paid for 
in their insurance.
    You can make a logical argument for that. You can also make 
a logical argument that if the plaintiff can't get the benefit 
of his health insurance coverage, then maybe Blue Cross Blue 
Shield ought to get their money back and then presumably 
premiums would be lower. You can make an argument for that.
    It seems to me the worst argument you could make is that 
the person to benefit from the plaintiff's health insurance 
ought to be the wrong-doer who cause all the problems. That is 
what the underlying bill provides. The wrong-doer will benefit 
from the plaintiff's thrift and the fact that he has insurance, 
not the plaintiff, not the innocent victim and not the health 
insurance that can get their money back.
    But of the three, the last person that we ought to be 
giving some benefits to is the wrong-doer. What this would do 
would be to restore the present law. If Blue Cross Blue Shield 
wants their money back, they can provide subrogation in the 
contract. That is health insurance law.
    But in liability law, helping the wrong-doer is the last 
thing that we ought to be doing. That is what this amendment 
does. It puts the priorities back in favor of the one that paid 
for the insurance or Blue Cross Blue Shield getting their money 
back, but not the wrong-doer that caused all the problems.
    I yield back.
    Chairman Sensenbrenner. The chair recognizes himself for 5 
minutes in opposition to the amendment. This amendment weakens 
the collateral source provisions in the bill that prevent 
unfair double recoveries. Many plaintiffs receive compensation 
for medical bills or lost wages by health insurance, disability 
insurance or workers comp. Yet, the hospital physician or other 
health care provider being sued is not allowed to tell the jury 
about this other source of compensation.
    Even after these collateral source payments have already 
been paid to the person bring the law suit, that person is 
allowed to try to collect a second time in their lawsuit. As a 
result, plaintiffs are often paid twice for the same damages. 
This phenomenon is sometimes referred to as double recovery.
    However, allowing the plaintiff to collect twice for the 
same medical bills and other economic losses drives up the cost 
of health care for all. The Health Act allows the tryer of fact 
to determine whether to offset damage awards based upon 
evidence of collateral benefits.
    The trier of facts should be informed of the collateral 
source as a factor to consider when determining the net amount 
of compensation necessary to make the claimant whole. The 
purpose of the provision that the amendment intends to strike 
is to eliminate double recovery or recovery substantially 
greater than the trier of fact determined to be appropriate 
under the circumstances.
    I would urge a no vote on the amendment and yield back the 
balance of my time.
    The gentleman from California.
    Mr. Berman. Mr. Chairman, I apologize for speaking again, 
but I want to support the Chairman on this one issue involving 
this bill because I do think that the collateral, what the bill 
does here makes some sense and I disagree with the gentleman.
    I thought a lot about our conversation on the Floor earlier 
about this issue. In the end, though, the gentleman from 
Virginia's arguments in favoring this focuses on the wrong-
doer. We are not talking about punitive damages here. We are 
not talking about punishing a wrong-doer.
    We are talking about a system to try and make the plaintiff 
whole. If the plaintiff has already recovered, his health care, 
his medical expenses as a result of the negligence of the 
defendant from his own insurance policy, the notion that he 
should recover again from the malpractice insurance, that 
creates a system where the plaintiff's recovery is being made 
more than whole by virtue of this.
    By the same reasons that I don't like the caps on pain and 
suffering and some of the other provisions in this bill, I 
think the theory of making the plaintiff whole if the right 
theory. The gentleman's amendment doesn't provide for any 
subrogation mechanisms. When we decide which insurance company 
should get the money back and putting it in the context of the 
wrong-doer, economic damages aren't to penalize the wrong-doer. 
They are to make the plaintiff whole.
    So, I oppose this amendment.
    Mr. Scott. Would the gentleman yield?
    Mr. Berman. Sure.
    Mr. Scott. I would just say if you have two plaintiffs, one 
has insurance and the other one does not, under the underlying 
bill they will end up exactly the same. It seems to me that 
someone with insurance really ought to be better off. But if 
you are going to deny the plaintiff the right to recover and 
benefit from his health insurance, it seems to me that the most 
of the other two left, give the money back to the health 
insurance or give it to the defendant, it seems to me you ought 
to give it back to Blue Cross Blue Shield.
    If life insurance worked this way and you killed somebody, 
you would say you don't get no benefit from your life 
insurance. I would like to make one other comment. I don't know 
what the law is in Wisconsin, but in Virginia workers comp has 
subrogation.
    You can never get--there is no collateral source issue on 
workers comp, but in Virginia, certainly, workers comp has 
subrogation and I thought it was the same everywhere, so in 
that case there would be no issue of collateral sources.
    Mr. Berman. If I may reclaim my time, the gentleman's point 
on workers comp, I think, makes my point. If his amendment were 
to provide a method of subrogation so that to say that we have 
decided as a matter of public policy the plaintiff shouldn't 
recover twice for the medical expenses that he has incurred, 
but that we favor the primary health care carrier over the 
malpractice carrier as a matter of public policy, that would be 
one thing.
    But the effect of his amendment is to maintain the notion 
that the plaintiff should recover twice.
    Mr. Scott. Would the gentleman yield?
    Mr. Berman. I just think that applies a punitive damages 
standard to an economic damages problem.
    Mr. Scott. Would the gentleman yield?
    Mr. Berman. Sure.
    Mr. Scott. The question of whether Blue Cross Blue Shield 
gets its money back really is a matter of contract between the 
plaintiff and Blue Cross Blue Shield. Many provisions under 
health insurance policies provide subrogation. If you collect, 
you give your money back.
    Mr. Berman. You just said that in Virginia, as in 
California, the workers comp law specifically provides for 
subrogation for comp carriers against third party carriers by 
statute.
    Mr. Scott. And, if the gentleman would yield, your health 
policy, if they wanted to provide for that provision, you can 
put that in the contract. But given the bit of requiring by law 
the benefit go to the wrong-doer, seems to me the last person 
in line for any benefit of the fact that the plaintiff paid for 
insurance.
    Mr. Berman. If I buy earthquake insurance every single year 
and then sell my home and never had an earthquake, you know, I 
ought to get my premium back because there was no earthquake. 
You pay different kinds of premiums to deal with certain 
contingencies.
    Well, I don't think we are going to change each other's 
mind on this issue.
    Chairman Sensenbrenner. The gentleman's time has just about 
expired.
    The question is on the Scott amendment. Those in favor will 
say aye.
    Opposed, no.
    The noes appear to have it. The noes have it. The amendment 
is not agreed to.
    Are there further amendments? The gentleman from Virginia.
    Mr. Scott. I have an amendment at the desk, number five.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R.4600 offered by Mr. Scott: On 
Page 8, strike all of Section 7.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Scott. Mr. Chairman, the bill limits punitive damages 
to two times the amount of economic damages or $250,000, 
whichever is greater. That is without any regard to the cost 
savings somebody may have had by their outrageous activity that 
killed or injured somewhat.
    It seems to me, Mr. Chairman, if you are going to have 
punitive damages deterring conduct that the only way to 
effectively do it is not to limit damages. This also has the 
FDA immunization that provides for the fact that if you have 
FDA approval that you can't be hit for punitive damages.
    Government safety standards at their best establish only a 
minimum level of protection for the public. They may be 
outdated. They may be under-protective. They may be under-
enforced. They also give an incentive to companies not to do 
ongoing research because once they are approved they have their 
immunity and all the research can do--they are much better off, 
rather than doing research for safety, they are much better off 
just sticking their head in the sand and making money.
    Mr. Chairman, we have seen cases where companies calculate 
the amount of profits from a defective product and conclude 
that the cost of fixing it is more than they want to spend and 
they will just pay the damages. The fact that you limit 
$250,000 in punitive damages means that many companies will not 
be deterred from conduct that will kill or injure certain 
people.
    I would hope that we would not limit the punitive damages 
as they are in the bill and pass the amendment. I yield back.
    Chairman Sensenbrenner. The chair recognizes himself in 
opposition to the amendment.
    What the bill does is it limits punitive damages to two 
times economic damages. It doesn't abolish punitive damages at 
all, but puts reasonable limits on it. The Supreme Court has 
observed that punitive damages have run wild, jeopardizing 
fundamental constitutional rights.
    This is an attempt to respond to the concern that the 
Supreme Court has expressed on this where we can put some 
legislatively imposed reasonableness in punitive damages rather 
than having the courts do it.
    I think it is important to preserve legislative 
prerogatives in this. There is no evidence that the behavior of 
profit-making enterprises is less safe than the States that 
have set limits on punitive damages, Louisiana, Nebraska, 
Washington, New Hampshire, Massachusetts and Michigan, against 
those that don't limit punitive damages anymore.
    I think that we have done the responsible thing here. There 
have been academic groups that have recommended limiting 
punitive damages and also people who have expressed opposition 
to excessive punitive damages awards, which include the 
American Bar Association, the American College of Trial 
Lawyers, and the American Law Institute.
    I would urge the Members to vote down this is amendment and 
to keep the responsible limits that are contained in the bill.
    I yield back the balance of my time.
    The question is on the Scott amendment. Those in favor will 
say aye.
    Opposed, no.
    The noes appear to have it. The amendment is not agreed to.
    Are there further amendments?
    Mr. Scott. Mr. Chairman.
    Chairman Sensenbrenner. The gentleman from Virginia is not 
out yet.
    Mr. Scott. This is the last one, Mr. Chairman.
    Chairman Sensenbrenner. The clerk will report the last one.
    [The amendment follows:]
    
    
    Mr. Scott. It is the one offered by Mr. Watt.
    The Clerk. Amendment to H.R.4600 offered by Mr. Scott. On 
Page 23, lines 17 and 18, strike ``federal or State court or 
subject to an alternative.''
    Chairman Sensenbrenner. Without objection, the amendment is 
considered as read and the gentleman is recognized for 5 
minutes.
    Mr. Scott. Thank you, Mr. Chairman. Mr. Chairman, this is 
fairly self explanatory. This was just limit all of what we are 
doing to cases brought in Federal court and would not afflict 
well-established State law. I yield back the balance of my 
time.
    Chairman Sensenbrenner. The chair recognizes itself. This 
guts the entire bill because it doesn't apply to any action 
brought in the State court. We need to do something about this 
national problem. We have to have a national law.
    I yield back the balance of my time.
    The question is on the last Scott amendment. Those in favor 
will say aye.
    Opposed, no.
    The noes appear to have it. The noes have it. The amendment 
is not agreed to.
    Are there further amendments? The gentlewoman from Texas.
    Ms. Jackson Lee. I have an amendment at the desk, amendment 
number 7.
    Chairman Sensenbrenner. The clerk will report amendment 
number 7.
    The Clerk. Amendment to H.R.4600 offered by Ms. Jackson 
Lee. Page 5, line 13, after the period insert ``This limitation 
does not apply with respect to recovery by a person who has not 
attained the age of 12 years at the time the claim arose.''
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. The gentlewoman is recognized for 5 
minutes.
    Ms. Jackson Lee. Thank you very much, Mr. Chairman. I came 
to this markup with great expectation, first of all with the 
Fairness in Sentencing legislation which I thought, before 
having had the chance to be briefed, that it dealt with 
eliminating the inequities between crack and cocaine 
sentencing.
    I found to my dismay that that was not the case. Having 
spent some time this recess with medical doctors, members of 
the National Medical Association, Mr. Chairman, and listening 
to the crisis, particularly in the minority community, of 
doctors' offices being closed one by one; but more importantly 
of doctors' offices being turned down by insurers precipitously 
with no concern for the patients that they serve, charging 
horrific fees for their insurance premiums, some of them saying 
``no room at the inn.''
    I was again delighted that we had legislation that was 
entitled, ``The Help Efficient, Accessible, Low Cost, Timely 
Health Care Act of 2002.'' I find to my dismay again that this 
is a misrepresentation. Frankly, the legislative thought behind 
this bill, the name is good; the actions are poor.
    This legislation will not help my physician friends at all. 
It is expansive. It deals with medical devices. It does not 
stop the gaping hole. It does not stop the bleeding of seeing 
minority doctors close in every part of America, along with 
their fellow counterparts of the American Medical Association.
    The reason is because this is the same kind of crisis we 
saw in the insurance industry in the 1980's, in the 1970's. 
Really, their problem is on the basement, on the--excuse me, on 
the basis--it is in the basement--on the basis of the 
investment practices of insurance companies and a self-created 
crisis. That is to make every buck they possibly can without 
being responsive to those who are serving those in need.
    I offer this amendment dealing with the age group because 
it is the most vulnerable population, one of the most 
vulnerable populations of children. When you begin to limit the 
non-economic damages, you are talking about ignoring the 
punitive nature of an action that may involve an injury to a 
child of the perpetrator of that particular act.
    For example, if you have a circumstance of a injury that we 
cannot determine the long-range on a child because they are a 
child, the injury may be hard to discover long-range. So, 
limiting the non-economic damages therefore limits the child's 
ability to recover.
    But more importantly, it does not emphasize the greater 
impact that you have on the child than you might have on 
someone else who might be able to recoup and find alternative 
work. That is in response to the changed health condition that 
they may have.
    Frankly, I think as well that H.R.4600, as consumer groups 
have said, really does not answer the actuarial analysis of 
medical malpractice insurance suggesting that tort questions or 
tort cases is not really the basis on which these costs have 
gone up. So, in fact this legislation is hurting the most 
vulnerable population and it does not correct the problem.
    Our doctors need insurers who are willing, if you will, to 
risk on good health care and to provide these doctors with 
premiums they can afford. The tort cases, we will find in 
totality, do not have the impact that cause these insurance 
companies to raise their premiums.
    I wish we would not have these false representatives behind 
good legislative thought because I think this legislation could 
be good because there are important issues that we must 
address. But certainly to limit punitive damages or non-
economic damages is not the way to go and particularly for the 
most vulnerable and that is children ages 12 and under. I yield 
back my time.
    I ask my colleagues to support this amendment.
    Chairman Sensenbrenner. The chair recognizes himself for 5 
minutes in opposition to the amendment.
    The policy behind the cap on inherently unquantifiable non-
economic damages benefits patients of all ages. Such caps 
increase access to health care equally for children as well as 
for adults. In fact, it is the OB-GYNs, those who bring 
children into the world and providers of emergency medicine who 
are among those suffering the most without reasonable caps on 
unquantifiable non-economic damages because the mere threat of 
potentially limitless liability sends their malpractice 
insurance rates skyrocketing and consequently drives them out 
of business.
    Children more so than adults tend to get themselves 
injured. Therefore children have a very pressing need to 
specialists in Emergency Medicine. Without a reasonable cap on 
non-economic damages, there will be no one there to provide 
that emergency medicine and the children will suffer immensely.
    I urge a no vote on this amendment and yield back the 
balance of my time.
    The question is on the Jackson Lee amendment. Those in 
favor will say aye.
    Opposed, no.
    The noes appear to have it.
    Ms. Jackson Lee. I would like a rollcall.
    Chairman Sensenbrenner. The rollcall is demanded. The 
question is on the amendment offered by the gentlewoman from 
Texas, Ms. Jackson Lee. Those in favor will say aye. Those 
opposed will say no. The clerk will call the role.
    The Clerk. The clerk will call the role.
    The Clerk. Mr. Hyde?
    [No response.]
    The Clerk. Mr. Gekas?
    Mr. Gekas. No.
    The Clerk. Mr. Gekas, no. Mr. Coble.
    Mr. Coble. No.
    The Clerk. Mr. Coble, no. Mr. Smith?
    Mr. Smith. No.
    The Clerk. Mr. Smith, no. Mr. Gallegly.
    Mr. Gallegly. No.
    The Clerk. Mr. Gallegly, no. Mr. Goodlatte?
    [No response.]
    The Clerk. Mr. Chabot?
    [No response.]
    The Clerk. Mr. Barr?
    [No response.]
    The Clerk. Mr. Jenkins?
    Mr. Jenkins. No.
    The Clerk. Mr. Jenkins, no. Mr. Cannon?
    Mr. Cannon. No.
    The Clerk. Mr. Cannon, no. Mr. Graham?
    [No response.]
    The Clerk. Mr. Bachus?
    Mr. Bachus. No.
    The Clerk. Mr. Bachus, no. Mr. Hostettler?
    Mr. Hostettler. No.
    The Clerk. Mr. Hostettler, no. Mr. Green?
    Mr. Green. No.
    The Clerk. Mr. Green, no. Mr. Keller?
    Mr. Keller. No.
    The Clerk. Mr. Keller, no. Mr. Issa?
    [No response.]
    The Clerk. Ms. Hart?
    Ms. Hart. No.
    The Clerk. Ms. Hart, no. Mr. Flake?
    Mr. Flake. No.
    The Clerk. Mr. Flake, no. Mr. Pence?
    [No response.]
    The Clerk. Mr. Forbes?
    [No response.]
    The Clerk. Mr. Conyers?
    [No response.]
    The Clerk. Mr. Frank?
    [No response.]
    The Clerk. Mr. Berman?
    Mr. Berman. Aye.
    The Clerk. Mr. Berman, aye. Mr. Boucher?
    [No response.]
    The Clerk. Mr. Nadler?
    Mr. Nadler. Aye.
    The Clerk. Mr. Nadler, aye. Mr. Scott?
    Mr. Scott. Aye.
    The Clerk. Mr. Scott, aye. Mr. Watt?
    [No response.]
    The Clerk. Ms. Lofgren?
    [No response.]
    The Clerk. Ms. Jackson Lee?
    Ms. Jackson Lee. Aye.
    The Clerk. Ms. Jackson Lee, aye. Ms. Waters?
    [No response.]
    The Clerk. Mr. Meehan?
    [No response.]
    The Clerk. Mr. Delahunt?
    [No response.]
    The Clerk. Mr. Wexler?
    [No response.]
    The Clerk. Ms. Baldwin?
    Ms. Baldwin. Aye.
    The Clerk. Ms. Baldwin, aye. Mr. Weiner?
    Mr. Weiner. Aye.
    The Clerk. Mr. Weiner, aye. Mr. Schiff?
    [No response.]
    The Clerk. Mr. Chairman?
    Chairman Sensenbrenner. No.
    The Clerk. Mr. Chairman, no.
    Chairman Sensenbrenner. Are there Members who wish to cast 
or change their vote?
    The gentleman from Georgia, Mr. Barr.
    Mr. Barr.
    The Clerk. Mr. Barr, no.
    Chairman Sensenbrenner. The gentleman from Ohio, Mr. 
Chabot.
    Mr. Chabot. No.
    The Clerk. Mr. Chabot, no.
    Chairman Sensenbrenner. Are there further Members who wish 
to cast or change their vote? If not, the clerk will report.
    The gentleman from Indiana, Mr. Pence?
    Mr. Pence. No.
    The Clerk. Mr. Pence, no. Mr. Chairman, there are six ayes 
and sixteen noes.
    Chairman Sensenbrenner. And the amendment is not agreed to. 
Are there further amendments? The gentlewoman from Texas.
    Ms. Jackson Lee. Mr. Chairman, amendment number 10. It may 
be listed as amendment number 2, but amendment number 10.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R.4600, offered by Ms. Jackson 
Lee. Add at the end the following new section: Section 13, 
Applicability to Individuals 65 and over. Notwithstanding any 
other provision of this act, this act shall not reduce.
    Chairman Sensenbrenner. Without objection, the amendment is 
considered as read.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. The gentlewoman is recognized for 5 
minutes.
    Ms. Jackson Lee. Thank you very much, Mr. Chairman. This 
amendment exempts senior citizens, defined for the purposes of 
this bill as those over the age of 65, from the reductions in 
non-economic damages.
    Now, the arguments track the concerns we have regarding 
children, but are even more enhanced because of the 
vulnerability of seniors, the devastating impact of the 
particular injury and the fact that seniors would be left 
particularly vulnerable in the later years of their life.
    The question is: What is the basis of capping those 
punitive damages in light of the devastating impact that could 
be faced?
    Let me share with my colleagues something that I think is 
very important and why I think this argument regarding this 
particular legislation or the argument opposing the legislation 
strikes at the core of those of us who continuously fight so 
that doctors can do their business and as well so that we can 
have the right kind of patient-physician relationship.
    I wish we had passed a real patient bill of rights because 
we might have had the doctors in the position that they want to 
be. But Robert Hunter, Director of Insurance for the Consumer 
Federation of America, conducted an actuarial analysis of 
medical malpractice insurance using the most recent insurance 
data available from the National Association of Insurance 
Commissioners and A.M. Best and Company.
    His data shows that the cost of medical malpractice at the 
national health care expenditure level is quite low. Medical 
malpractice is a fraction of the cost of health care in the 
United States. For every $100 of national health care costs, 
medical malpractice costs 66 cents. In the year 2000, the cost 
was 56 cents, the second lowest rate of the decade.
    But for the life of me, I can't understand why doctors are 
being told by insurers, ``We cannot provide you with insurance 
without charging you exorbitant crisis-type premiums,'' 
$200,000, $150,000, $300,000, literally putting doctors out of 
business.
    All this legislation attempts to do, rather than being able 
to do this in a bipartisan way, and I note that there are those 
who are supporting this, it pits one group against another when 
the real culprit are insurance companies who are only trying to 
make major profit over vulnerable doctors who simply can do 
nothing else but follow the Hippocratic Oath, which is to save 
the people other than close their doors.
    We are doing a disservice to them and their patients by 
passing this kind of legislation. I would hope that we would 
give some hope, some help to senior citizens, minimally 
speaking, on this issue.
    You know, we really need to get in a room and talk face-to-
face about reality. Insurance companies are pitting us and we 
are both losing because when you have people who cannot recover 
in the right manner with these non-economic damages, this is a 
backdoor tort reform. It is not bringing down health care costs 
and it is not helping my friends who are physicians, though you 
may think it is.
    I ask my colleagues to support this amendment and I yield 
back my time.
    Chairman Sensenbrenner. The chair recognizes himself for 5 
minutes in opposition to the amendment.
    Many of the same arguments I made in opposition to the 
previous amendment by the gentlewoman from Texas prevail here, 
except we strike out OB-GYNs and put oncologists or geriatric 
psychiatrists or other types of specialties that treat 
primarily older people rather than those who treat younger 
people and children.
    Now, how this amendment will actually reduce the cost of 
health care to senior citizens is beyond me because by saying 
that senior citizens can recover more money and thus the 
doctors who treat senior citizens are going to have to pay more 
in malpractice insurance premiums, you know, simply does not 
add up.
    Fuzzy math was used in the last Presidential campaign. I 
would hope that we would have a uniform law that applied to 
everybody. This amendment actually pits doctors against each 
other and I think will force doctors into not treating senior 
citizens because the malpractice insurance costs will be much 
lower if they cut out their treatment of people who are over 
the age of 65.
    I yield back the balance of my time.
    The question is on the Jackson Lee amendment. Those in 
favor will say aye.
    Opposed, no.
    The noes appear to have it. The noes have it and the 
amendment is not agreed to.
    Are there further amendments? If not, the question occurs 
on the motion to report the bill, H.R.4600 favorably as 
amended. The chair notes the presence of a reporting quorum. 
All in favor will signify by saying aye.
    Opposed, no.
    The aye appear to have it. The ayes have it and the motion 
to report favorably is adopted. Without objection the bill will 
be reported favorably to the House in the form of a single 
amendment in the nature of a substitute, incorporating the one 
amendment adopted here today.
    Without objection, the Chairman is authorized to move to go 
to conference pursuant to House rules. Without objection, the 
staff is directed to make any technical and conforming changes 
and all Members will be given 2 days, as provided by the rules, 
in which to submit additional supplemental or minority views.
                            Dissenting Views

                              INTRODUCTION

    The undersigned reject the legislation on medical 
malpractice adopted by the Committee. Not only has the majority 
gone beyond their purported goal of reducing medical 
malpractice premiums, they have done so in a manner that 
jeopardizes and penalizes the health and safety of consumers, 
particularly women, children, seniors, and the underprivileged.
    We oppose this legislation for several reasons. First, 
medical malpractice is a serious problem in this country--
causing an estimated one hundred thousand preventable deaths 
per year--and the legislation's severe restrictions will no 
doubt exacerbate this problem. There is also scant evidence 
that restricting victims' access to damages will have any 
appreciable impact on medical malpractice premiums, defensive 
medicine, or physicians' departure from the field. By 
unilaterally preempting State laws, this bill also raises 
serious constitutional issues, including Commerce Clause, due 
process and right to trial-by-jury issues.
    We further oppose the legislation because the scope goes 
well beyond medical malpractice and goes so far as to limit the 
liability of HMOs for failure to provide coverage and to 
insulate drug and medical product manufactures from liability. 
Beyond this we have a number of specific concerns regarding the 
legislation's impact on victims, including draconian caps on 
non-economic and punitive damages that discriminate against 
women, seniors and children; a shortened statute of 
limitations; elimination of joint and several liability and the 
collateral source rule; the provision of periodic damages that 
will shift risk from wrongdoers to victims; and restrictions on 
contingency fees that will make it more difficult for the 
poorest members of society to obtain access to justice.
    The following is a brief description of the bill and a more 
detailed itemization of our concerns.
Description of Legislation
    H.R. 4600 limits the amount of non-economic damages--
damages for pain and suffering--to $250,000.
    In addition, H.R. 4600 eliminates joint and several 
liability, a longstanding common law doctrine that ensures that 
victims will be made whole. Similarly, the bill eliminates the 
collateral source doctrine, the effect of which is to shift the 
costs of malpractice from negligent defendants to innocent 
victims.
    The bill dramatically limits a victim's ability to recover 
punitive damages in two distinct ways. First, the bill imposes 
a heightened standard for the recovery of punitive damages, 
requiring clear and convincing evidence that the defendant 
acted with malicious intent to injure the plaintiff, or the 
defendant understood the plaintiff was substantially certain to 
suffer unnecessary injury yet deliberately failed to avoid such 
injury. It also limits punitive damages to two times the amount 
of economic damages or $250,000, whichever is greater. The 
second category of punitive damages affected by the bill is 
with respect to manufacturers and distributors of drugs and 
medical devices. Specifically, the bill bans punitive damage 
liability for manufacturers of drugs and devices that are 
approved by the FDA. It also extends this immunity to the 
manufacturers of drugs and devices that are not FDA-approved 
but are ``generally recognized as safe and effective,'' and to 
manufacturers or sellers of drugs from punitive damages for 
packaging or labeling defects. These restrictions are simply 
discriminatory and unjust.
    H.R. 4600 also restricts the payment of a claimant's damage 
recovery to his or her attorney, and sets unprecedented limits 
on the amount an attorney may receive in contingency fee 
payments. Specifically, the total amount of all contingent fees 
for representing all claimants in a health care lawsuit may not 
exceed: (1) 40% of the first $50,000 recovered by the 
claimant(s); (2) 33 1/3% of the next $50,000 recovered by the 
claimant(s); (3) 25% of the next $500,000 recovered by the 
claimant(s); and (4) 15% of any amount by which the recovery by 
the claimant(s) is in excess of $600,000.
    H.R. 4600 also provides an extremely restrictive statute of 
limitations for medical malpractice actions. It states that a 
``health care lawsuit may be commenced no later than 3 years 
after the date of injury or 1 year after the claimant 
discovers, or through the use of reasonable diligence should 
have discovered, the injury, whichever occurs first.'' 
(Emphasis added). This means that no lawsuit may be commenced 
after 3 years from the date of injury, regardless of the 
victim's knowledge of the injury.\1\
---------------------------------------------------------------------------
    \1\ The only exception is for minors who have sustained injury 
before the age of 6. These victims may bring a lawsuit until the later 
of 3 years from the date of injury, or the date on which the minor 
attains the age 8.
---------------------------------------------------------------------------
    The bill also provides for periodic payment rather than a 
lump sum payments to victims. And finally, H.R. 4600 is not 
limited to medical malpractice actions but covers lawsuits for 
failure to cover against HMOs and other insurers as well.
I. Background
    Medical malpractice is a tort-based legal claim for damages 
arising out of an injury caused by a health care provider. Tort 
claims are part of the ``common law,'' or judge-made law, of 
the United States' civil justice system. Typically, tort claims 
have been reserved to the States.\2\
---------------------------------------------------------------------------
    \2\ ``Tort law at present is almost exclusively State law rather 
than Federal law. . . .'' Federal Tort Reform Legislation: 
Constitutionality and Summaries of Selected Statutes (CRS Report 95-797 
A), at 1.
---------------------------------------------------------------------------
    The tort system provides a number of benefits to society. 
First, it compensates victims who have been injured by the 
negligent conduct of others. Second, it deters future 
misconduct and carelessness that may cause injury and punishes 
wrongdoers who inflict injury. Third, it prevents future injury 
by removing dangerous products and practices from the 
marketplace. Fourth, it informs an otherwise unknowing public 
of such harmful products or practices, thereby expanding public 
health and safety.\3\
---------------------------------------------------------------------------
    \3\ Joan Claybrook, Consumers and Tort Law, 34 Fed. B. News & J. 
127 (1987).
---------------------------------------------------------------------------
    Most medical malpractice claims are based on the tort of 
``negligence,'' defined as conduct ``which falls below the 
standard established by law for the protection of others 
against unreasonable risk of harm.'' \4\ In medical malpractice 
cases, this legal standard is based on the practices of the 
medical profession,\5\ and is usually determined based on the 
testimony of expert witnesses.
---------------------------------------------------------------------------
    \4\ Restatement (Second) of Torts Sec. 282 (1965).
    \5\ David M. Harney, Medical Malpractice Sec. 21.2, at 413 (2d ed 
1987).
---------------------------------------------------------------------------
    As with other torts, remedies for medical malpractice may 
consist of compensatory damage awards for economic losses such 
as medical expenses or lost wages; non-economic losses such as 
pain and suffering, reduced life expectancy and diminished 
quality of life; and punitive damages to punish and deter 
willful and wanton conduct.
II. General Concerns
    A review of the empirical evidence gathered over the last 
decade supports a number of conclusions: first, medical 
malpractice is a serious problem in the United States; second, 
H.R. 4600 does not respond to the problem of rampant medical 
malpractice and ignores the true reason for the ``crisis'' it 
purports to solve--the insurance industry's cycles and 
practices; and third, tort reforms have not reduced premiums 
for medical malpractice to any significant extent.
            A. Medical malpractice is a serious problem.
    Medical malpractice in the United States is a very real 
problem with devastating consequences. According to a study 
conducted in 1999 by the National Academy of Sciences Institute 
of Medicine (``IOM''), between 44,000 and 98,000 deaths occur 
each year in U.S. hospitals due to medical errors.\6\ This does 
not even include malpractice committed at outpatient centers, 
physician offices and clinics. These numbers are greater than 
the number of people who die due to motor vehicle accidents 
(43,458), breast cancer (42,297) or AIDS (16,516).\7\
---------------------------------------------------------------------------
    \6\ Kohn, Corrigan, Donaldson, Eds., To Err is Human: Building a 
Safer Health System, Institute of Medicine, National Academy Press: 
Washington, DC (1999). Using the lower estimate, medical malpractice in 
hospitals is the 8th leading cause of death in this country; using the 
higher estimate, it is the 5th leading cause of death. Id.
    \7\ Id.
---------------------------------------------------------------------------
    Study after study has shown that the prevalence of medical 
malpractice extolls an enormous burden on its victims. A 1990 
Harvard Medical Practice study found that medical negligence in 
New York hospitals results in 27,000 injuries and 7,000 deaths 
each year. The study found that eight times as many patients 
are injured by malpractice as ever file a claim; 16 times as 
many suffer injuries as receive any compensation.\8\ At a 1992 
meeting of the American Association for the Advancement of 
Science, it was reported that more than 1.3 million 
hospitalized Americans, or nearly 1 in 25, are injured annually 
by medical treatment; about 100,000 such patients, or 1 in 400, 
die each year as a direct result of such injuries.\9\ In 
contrast to the low number of lawsuits that are filed on behalf 
of malpractice's victims, the total national cost of 
malpractice is quite high. The 1999 IOM study found that total 
national cost of medical malpractice (lost income, lost 
household production, disability and health care costs) is 
between $17 billion and $29 billion each year.\10\
---------------------------------------------------------------------------
    \8\ Harvard Medical Practice Study, Patients, Doctors and Lawyers: 
Medical Injury, Malpractice Litigation, and Patient Compensation in New 
York (1990).
    \9\ Christine Russell, Human Error: Avoidable Mistakes Kill 100,000 
Patients a Year, Wash. Post Health Mag., Feb. 18, 1992; see also Harvey 
Wachsman, Lethal Medicine, The Epidemic of Medical Malpractice in 
America (1993).
    \10\ See Kohn et al., supra note 6.
---------------------------------------------------------------------------
            B. H.R. 4600 does not respond to the problem of rampant 
                    medical malpractice and ignores the true cause of 
                    the ``crisis''--the cyclical nature of the 
                    insurance industry and the investment practices of 
                    insurance companies.
    Supporters of H.R. 4600 claim that insurance companies have 
become insolvent or have left certain markets because of 
excessive litigation and unrestrained jury awards. This so-
called ``crisis,'' however, mirrors the last insurance 
``crisis'' that hit the United States in the mid-1980's and an 
earlier one in the mid-1970's. Similar to its predecessors, 
today's insurance ``crisis'' has less to do with the legal 
system, tort laws, lawyers or juries and more with the 
insurance underwriting cycle and insurance companies' own 
investment practices.
    Insurance industry experts have articulated the cyclical 
nature of the industry, showing a boom and bust cycle of so-
called ``crises,'' beginning in the 1970's. During this first 
cycle, medical malpractice insurance premiums increased by 
large margins and certain specialties were denied coverage.\11\ 
As a result, all States but one initiated reforms designed to 
provide alternative sources of insurance and to reduce the 
number and costs of claims. Physician and hospital-owned 
insurance companies emerged as an alternative to traditional 
policy providers,\12\ and, for at least a decade, insurance was 
accessible and affordable in a market dominated by these 
companies.
---------------------------------------------------------------------------
    \11\ U.S. Congress, Office of Technology Assessment, Pub. No. OTA-
BP-H-119, Impact of Legal Reforms on Medical Malpractice Costs 13 
(1993) [hereinafter OTA Report on Legal Reforms].
    \12\ Medical insurance providers consist of both stock and mutual 
insurance companies. The physician and hospital owned companies are 
among the mutual insurance companies created to provide the lowest 
possible premiums.
---------------------------------------------------------------------------
    The mid-1980's saw another such ``crisis.'' Prior to that, 
the insurance industry maintained affordable premiums and only 
minimal increases because of investments at high interest rates 
that produced significant yields. When interest rates dropped 
in 1984, driving down insurers' investment income, however, 
insurance providers responded with considerable increases in 
medical malpractice insurance premiums.\13\ The mid-1980's saw 
insurance rate increases of 300% or more for manufacturers, 
municipalities, doctors, nurse-midwives, day-care centers, non-
profit groups and many other commercial customers of liability 
insurance.\14\
---------------------------------------------------------------------------
    \13\ See OTA Report on Legal Reforms at 15.
    \14\ Statement of Joanne Doroshow, before the House Subcommittee on 
Commercial and Administrative Law, June 1, 2002 [hereinafter Doroshow 
statement].
---------------------------------------------------------------------------
    As Joanne Doroshow testified at the hearing before the 
Subcommittee on Commercial and Administrative Law, what 
precipitates these crises is always the same. ``Insurers make 
their money from investment income. During years of high 
interest rates and/or insurer profits, insurance companies 
engage in fierce competition for premiums dollars to invest for 
maximum return. More specifically, insurers engage in severe 
underpricing to insure very poor risks just to get premium 
dollars to invest. But when investment income decreases because 
interest rates drop, the stock market plummets and/or 
cumulative price cuts make profits become unbearably low, the 
industry responds by sharply increasing premiums and reducing 
coverage, creating a `liability insurance crisis.' '' \15\
---------------------------------------------------------------------------
    \15\ Id. at 7. Another factor that may adversely affect insurance 
rates is the fact that since 1945 insurance companies have been exempt 
from the antitrust laws. See 15 U.S.C. Sec. Sec. 1011-1015 (1945) 
(McCarran-Ferguson Act). Under the McCarran-Ferguson Act, courts have 
held that State regulation need not be meaningful or active in a 
particular instance to trigger the antitrust exemption. The result over 
the years has been uneven oversight of the insurance industry by the 
States, coupled with no possibility of Federal antitrust enforcement, 
creating an environment that has fostered a wide range of 
anticompetitive practices.
---------------------------------------------------------------------------
    One insurance expert recently described today's situation:

        What is happening to the market for medical malpractice 
        insurance in 2001 is a direct result of trends and 
        events present since the mid to late 1990's. Throughout 
        the 1990's and reaching a peak around 1997 and 1998, 
        insurers were on a quest for market share, that is, 
        they were driven more by the amount of premium they 
        could book rather than the adequacy of premiums to pay 
        losses. In large part this emphasis on market share was 
        driven by a desire to accumulate large amounts of 
        capital with which to turn into investment income. 
        Driven in large part by lobbyist for the insurance 
        industry and doctors' groups, H.R. 4600 is the latest 
        attempt to ``fix'' the system. Unfortunately, H.R. 4600 
        does not address the real problems, which include the 
        quantity of malpractice being committed by the medical 
        profession and the inability of many victims to obtain 
        reasonable compensation.

        In a perfect world, investment income would cover any 
        deficiencies that might exist in underwriting results 
        and the insurers' aggressive marketing and pricing 
        strategy would prove to be successful. Alas, we do not 
        live in a perfect insurance world and, as competition 
        intensified, underwriting results deteriorated. 
        Regardless of the level of risk management 
        intervention, proactive claims management, or tort 
        reform, the fact remains that if insurance policies are 
        consistently underpriced, the insurer will lose 
        money.\16\
---------------------------------------------------------------------------
    \16\ Charles Klodkin, Gallagher Healthcare Insurance Services, 
Medical Malpractice Insurance Trends? Chaos!, Sept. 2001 (emphasis 
added).

    Thus, there are many factors, completely unrelated to jury 
verdicts and the civil justice system, that affect insurance 
rates, including the following: changes in State law and 
regulatory requirements; competitiveness within the insurance 
market; the types of policies issued within the industry; 
interest rates; State socio-economic factors, such as 
urbanization; national economic trends; and huge portfolio 
losses due to the falling stock market.\17\ According to the 
National Association of Insurance Commissioners, these factors 
fall into three categories: (a) changes in interest rates, (b) 
underpricing in soft markets, and (c) adverse loss shocks that 
lead to supra-competitive cycles.\18\
---------------------------------------------------------------------------
    \17\ Numerous GAO studies and testimony over the past two decades 
have repeatedly demonstrated that the nexus between litigation, 
insurance rates, and health care costs is neither linear nor 
coextensive. See, e.g., ``Medical Malpractice: A Continuing Problem 
With Far-Reaching Implications,'' Statement of Charles A. Bowsher, 
Comptroller General of the United States Before the Subcommittee on 
Health House Committee on Ways and Means (GAO/T-HRD-90-24), Apr. 26, 
1990.
    \18\ Cycles and Crises in Property/Casualty Insurance: Causes and 
Implications, edited by Cummings, Harrington and Klein, NAIC, 1991 at 
339; see also Risk Managers Blame Insurers for Renewal Woes, National 
Underwriter, Jan. 14, 2002.
---------------------------------------------------------------------------
    The current crisis has also been affected by two additional 
factors. First, September 11 accelerated the price increases 
that had already started to set in by providing the adverse 
shock loss component of the equation.\19\ Second, St. Paul 
Insurance Company withdrew from the medical malpractice market, 
creating major supply and demand problems. Although St. Paul 
cited liability risks as the reason for its withdrawal, it is 
also noteworthy that St. Paul lost a significant amount of 
investment money in the Enron scandal.\20\ In addition, St. 
Paul engaged in a premium price war in the 1990's, using the 
go-go stock market to cover the spread. Invested reserves grew 
so large that some of the funds were released to the bottom 
line as profit. When the stock market crashed, however, St. 
Paul was left with the option of exiting the market or 
increasing premiums.\21\
---------------------------------------------------------------------------
    \19\ Well before September 11, the Federal Reserve had cut interest 
rates several times, providing the first element, and insurers had been 
underpricing in the soft market, providing the second element. See also 
Year in Review, Business Insurance, Dec. 24, 2001 (``To be sure, the 
market began firming in 2000. But the Sept. 11 terrorist attacks sent 
insurance prices skyrocketing far beyond the estimates of increases 
that earlier were being attributed to a normal hard cycle.'').
    \20\ Statement of Joanne Doroshow at 11-12.
    \21\ Todd Sloane, Back on the tort reform merry-go-round, 32 Modern 
Healthcare 28, July 15, 2002.
---------------------------------------------------------------------------
    Astonishingly, given this history, H.R. 4600 addresses none 
of these problems. It does nothing about insurance companies' 
bad investment practices or the insurance companies' boom and 
busy cycles. Rather, as in every other cyclical insurance 
industry ``crisis,'' the target and focus have been the legal 
system and restrictions on victims' rights to recover, 
respectively.
            C. Empirical evidence shows tort reforms have not had a 
                    significant impact in reducing insurance premiums.
    Supporters of H.R. 4600 argue that jury awards have 
skyrocketed, which in turn has caused malpractice premiums to 
increase, doctors to practice defensive medicine, and doctors 
to leave their practices in certain States with high premiums. 
They argue that restrictions on victims' abilities to pursue 
and collect on claims for malpractice will reduce these 
problems. A review of the empirical data indicates that the 
proponents' arguments are not correct and legal restrictions 
such as H.R. 4600 will not increase consumer welfare.
    First, the empirical data shows that jury awards, 
particularly punitive damages, are not increasing at a rate far 
beyond the rate of inflation. According to the actuarial 
analysis of medical malpractice insurance conducted by J. 
Robert Hunter, Director of Insurance for the Consumer 
Federation of America,\22\ the average malpractice payout has 
not changed much over the decade, hovering at approximately 
$30,000, not even taking into account inflation.\23\ For the 
decade ending in December 2000, each closed claim for medical 
malpractice, including million dollar verdicts, averaged only 
$27,824.\24\
---------------------------------------------------------------------------
    \22\ See Letter from J. Robert Hunter to Joanne Doroshow, Oct. 13, 
2001 and attached spreadsheet [hereinafter Hunter analysis]. To conduct 
this analysis, Mr. Hunter used the most recent insurance data available 
from the National Association of Insurance Commissioners and A.M. Best 
and Company. Id.
    \23\ Id.
    \24\ Id.
---------------------------------------------------------------------------
    Supporters of H.R. 4600 cite anecdotal evidence that jury 
awards are increasing. One such study, conducted by Jury 
Verdict Research and released in March 2002, showed that jury 
awards in medical malpractice cases jumped 43% from 1999 to 
2000. Studies such as this, however, are too narrowly focused 
to provide the complete picture. The JVR study cites data that 
is skewed toward the high-end and doesn't include defense 
verdicts (verdicts in which no money was awarded), verdicts in 
non-jury trials, verdict reductions by remittitur, or verdicts 
overturned on appeal. The JVR and similar studies are not 
adjusted for inflation and have no relation to what insurance 
companies actually pay out to claimants (an average of $30,000 
per claim).\25\
---------------------------------------------------------------------------
    \25\ Press Release, Flawed Jury Data Masks Trends, Center for 
Justice and Democracy, Mar. 23, 2002; see also Todd Sloane, Back on the 
tort reform merry-go-round, 32 Modern Healthcare 28, July 15, 2002 (JVR 
admitted that its 2,951-case malpractice database has large gaps in 
it--it collects award information sporadically and unsystematically, 
does not know how many it misses, cannot calculate the percentage 
change in the median for childbirth negligence cases, and excludes 
trial victories by doctors and hospitals that are worth zero dollars); 
Rachel Zimmerman and Christopher Oster, Assigning Liability: Insurers' 
Missteps Helped Provoke Malpractice ``Crisis''--Lawsuits Alone Didn't 
Cause Premiums to Skyrocket; Earlier Price War a Factor--Delivering Ms. 
Kline's Baby, The Wall Street Journal, A1, June 24, 2002 (discussing 
JVR's incomplete study).
---------------------------------------------------------------------------
    As for punitive damages--damages that are designed to deter 
willful and wanton misconduct--the evidence shows that they are 
infrequent. According to the Bureau of Justice Statistics, in 
1996 only 1.1 percent of medical malpractice plaintiffs who 
prevailed at trial were awarded punitive damages and only 1.2 
percent of those awards were awarded by juries.\26\
---------------------------------------------------------------------------
    \26\ Tort Trials and Verdicts in Large Counties, 1996, U.S. 
Department of Justice, Bureau of Justice Statistics, NCJ 179769 (August 
2000), p. 7.
---------------------------------------------------------------------------
    Second, medical malpractice premiums have not increased 
beyond the rate of inflation. The evidence compiled by Mr. 
Hunter shows that inflation-adjusted medical malpractice 
premiums have actually declined in the last decade. Average 
premiums per doctor barely climbed from $7,701 in 1991 to 
$7,843 in 2000, an increase of 1.9 percent. Adjusted for 
inflation, these figures show that premiums have actually 
decreased by 32.5 percent.\27\ Equally importantly, the 
statistics show that medical malpractice legal costs constitute 
a small fraction of the of the cost of health care in the 
United States. Mr. Hunter's analysis supports the conclusion 
that the cost of medical malpractice at the national health 
care expenditure level is quite low: for every $100 of national 
heath care costs, medical malpractice insurance costs 66 cents. 
In the year 2000, the cost was 56 cents, the second lowest rate 
of the decade.\28\
---------------------------------------------------------------------------
    \27\ Hunter analysis, supra.
    \28\ Id.
---------------------------------------------------------------------------
    Third, proponents' claims that doctors, fearing litigation, 
engage in the practice of defensive medicine simply do not bear 
out. In fact, the evidence shows that less than 8 percent of 
all diagnostic procedures are performed because of liability 
fears; most doctors who use aggressive diagnostic procedures do 
so because they believe the tests are medically indicated.\29\ 
A study conducted by the non-partisan Office of Technology 
Assessment (OTA) found that ``in the majority of clinical 
scenarios used in OTA's and other surveys, respondents did not 
report substantial levels of defensive medicine, even though 
the scenarios were specifically designed to elicit a defensive 
response.''\30\ The OTA further found that ``[c]onventional 
tort reforms that tinker with the existing process for 
resolving malpractice claims while retaining the personal 
liability of the physician are [unlikely to] alter physician 
behavior.''\31\ Thus, the effects of H.R. 4600's limitations on 
defensive medicine are likely to be small. If anything, we are 
more likely to see the result of too little services.
---------------------------------------------------------------------------
    \29\ U.S. Congress, Office of Technology Assessment, Defensive 
Medicine and Medical Malpractice, OTA-H-602 (Washington, D.C.: U.S. 
Government Printing Office, July 1994) at 74.
    \30\ Id.
    \31\ Id. at 92.
---------------------------------------------------------------------------
    Fourth, studies show that, despite claims by doctors' 
groups and the insurance industry,\32\ doctors are not leaving 
certain fields because they cannot afford the insurance 
premiums. Data from the American Medical Association actually 
shows that there are 4.4% more physicians in patient care per 
100,000 population in States without damage caps.\33\ There are 
5.8% more ob/gyn physicians per 100,000 women in States without 
caps.\34\ And in States without malpractice limitations, there 
are 233 physicians per 100,000 residents, while in States with 
malpractice limitations, there are 223 physicians per 100,000 
residents.\35\
---------------------------------------------------------------------------
    \32\ See Statement of the American Medical Association to the House 
Committee on Energy and Commerce, July 17, 2002, at 2-7; Statement of 
the National Medical Liability Reform Coalition, before the House 
Committee on Energy and Commerce, July 17, 2002, at 2.
    \33\ American Medical Association, Physician Characteristics and 
Distribution in the US (2001 ed).
    \34\ Health Care State Rankings (Morgan Quitno Press 2001).
    \35\ Senate Congressional Record, July 30, 2002, S7534.
---------------------------------------------------------------------------
    Studies done on particular States bear out this evidence. 
For example, Charleston Gazette reporters Lawrence Messina and 
Martha Leonard's series ``The Price of Practice'' \36\ found 
that, contrary to claims by the West Virginia Medical 
Association that doctors had left the State because of its lack 
of tort reform, the number of doctors in West Virginia had 
actually increased. In fact, between 1990 and 2000 the number 
of doctors had increased by 14.3 percent, a rate twenty times 
greater than the population.
---------------------------------------------------------------------------
    \36\ Martha Leonard, State has seen sharp increase in number of 
doctors, Sunday Gazette Mail, Feb. 25, 2001.
---------------------------------------------------------------------------
    The same is true in Pennsylvania. A census conducted by the 
Pennsylvania Medical Professional Liability Catastrophe Loss 
Fund found that between 1990 and 2000, the number of doctors 
increased by 13.5 percent, while the population increased by 
only 3.4 percent.\37\ Not only is Pennsylvania not losing 
doctors, it had more doctors in 2001 than it did in the 
preceding five to 10 years.\38\ Furthermore, the Philadelphia 
Inquirer notes that in 2000, ``Pennsylvania ranked ninth-
highest nationally for physician concentration, a top-10 
position it has held since 1992. There were 318 doctors for 
every 100,000 residents in 2000, according to the American 
Medical Association.'' \39\
---------------------------------------------------------------------------
    \37\ Ann Wlazelek, Doctors' ad campaign baseless; They're not 
fleeing Pa., but malpractice straits create ``hostile'' climate, 
Morning Call, Mar. 24, 2002; Josh Goldstein, Recent census of doctors 
shows no flight from Pa., Philadelphia Inquirer, Oct. 2, 2001.
    \38\ Goldstein, supra.
    \39\ Wlazelek, supra. Studies done on the ob/gyn market in New York 
yield similar conclusions. See New York Public Interest Research Group 
study, http://www.nypirg.org/health/malpractice--facts.html (N.Y. 
ranked 3rd in the nation in number of ob/gyn's per capita; the number 
of physicians in N.Y. has skyrocketed and increasing at a rate faster 
than the national average; N.Y. ranked 2nd in number of doctors per 
capita).
---------------------------------------------------------------------------
    Fifth, there is no evidence to support the claim that 
restrictions on malpractice litigation will bring about 
appreciable health care savings. To date there is scant 
quantitative evidence that previous attempts at the State level 
have accomplished this purported goal.\40\ In a comparison of 
States that enacted severe tort restrictions during the mid-
1980's and those that resisted enacting any tort reform, no 
correlation was found between tort reform and insurance 
rates.\41\ Indeed, some of the resisting States experienced low 
increases in insurance rates or loss costs relative to the 
national trends, while some States that enacted tort reforms 
experienced high rate or loss cost increases relative to the 
national trends. For example, data provided by Medical 
Liability Monitor in 2001 showed that in the practice of 
internal medicine, States with caps on damages had higher 
premiums than States without caps. For general surgeons, 
insurance premiums were 2.3% higher in States with caps on 
damages. And for ob/gyn's, premiums were only 3.3% lower in 
States with caps on damages.\42\ On average, malpractice 
premiums were no higher in the 27 States that have no 
limitations on malpractice damages, than in the 23 States that 
do have such limits.\43\ The vast majority of the evidence 
shows that tort reform does little if anything to reduce 
medical malpractice premiums.\44\
---------------------------------------------------------------------------
    \40\ It is hardly a foregone conclusion that such restrictions will 
``fix'' the problem. In fact, both Republican and Democratic Members of 
the Judiciary Committee requested the General Accounting Office to 
conduct an inquiry into the effect of State tort laws on medical 
professional liability premium increases nationwide.
    \41\ Robert J. Hunter and Joanne Doroshow, Premium Deceit--the 
Failure of ``Tort Reform'' to Cut Insurance Prices, Center for Justice 
& Democracy (1999).
    \42\ Medical Liability Monitor (Vol 26, #10--Oct 2001).
    \43\ Senate Congressional Record, July 30, 2002, S7534. Moreover, 
studies show that rising insurance rates have been a trend in the 
entire commercial industry, not just in the medical malpractice 
industry. Insurance prices have risen by 21% for small commercial 
accounts, by 32% for mid-size commercial accounts, and by 36% for large 
commercial accounts. Insurance for the construction industry, the 
commercial automobile industry, the property industry, the workers' 
compensation industry, and more, have all increased between 24% and 
56%. See Council of Insurance Agents and Brokers, 4th Quarter 2001 
Survey, released January 2002.
    \44\ Insurance industry spokespersons practically admit this. As 
Sherman Joyce, president of the American Tort Reform Association 
(ATRA), stated, ``We wouldn't tell you or anyone that the reason to 
pass tort reform would be to reduce insurance rates.'' Study Finds No 
Link Between Tort Reforms and Insurance Rates , Liability Week, July 
19, 1999. ATRA's General Counsel, Victor Schwartz, told Business 
Insurance that ``many tort reform advocates do not contend that 
restricting litigation will lower insurance rates, and `I've never said 
that in 30 years.' '' Michael Prince, Tort Reforms Don't Cut Liability 
Rates, Study Says , Business Insurance, July 19, 1999. And Debra 
Ballen, the executive vice president of the American Insurance 
Association, stated that ``insurers never promised that tort reform 
would achieve specific PREMIUM savings.'' Press Release, AIA Cites 
Fatal Flaws in Critic's Reports on Tort Reform, Mar. 13, 2002. 
Moreover, studies conducted by the National Association of Attorneys 
General and State commissions in New Mexico, Michigan and Pennsylvania 
confirmed that the crisis was caused not by the legal system but rather 
by the insurance cycle and mismanaged underwriting by the insurance 
industry. Francis X. Bellotti, Attorney General of Massachusetts, et 
al., Analysis of the Causes of the Current Crisis of Unavailability and 
Unaffordability of Liability Insurance (Boston, MA: Ad Hoc Insurance 
Committee of the National Association of Attorneys General, May 1986).
---------------------------------------------------------------------------
    The California experience is perhaps the most telling of 
this fact. In 1975, California enacted into law the ``Medical 
Injury Compensation Reform Act'' (MICRA), after which many 
provisions of H.R. 4600 are modeled, including caps on non-
economic damages, collateral source offsets, and limitations on 
attorneys' fees. Despite these ``reforms,'' premiums for 
medical malpractice in California grew more quickly between 
1991 and 2000 than in the nation (3.5% vs. 1.9%, 
respectively).\45\ And between 1975 and 1993, California's 
health care costs rose 343%, almost double the rate of 
inflation.\46\
---------------------------------------------------------------------------
    \45\ Hunter analysis, supra.
    \46\ Data provided by Consumers Union.
---------------------------------------------------------------------------
    A comprehensive study of MICRA's impact conducted in 1995 
found the following: per capita health care expenditures in 
California have exceeded the national average every year 
between 1975 and 1993 by an average of 9% per year; 
California's medical malpractice liability premiums actually 
increased by 190% in the twelve years following enactment of 
MICRA; hospital patient costs are higher in California than in 
other major States; and California's health care costs have 
continued to increase at a rate faster than inflation since the 
passage of MICRA.\47\
---------------------------------------------------------------------------
    \47\ See Proposition 103 Enforcement Project, MICRA: The Impact on 
Health Care Costs of California's Experiment With Restrictions on 
Medical Malpractice Lawsuits, 1995. Inflation rose 186% between 1975 
and 1993. California's health care costs grew by 343% during the same 
period, and generally have grown at almost twice the rate of inflation 
since 1985.
---------------------------------------------------------------------------
    Not only does the evidence show that California's tort 
reform has failed to lower premiums for doctors, it also shows 
that California's insurance companies are reaping excessive 
profits in the aftermath of tort reform. In 1997, California's 
insurers earned more than $763 million, yet paid out less than 
$300 million to claimants.\48\ The National Association of 
Insurance Commissioners reported the following: malpractice 
insurance profits are ten times greater than the profits of 
other lines of insurance in California; the average profit for 
malpractice insurance in California was 25.40% of the collected 
premium; and less than half of medical malpractice premiums are 
paid to claimants--only 38.4% of medical malpractice premiums 
collected in California since 1988.\49\
---------------------------------------------------------------------------
    \48\ California Department of Insurance.
    \49\ National Association of Insurance Commissioners, Profitability 
By Line By State in 1997 (Dec. 1998).
---------------------------------------------------------------------------
III. H.R. 4600 Goes Beyond Medical Malpractice And Applies To Insulate 
        HMO's Insurers, Drug Companies, And Manufacturers And 
        Distributors Of Medical Devices.
    Although H.R. 4600's proponents frequently tout it as a 
medical malpractice bill, its scope is far broader. In fact, 
the bill applies to (1) lawsuits against HMOs and other 
insurers, and (2) products liability claims against drug 
companies and manufacturers and distributors of medical 
devices.
            A. H.R. 4600 completely preempts States' patients' bills of 
                    rights that have allowed HMOs to be sued for 
                    wrongful actions.
    As currently drafted, this bill guts HMO reform laws the 
States have already passed. On pages 17 and 18, the bill 
defines a health care liability claim as ``based upon the 
provision of, use of, or payment for (or the failure to 
provide, use, or pay for) health care services or medical 
products.''
    We find it extremely problematic that legislation 
purporting to be a medical malpractice bill would be broad 
enough to cover lawsuits against HMO's and other insurers, 
particularly because such legislation serves to preempt the 
patients' bills of rights passed by some States. For example, 
the HMO law enacted in Texas under George W. Bush was Governor 
has a higher cap on punitive damages ($75,000) than H.R. 4600, 
and no caps on non-economic damages for suits against HMOs.\50\ 
The Arizona law has no limits on damages for HMO lawsuits.\51\ 
California, on which much of H.R. 4600 is based, has no HMO 
caps.\52\ Georgia's law does not allow any punitive damages but 
allows all non-economic damages against HMOs.\53\ Maine's law 
does not allow punitive damages but has a higher cap on non-
economic damages at $400,000.\54\ And Oklahoma, Washington and 
West Virginia have no limitations on damages.\55\ In one piece 
of legislation, H.R. 4600 completely eviscerates these 
protections specifically enacted by these States.
---------------------------------------------------------------------------
    \50\ TX. Civ. Prac. & Rem. Code, Title 4, sec. 88.001 et seq. 
(1997).
    \51\ AZ Rev. Stat. 20-3153 et seq. (2000).
    \52\ CA Civil Code 3428 (1999).
    \53\ GA Code ann. 51-1-48 et seq. (1999).
    \54\ 24-A M.R.S.A. sec. 4313 (1999).
    \55\ OK. Stat. Title 36 sec. 6593 et seq. (2000); 48.43.545 Rev. 
Code WA (2000); 33-25C7 Code of W Va (2001).
---------------------------------------------------------------------------
            B. This ``medical malpractice'' bill also covers products 
                    liability lawsuits against manufacturers and 
                    distributors of medical devices and drugs.
    The bill also exempts from liability for punitive damages 
manufacturers and distributors of medical devices, as well as 
pharmaceutical companies, who happen to obtain FDA approval. 
This provision provides a complete defense to liability for any 
drug or medical device that received pre-market approval from 
the FDA. In other words, if the FDA mistakenly allows a 
defective product on the market, the victims would not be able 
to sue at all. Even if both the manufacturer and the FDA have 
evidence of the dangers of a product, but permit it to be 
marketed anyway, the innocent, injured victim would be left 
without any opportunity for compensation whatsoever. We have 
seen no evidence that placing such faith in underfunded Federal 
regulators is warranted.
    Moreover, these Federal regulators approve the design of 
the product before it enters the manufacturing process only; 
they does not approve the manufacturing of each batch of a 
product. Nevertheless, the manufacturer of a defective product 
is exempt from punitive damages under this bill. And the 
examples of products such as the Dalkon Shield, the Cooper-7 
IUD device, high absorbency tampons linked to toxic shock 
syndrome, and silicone gel breast implants provide further 
reasons for our concerns. For each of these products, the 
manufacturer had information indicating the dangers posed by 
the product, and in each of those cases the sometimes lax 
approval process of the FDA allowed those deadly products to go 
to market.
IV. H.R. 4600 Raises Constitutional And Federalism Concerns
    Among the many problems with H.R. 4600, we are also 
concerned that the bill may be unconstitutional under the 
Commerce Clause, the Fifth Amendment, and the Seventh 
Amendment.
    First, the bill as drafted invites legal challenges to 
Congressional authority to legislate in this area, given the 
Supreme Court's recent Commerce Clause jurisprudence. There is 
a genuine issue as to whether H.R. 4600 constitutes a 
permissible exercise of Congress' power to regulate interstate 
commerce,\56\ particularly to the extent the Act is applied to 
purely intrastate medical services. The Act itself contains no 
interstate commerce jurisdictional requirement, but merely 
makes a flat and unsubstantiated assertion that all of the 
activities it regulates affect interstate commerce.\57\ 
Furthermore, the Supreme Court repeatedly has frowned upon 
Federal intervention into areas like medical malpractice law 
that have been traditionally reserved to the States.\58\
---------------------------------------------------------------------------
    \56\ Article I, Section 8 of the Constitution provides, inter alia, 
``Congress shall have Power . . . to regulate Commerce with foreign 
Nations and among the several States. . . .'' U.S. Const. art I, 
Sec. 8, cl. 3.
    \57\ Section 2 of the bill states that ``Congress find that the 
health care and insurance industries are industries affecting 
interstate commerce and the health care liability and litigation 
systems existing throughout the United States are activities that 
affect interstate commerce by contributing to the high cost of health 
care and premiums for health care liability insurance purchased by 
health care system providers.'' According to the Lopez Court, one of 
the problems with the school gun ban was that it contained ``no express 
jurisdictional element which might limit its reach to a discrete set of 
firearms possessions that additionally have an explicit connection with 
or effect on interstate commerce.''
    \58\ The Court in Lopez observed that there were certain 
traditional areas of State law, such as criminal law and education, 
which should be off limits to Federal intervention. The concurrence by 
Justices Kennedy and O'Connor also reasoned that the Federal Government 
should avoid involving itself in areas which fall within the 
``traditional concern of the States,'' noting that over 40 States had 
adopted laws outlawing the possession of firearms on or near school 
grounds.
---------------------------------------------------------------------------
    The bill also invites challenges that it violates the Fifth 
Amendment, which provides that no person shall be ``deprived of 
life, liberty, or property without due process of law,'' \59\ a 
proscription which has been held to include an equal protection 
component.\60\ Plaintiffs will no doubt argue that the law does 
not provide a legislative quid pro quo and, as such, violates 
the Fifth Amendment. In exchange for depriving plaintiffs of 
their common law rights, the bill does not provide any 
offsetting legal benefits, at least to the parties directly 
harmed by the loss of their common law rights.
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    \59\ U.S. Const. amend. V.
    \60\ See Bolling v. Sharpe, 347 U.S. 497 (1954) (Fifth Amendment 
due process found to incorporate equal protection guarantees in case 
involving public school desegregation by the Federal Government in the 
District of Columbia).
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    Finally, the bill may violate the Seventh Amendment, which 
provides, ``[i]n suits at common law, where the value in 
controversy shall exceed twenty dollars, the right of trial by 
jury shall be preserved, and no fact tried by a jury shall be 
otherwise re-examined in any Court of the United States, than 
according to the rules of the common law.'' \61\ Because the 
bill eliminates the right of a jury to determine the 
appropriate amount of punitive and non-economic damages, this 
bill arguably deprives a plaintiff of the right to jury trial 
with respect to those elements of the case. These problems are 
highlighted by the fact that courts in some States that have 
enacted similar tort reforms, such as caps on non-economic 
damages and collateral source offsets, have ruled such reforms 
unconstitutional as violative of equal protection, due process, 
and the right to a trial by jury and access to courts.\62\
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    \61\ U.S. Const. amend. VII.
    \62\ Specifically, thirty-one States (AL, AZ, CA, CO, FL, GA, DE, 
IL, IN, KS, KY, LA, MO, NE, NH, NM, NC, ND, OH, OK, OR, PA, RI, SC, SD, 
TN, UT, WA, WI, WY) have ruled that such sweeping restrictions on the 
rights of medical malpractice victims are unconstitutional. Courts in 
twenty States (AL, CO, FL, GA, ID, IL, KS, NE, NH, ND, OH, PA, OK, OR, 
SC, SC, TX, UT, WA, WI) have ruled caps or limitations on medical 
malpractice damages to be unconstitutional. Courts in NH and PA have 
ruled that statutory limitations on attorneys fees in medical 
malpractice cases are unconstitutional, unfairly burdening medical 
malpractice victims and their lawyer, or resulting in an 
unconstitutional infringement on the right to jury trial. Courts in KS, 
NH, ND, OH, PA, and RI have ruled that medical malpractice statutes 
eliminating the common law ``collateral source'' rule are 
unconstitutional violations of due process and equal protection. 
Eighteen States (AZ, CA, CO, GA, IN, KY, LA, MO, NH, NM, NC, OH, OK, 
SD, TX, UT, WA, and WI) have held that their States' medical 
malpractice ultimate statutes of limitations are unconstitutional. 
Courts in four States (AZ, KS, NH, and OH) have ruled that structured 
settlement provisions of their States' medical malpractice statutes are 
unconstitutional violations of the right to jury trial, equal 
protection and due process. And courts in eighteen States (AZ, CA, CO, 
GA, IN, KY, LA, MO, NH, NM, NC, OH, OK, SD, TX, UT, WA, and WI) have 
ruled similar restrictions unconstitutional for failing to include 
adequate discovery provisions, for imposing restrictions which are too 
short in time, and for discriminating against minors or incompetent 
adults, in violation of equal protection, open courts, or due process 
guarantees, or the privileges and immunities clauses of State 
constitutions.
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V. Specific Concerns
    In addition to the general problems raised above concerning 
the overall purpose and effect of H.R. 4600, we have a number 
of specific concerns relating to particular provisions of the 
legislation. Most importantly, we are concerned that H.R. 4600 
does not solve the alleged insurance and litigation crises but 
rather unjustly restricts a patient's right to recover for 
injuries inflicted by a negligent and careless health care 
provider. The following is an itemization of some of the most 
pressing problems adopted by the majority in passing H.R. 4600.
            A. $250,000 aggregate cap on non-economic damages
    We particularly object to the $250,000 cap on non-economic 
damages. Non-economic damages compensate victims for the human 
suffering they experience as the result of negligent conduct. 
Although intangible, these injuries are real and include 
infertility, permanent disability, disfigurement, pain and 
suffering, loss of a limb or other physical impairment. These 
damages are not accounted for in damages for lost wages, which 
are unrestricted under H.R. 4600.
    We object to this cap for three reasons: it is manifestly 
unfair, it discriminates against women and children and those 
in low-economic brackets, and it does not take into account 
inflation.
    First, the cap is unfair because it puts a price tag on the 
most horrendous of injuries and applies a ``one-size-fits-all'' 
philosophy that objectifies and erases the person and 
uniqueness of their suffering. An incident recited by Jamie 
Court during his testimony before the House Committee on Energy 
and Commerce,\63\ illustrates H.R. 4600's manifest unfairness. 
Mr. Court told the story of Steve Olsen, a twelve year old from 
San Diego who is blind and brain damaged because of medical 
negligence. When he was 2 years old he fell on a stick in the 
woods. Steve's doctor gave Steve steroids and sent him home. 
Although his parents asked for a CAT scan, the doctor refused. 
The following day, Steve returned to the hospital in a coma 
because of the growing brain abscess he had developed, which 
would have been detected had the CAT scan been performed. At 
trial, the jury concluded that the doctor had committed medical 
malpractice and awarded $7.1 million in ``non-economic'' 
damages. One of the jurors later explained that they saw Steve 
as a boy doomed to a life of darkness, loneliness and pain. He 
would never play sports, work or enjoy normal relationships 
with his peers. He would have to endure a lifetime of 
treatment, therapy, prosthesis fitting and around-the-clock 
supervision. The judge, however, was forced the reduce that 
damage award to $250,000 because of the State's cap.
---------------------------------------------------------------------------
    \63\ Testimony of Jamie Court, before the House Committee on Energy 
and Commerce, July 17, 2002, at 4-6.
---------------------------------------------------------------------------
    Mr. Court testified that he often visits Steve and his 
family when he is in San Diego. In 2001 he had 74 doctor 
visits, 164 physical and speech therapy appointments, and three 
trips to the emergency room. Steve's mother had to leave her 
job because caring for him is a full time job. He requires 
special education classes, for which Steve's mother must 
constantly fight. His pain and suffering is intangible but 
unrecognized by the misguided ``reforms'' that placed an 
arbitrary, one-size-fits-all cap on the amount he could 
recover.
    Second, the $250,000 cap discriminates against women, 
children, seniors, and the poor. These categories of victims do 
not have high economic damages and are more likely to receive a 
greater percentage of their compensation in the form of non-
economic damages. The result is that homemakers and children 
will be limited to $250,000 in non-economic damages, but CEO's 
could recover millions of dollars.\64\
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    \64\ In their 1995 article, Thomas Koenig and Michael Rustad 
studied the effects of tort reforms on the different genders, finding 
that women are disproportionately affected by such reforms. Thomas 
Koenig and Michael Rustad, His and Her Tort Reform: Gender Injustice in 
Disguise, 70 Wash. L. Rev. 1 (1995). Specifically, the study found that 
women receive smaller economic verdicts for equivalent injuries because 
of lower overall wages. Id. at 78. And medical malpractice awards to 
women were almost three times more likely to include a pain and 
suffering component as those given to men. Id. at 84. This is true 
because women are most likely to suffer severe non-economic loss (loss 
of fertility, disfigurement, etc.) and be the victims of the types of 
medical malpractice that lead to punitive damages (sexual assault, 
fraud, false imprisonment, and extreme violation of medical standards, 
etc.).
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    Finally, the $250,000 cap is based on MICRA's cap, which 
was set in 1975 and has not been adjusted for inflation. A 
close look at California's numbers adjusted for inflation shows 
exactly what $250,000 is worth today. Using the consumer price 
index, the medical care value of $250,000 has dropped to just 
$40,389 over the 27 years since MICRA was enacted. One would 
need $1,547,461 in 2002 for the equivalent medical purchasing 
power of $250,000 in 1975.
    This problem was acknowledged at the Judiciary's 
Committee's recent hearing by Rep. Berman, who was a member of 
the California Legislature when MICRA passed. In response to 
Mr. Gekas' concern that the recoverable costs of health care in 
California were still rising, Mr. Berman stated:

        I understand the gentleman's point, but the economic 
        damages are about wages lost, about health care costs 
        expended and incurred. Of course they're going to rise. 
        Wages have risen since 1975; health care costs have 
        risen since 1975. Why the notion--when you maintain a 
        $250,000 cap that was appropriate in 1975, in 2002, you 
        are decreasing the recovery for pain and suffering 
        every single year by the cost-of-living. By any 
        measurement, it is a decrease. To simply graft that 
        figure onto here without making any compensation for 27 
        years of time, and without including some kind of cost-
        of-living factor for the future, is not maintaining the 
        equilibrium of the California law at the time it 
        passed. It's imposing a serious cut.\65\
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    \65\ The Help Efficient, Accessible, Low-Cost, Timely Health Care 
Act: Hearings before the House Comm. On the Judiciary, 107th Cong. 2d 
Sess (Sept. 10, 2002) [hereinafter ``2002 Medical Malpractice 
Hearing''], Transcript at 21-22.

    Mr. Nadler elaborated on the problem. Pointing out the fact 
that we put cost-of-living adjustments in Social Security, 
pensions, congressional salaries, and Federal salaries, he asks 
why this bill cannot have a cost-of-living, or inflation, 
---------------------------------------------------------------------------
adjustment. He states:

        Unless you want to say that what you really want to do 
        is say no economic damages eventually, because that's 
        what this does. It reduces it to insignificance, 
        ultimately.
          It seems to me that any hard-dollar amount in 
        legislation has to have an inflation factor in it. And 
        if you don't put that in what you're really saying, and 
        maybe that's the will of the Republicans, that we don't 
        want people to get compensation for noneconomic 
        damages. We don't dare say it, but that's what we want. 
        So we set up an amount that was appropriate in 1975 and 
        by 2000, it's inadequate, and by 2025, no one will even 
        care about it anymore, because it's a pittance.\66\
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    \66\ Id. at 23-24.

    As Mr. Nadler accurately summarized, the $250,000 cap is 
``unfair. It's unjust. And frankly, it's totally indefensible 
not to have an inflation factor in a limit like this.'' \67\
---------------------------------------------------------------------------
    \67\ Id. at 24. (The amendment prompting this debate proposed that 
Section 4, providing for caps on non-economic damages, be struck. The 
amendment almost passed, receiving a 14-14 vote.)
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            B. Abolition of joint and several liability
    In addition, we oppose H.R. 4600's total elimination of 
joint and several liability from medical malpractice cases 
because the result is to shift responsibility from the 
wrongdoer to the innocent victims of medical malpractice. Joint 
and several liability has been a part of the American common 
law for centuries. The doctrine provides that all tortfeasors 
who are responsible for an injury are ``jointly and severally'' 
liable for the claimant's damages. This means the victim can 
sue all responsible defendants and recover from each one in 
proportion to that defendant's degree of fault, or sue any one 
defendant and recover the total amount of damages. A defendant 
who pays more than its share is then entitled, under the 
doctrine of contribution, to seek compensation from other 
responsible parties based on their degree of fault.\68\ The 
doctrine is designed to help ensure that victims of wrongful 
conduct are able to fully recover damages for their injuries, 
especially when one or more of the defendants is judgment-
proof.\69\
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    \68\ Restatement (Third) of Torts Sec. 23 (1999).
    \69\ At the hearing, Mr. Chairman stated the crux of the issue 
when, after acknowledging that the rule is ``motivated by a desire to 
ensure that plaintiffs are made whole,'' he said: ``The HEALTH Act, by 
providing a fair share rule, it apportions damages in proportion to a 
defendant's degree of fault and prevents unjust situations in which 
hospitals can be forced to pay for all damages for an injury, even when 
the hospital is minimally at fault.'' 2002 Medical Malpractice Hearing, 
Transcript at 16. As we see it, if one has to choose between protecting 
victims of malpractice or protecting hospitals who every so often may 
not receive contribution from the other wrongdoers, the choice is 
obvious. As Mr. Scott put it, ``which is more fair? For the hospital to 
decide to apportion all of that amonst itself, which is all insured 
anyway? Or have the plaintiff have that possibility and lose 1 percent 
there because they couldn't find that one, or 2 percent there, and they 
collect all from this one and a little bit--this one goes bankrupt? 
Which is more fair? You've got somebody with a $100,00 judgment and 50 
people, possibly, at fault.'' Id. at 31.
---------------------------------------------------------------------------
    The majority's reasons for eliminating the doctrine in 
medical malpractice cases is nothing but an extreme reaction to 
mostly unsubstantiated anecdotal stories, rather than a 
moderate response to the facts. Mr. Bachus's hypothetical of a 
drug dealer who gets shot during a drug deal gone bad, who then 
goes to the hospital and receives treatment from a doctor who 
is fatigued, is a perfect example. Mr. Bachus raises the 
possibility that the drug dealer will be found to be 99 percent 
at fault and the hospital 1 percent at fault, but the drug 
dealer recovers 100 percent because of joint and several 
liability.\70\ As Mr. Frank correctly points out, ``a drug 
dealer who was shot and was 99 percent responsible and 
recovered . . . is the sort of example that makes no 
constructive contribution to the debate.'' \71\
---------------------------------------------------------------------------
    \70\ Id. at 28.
    \71\ Id. at 34.
---------------------------------------------------------------------------
    These preposterous hypotheticals are the basis for the 
majority's extreme response--the elimination of the doctrine 
altogether--even though far more moderate responses previously 
have been propounded. For example, in 1999 the Congress passed 
the Y2K bill, which had several limitations on the total 
abolition of joint and several liability. First, it had a 
complete carve-out where the defendant acted with specific 
intent to injure the plaintiff or knowingly committed 
fraud.\72\ In addition, the Y2K Act provides that if portions 
of the plaintiff's damage claim ultimately prove to be 
uncollectible, and the plaintiff is an individual with a net 
worth of less than $200,000 and damages are greater than 10 
percent of a plaintiff's net worth, a solvent defendant is 
responsible for paying an additional 100 percent share of the 
liability, or an additional 150 percent of this amount if it 
acted with ``reckless disregard for the likelihood that its 
acts would cause injury.'' \73\
---------------------------------------------------------------------------
    \72\ 15 U.S.C. Sec. 6605(c).
    \73\ Id. Sec. 6605(d).
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            C. Limits on punitive damages in medical malpractice cases
    The limitations on punitive damages are also of major 
concern to us for two reasons: the heightened standard is 
practically impossible for plaintiffs to prove, and the 
$250,000 cap is inadequate in extreme cases of abuse, such as 
those involving rape or drugs.
    First, the heightened standard for recovery--the 
requirement of clear and convincing evidence that the defendant 
acted with malicious intent to injure (or he was substantially 
certain the plaintiff would suffer injury but failed to avoid 
such injury)--is so extreme it is practically criminal. This 
standard makes it almost impossible for plaintiffs who have 
been egregiously wronged to recover punitive damages.
    Second, even plaintiffs who could meet this standard are 
still limited by the cap at $250,000 or two times the amount of 
economic damages. This cap completely eviscerates the deterrent 
effect punitive damages have on egregious misconduct of 
defendants because the threat of having to pay a maximum of 
$250,000 would not affect many large companies or wealthy 
individuals. Moreover, the cap applies no matter what the 
conduct, even in situations where a medical professional harmed 
a patient because he was under the influence of alcohol or 
drugs, or where a doctor sexually assaults his patient.\74\
---------------------------------------------------------------------------
    \74\ In fact, a report by Public Citizen found that ``47.7% of 
doctors [found to have been disciplined for sexual abuse or misconduct 
by a disciplinary board] were allowed to continue practicing, their 
behavior probably unknown to most if not all of their patients.'' 
Sidney Wolfe et al., 20,125 Questionable Doctors, Public Citizen Health 
Research Group, Washington, D.C. (2000).
---------------------------------------------------------------------------
            D. Elimination of punitive damages for products approved by 
                    the FDA.
    In addition to the caps on punitive damages, we are 
especially troubled by the bill's abolition of punitive damages 
for products that have been approved by the FDA. Simply because 
a product has been approved by the FDA does not mean the 
company should be immunized from punitive liability when the 
product, despite such approval, causes severe harm to an 
individual. This is especially compelling given that studies 
have shown that medical devices cause approximately 53 deaths 
and over 1,000 serious injuries annually, costing approximately 
$26 billion annually.\75\ Government safety standards, at their 
best, establish only a minimum level of protection for the 
public. At their worst, they can be outdated, under-protective, 
or under-enforced.
---------------------------------------------------------------------------
    \75\ A recent article by Robert Cohen and J. Scott Orr sets out 
startling statistics with respect to the medical implant industry. A 
few are as follows:

       GDuring the past 10 years, 573 recall notices 
      covering more than 2 million implants were issued for 
      lapses such as mislabeling, structural failure, or 
      manufacturing error. All but one of these errors were 
---------------------------------------------------------------------------
      noticed by manufacturers, not the FDA.

       GOf the 3500 proposed medical devices reviewed by 
      the FDA last year, 98% were approved under an expedited 
      process that requires no clinical testing.

       GFederal law requires the FDA to inspect medical 
      device manufacturers every 2 years, but due to budget 
      constraints, it actually visits U.S. plants on average 
      every 5 years and overseas plants ever 13 years.

See Robert Cohen and J. Scott Orr, Faulty Medical Implants Enter Market 
Through Flawed System, Newhouse News Service, 2002.
    Moreover, the bill completely insulates manufacturers and 
distributors of products and drugs from defects arising during 
the manufacturing process, which occurs after the FDA has given 
its approval of the device.
    And finally, banning punitive damages for FDA-approved 
products will have a disproportionate impact on women and 
seniors, who make up the largest class of victims of medical 
products. There are many examples of FDA-approved products that 
are dangerous and have caused harm to scores of women, 
including DES, the Dalkon Shield and Copper-7 IUDs, super-
absorbent tampons, high-estrogen oral contraceptives, and the 
weight loss drug phen-fen. For each of these products, the 
manufacturer had information indicating the dangers posed by 
the product.\76\
---------------------------------------------------------------------------
    \76\ See also Koenig and Rustad, supra, at 38-46 (``There are far 
too many examples of instances where the FDA could not by itself 
adequately protect the public from dangerous, defective medical 
devices'') (citing Lack of Life Saving Medical Devices, Hearing on S. 
687 Before the Subcomm. on Reg. and Gov't Info. Comm. of the Senate 
Comm. on Gov't Affairs, 103d Cong., 2d Sess. (testimony of Kristin 
Rand, counsel on behalf of Consumer's Union)).
---------------------------------------------------------------------------
            E. Repeal of the collateral source rule
    We dissent from the bill's repeal of the collateral source 
rule because the effect is also to shift the costs of 
malpractice from negligent defendants to innocent victims. The 
collateral source rule prevents a wrongdoer from reducing the 
amount of damages it must pay a victim by the amount the victim 
receives from outside sources. Payments from outside sources 
often include health or disability insurance, for which the 
victim already paid premiums and taxes. The rule is fair 
because the doctrine of subrogation, which provides that the 
collateral source has the right to reimbursement from the 
victim out of the damage award, ensures that no source pays 
more than its share of the liability.\77\
---------------------------------------------------------------------------
    \77\ See Kenneth Abraham, Distributing Risk: Insurance, Legal 
Theory, and Public Policy, 1330-172 (1986); Fleming, The Collateral 
Source Rule and Loss Allocation in Tort Law, 54 Cal. L. Rev. 1478, 
1481-85 (1966).
---------------------------------------------------------------------------
    In addition to shifting costs to the plaintiff, eliminating 
the collateral source rule would discourage prudent insurance 
planning by penalizing consumers for acting responsibly \78\; 
would undermine the deterrent effect of the malpractice system 
by enabling negligent physicians to avoid liability for damages 
they inflict \79\; and could result in a double reduction of 
the victim's damages, by the defendant and by subrogation.
---------------------------------------------------------------------------
    \78\ See James L. Branton, The Collateral Source Rule, 18 St. 
Mary's L.J. 883 (1987).
    \79\ See Patricia M. Danzon, The Frequency and Severity of Medical 
Malpractice Claims: New Evidence, 49 Law & Contemp. Probs. 57, 72 
(Spring 1986).
---------------------------------------------------------------------------
            F. Contingency fee limitations
    In addition, we disagree with the provision in the bill 
limiting contingency fees for attorneys. Contingency fee 
arrangements can serve a useful and essential function in the 
legal system. They allow injured customers who could not 
otherwise afford legal representation access to the courts 
because the attorney agrees to take the case on behalf of an 
injured patient without obtaining any money up front from the 
client. The attorney thus incurs a risk in taking on the case 
because if the client loses, the attorney never gets paid. Not 
only does this help ensure that poor victims have access to the 
civil justice system, it also serves as a screening mechanism 
for unmeritorious cases on which attorneys will not take a 
risk.
    H.R. 4600's restrictions make it more difficult for poor 
victims of medical malpractice with legitimate claims to find 
legal representation. Moreover, it is unfair to restrict 
plaintiffs' attorneys fees but not defendants, especially when 
defense attorneys are usually paid by the hour and thus have 
incentive to engage in meaningless litigation to drive up the 
costs.\80\
---------------------------------------------------------------------------
    \80\ We also find it interesting that the majority would support a 
bill that is so anti-capitalistic. Restrictions on contingency fees are 
restrictions on compensation to attorneys who have worked hard and 
performed in the maketplace. This provision could not be more ``anti-
Republican.''
---------------------------------------------------------------------------
            G. Periodic payments
    As with the other provisions of the bill, the provision 
regarding periodic payments harms victims and protects 
wrongdoers. First, it allows the negligent party or insurance 
company to invest and earn interest on the victim's 
compensation. Second, it puts the onus on the victim, not the 
wrongdoer, to pursue the compensation in the event that the 
wrongdoer files for bankruptcy or refuses to pay. And if the 
wrongdoer files for bankruptcy, the chances of the victim ever 
receiving compensation for his or her loss is close to nothing. 
Finally, it leaves the victim without adequate resources in the 
event of an unanticipated medical emergency, if costs of the 
victims's medical care increase beyond his or her means, or a 
special medical technology is made available which the victim 
requires. In these circumstances, the injured patient would 
have to retain a lawyer to have the schedule modified.
            H. Reduced statute of limitations
    Finally, we oppose this statute of limitations for several 
reasons. The most important is that it cuts off all meritorious 
claims involving diseases with long incubation periods. For 
example, HIV often goes undetected for eight to 10 years. Under 
H.R. 4600 a patient who contracted HIV through a negligent 
blood transfusion, but did not learn of the disease until after 
3 years from the date of the transfusion, would be barred from 
filing a claim. Other examples include cases in which doctors 
have left foreign objects inside patients' bodies during 
surgery. Or cases where a patient takes a newly developed drug 
prescribed by his or her dermatologist, only to learn 4 years 
later that the drug caused heart damage. Or cases where a 
patient's pacemaker, implanted with a defect 5 years earlier, 
fails. In each of these cases, the injury would not be 
discovered until the statute of limitations under H.R. 4600 had 
come and gone.
    Real life examples are abundant. One involves a young girl 
named Collazo, who was 8 years old when she sought treatment at 
the hospital for an ankle injury. She was examined but not 
treated and told to return 2 days later. When she returned, her 
ankle was severely flexed downward. The hospital placed a 
splint on her ankle and sent her home, advising her to see a 
private physician. By the time a private physician diagnosed 
her (with three severed tendons), her only treatment option was 
tendon grafting. She suffered significant lost range of motion 
on her foot, she cannot extend her toes upward, she has a limp, 
cannot engage in athletics, and can only wear sneakers. Under 
the State's 10 year statute of limitations, Collazo filed a 
lawsuit and received $1.2 million from the jury, mostly for 
noneconomic loss.\81\ Under H.R. 4600, however, Collazo would 
have been prohibited from even filing the lawsuit--she was 8 
years old when the injury occurred, placing her outside the 
minority exemption, and requiring her to file the lawsuit by 
the time she was nine to preserve her rights.\82\
---------------------------------------------------------------------------
    \81\ See Collazo v. New York City Health & Hosps. Corp., N.Y. Bronx 
County Sup. Ct., No. 8606/94 (1999).
    \82\ It is useful to note that H.R. 4600's statute of limitations 
is more restrictive than statutes of limitations provided for by most 
States. Most States allow plaintiffs 2 years from the date of injury to 
sue for medical malpractice. And many States afford plaintiffs a 
discovery rule, which tolls the statute of limitations until the 
plaintiff knew or should have discovered the injury. For example, 
Arizona allows plaintiffs to file a lawsuit up to 2 years from 
``reasonable discovery.'' See Az. Rev. Stat. Ann. Sec. 12-542(1). D.C. 
provides that the time for filing runs from the date the plaintiff 
should have known of the injury. See Stager v. Schneider, 494 A.2d 1307 
(1985). Indiana allows 2 years from the date of reasonable discovery. 
See In. Code Sec. 34-18-7-1(b). There are many more examples of States 
that do not arbitrarily limit a victims' ability to bring a lawsuit for 
injuries he or she has sustained as a result of medical negligence but 
could not reasonably discover for more than 3 years. By contrast, while 
H.R. 4600 allows plaintiffs 3 years to discover the injury, any 
reasonable discovery after 3 years is simply too late.
---------------------------------------------------------------------------

                               CONCLUSION

    Collectively, the supposed ``reform'' included in H.R. 4600 
would severely limit victims' ability to recover compensation 
for damages caused by medical negligence, defective products, 
and irresponsible insurance providers. In addition to raising 
core issues of fairness, the legislation would intrude into an 
area which has traditionally been the sole province of the 
States, many of which have enacted their own medical 
malpractice legislation in recent years. H.R. 4600, which is 
designed to limit medical malpractice premiums and jury awards, 
presents a ``fix'' that is not supported by the empirical 
evidence; indeed it is being propounded at a time when the 
great wealth of data suggests that there is no medical 
malpractice ``crisis'' in our society. For these and other 
reasons set forth above, we strongly believe H.R. 4600 should 
be rejected.

                                   John Conyers, Jr.
                                   Jerrold Nadler.
                                   Robert C. Scott.
                                   Melvin L. Watt.
                                   Sheila Jackson Lee.
                                   Maxine Waters.
                                   Martin T. Meehan.
                                   William D. Delahunt.
                                   Robert Wexler.
                                   Tammy Baldwin.
                                   Anthony D. Weiner.