[House Report 108-32]
[From the U.S. Government Publishing Office]



108th Congress                                             Rept. 108-32
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 2

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



 
HELP EFFICIENT, ACCESSIBLE, LOW-COST, TIMELY HEALTHCARE (HEALTH) ACT OF 
                                  2003

                                _______
                                

                 March 11, 2003.--Ordered to be printed

                                _______
                                

 Mr. Tauzin, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                         [To accompany H.R. 5]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 5) 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, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     7
Background and Need for Legislation..............................     8
Hearings.........................................................     9
Committee Consideration..........................................    10
Committee Votes..................................................    10
Committee Oversight Findings.....................................    20
Statement of General Performance Goals and Objectives............    20
New Budget Authority, Entitlement Authority, and Tax Expenditures    20
Committee Cost Estimate..........................................    20
Congressional Budget Office Estimate.............................    20
Federal Mandates Statement.......................................    27
Advisory Committee Statement.....................................    28
Constitutional Authority Statement...............................    28
Applicability to Legislative Branch..............................    28
Section-by-Section Analysis of the Legislation...................    28
Changes in Existing Law Made by the Bill, as Reported............    32
Dissenting Views.................................................    33

                               AMENDMENT

  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 2003''.

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;
          (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.

  The time for the commencement of a health care lawsuit shall be 3 
years after the date of manifestation 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 after 
the date of manifestation of injury unless tolled for any of the 
following:
          (1) Upon proof of fraud;
          (2) Intentional concealment; or
          (3) The presence of a foreign body, which has no therapeutic 
        or diagnostic purpose or effect, in the person of the injured 
        person.
Actions by a minor shall be commenced within 3 years from the date of 
the alleged manifestation of injury except that actions by a minor 
under the full age of 6 years shall be commenced within 3 years of 
manifestation of injury or prior to the minor's 8th birthday, whichever 
provides a longer period. Such time limitation shall be tolled for 
minors for any period during which a parent or guardian and a health 
care provider or health care organization have committed fraud or 
collusion in the failure to bring an action on behalf of the injured 
minor.

SEC. 4. COMPENSATING PATIENT INJURY.

  (a) Unlimited Amount of Damages for Actual Economic Losses in Health 
Care Lawsuits.--In any health care lawsuit, nothing in this Act shall 
limit a claimant's recovery of the full amount of the available 
economic damages, notwithstanding the limitation in subsection (b).
  (b) Additional Noneconomic Damages.--In any health care lawsuit, the 
amount of noneconomic damages, if available, 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 injury.
  (c) No Discount of Award for Noneconomic Damages.--For purposes of 
applying the limitation in subsection (b), 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. Whenever a judgment of liability 
is rendered as to any party, 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. The requirement for court 
supervision in the first two sentences of subsection (a) applies only 
in judicial proceedings.

SEC. 6. ADDITIONAL HEALTH BENEFITS.

  In any health care lawsuit involving injury or wrongful death, 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 involving injury or wrongful death. 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. This section 
shall not apply to section 1862(b) (42 U.S.C. 1395y(b)) or section 
1902(a)(25) (42 U.S.C. 1396a(a)(25)) of the Social Security Act.

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, if awarded, in a health care lawsuit, 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, if 
        awarded, in a health care lawsuit may be as much as $250,000 or 
        as much as two times the amount of economic damages awarded, 
        whichever is greater. The jury shall not be informed of this 
        limitation.
  (c) No Punitive Damages for Products in Compliance With FDA 
Standards.--
          (1) Punitive damages.--
                  (A) In general.--In addition to the requirements of 
                subsections (a) and (b), punitive damages may not be 
                awarded against the manufacturer or distributor of a 
                medical product, or a supplier of any component or raw 
                material of such medical product, on the basis that the 
                harm to the claimant was caused by the lack of safety 
                or effectiveness of the particular medical product 
                involved, unless, the claimant demonstrates by clear 
                and convincing evidence that--
                          (i) the manufacturer or distributor of the 
                        particular medical product, or supplier of any 
                        component or raw material of such medical 
                        product, failed to comply with a specific 
                        requirement of the Federal Food, Drug, and 
                        Cosmetic Act, section 351 of the Public Health 
                        Service Act, or the regulations promulgated 
                        thereunder; and
                          (ii) the harm attributed to the particular 
                        medical product resulted from such failure to 
                        comply with such specific statutory requirement 
                        or regulation.
                  (B) Rule of construction.--Subparagraph (A) may not 
                be construed as establishing the obligation of the Food 
                and Drug Administration to demonstrate affirmatively 
                that a manufacturer, distributor, or supplier referred 
                to in such subparagraph meets any of the conditions 
                described in such subparagraph.
          (2) Liability of health care providers.--A health care 
        provider who prescribes, or who dispenses pursuant to a 
        prescription, a medical product approved, licensed, or cleared 
        by the Food and Drug Administration shall not be named as a 
        party to a product liability lawsuit involving such product and 
        shall not be liable to a claimant in a class action lawsuit 
        against the manufacturer, distributor, or seller of such 
        product. Nothing in this paragraph prevents a court from 
        consolidating cases involving health care providers and cases 
        involving products liability claims against the manufacturer, 
        distributor, or product seller of such medical product.
          (3) Exception.--Paragraph (1) shall not apply in any health 
        care lawsuit in which--
                  (A) a person knowingly misrepresented to the Food and 
                Drug Administration information which 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); or
                  (B) a person made an illegal payment to a 
                governmental official for the purpose of either (i) 
                securing or maintaining approval, clearance, or 
                licensure of such medical product or (ii) preventing an 
                enforcement action.

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.
  (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. Such term does not include a claim or action 
        which is based on criminal liability; which seeks civil fines 
        or penalties paid to Federal, State, or local government; which 
        is grounded in antitrust; or in which the dispute is over the 
        price of health care goods or services.
          (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 or care 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, device, or biological product intended for humans, and 
        the terms ``drug'', ``device'', and ``biological product'' 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) and 
        section 351(a) of the Public Health Service Act (42 U.S.C. 
        262(a)), 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 and Other Laws.--(1) 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.
  (2) This Act shall not preempt or supersede any State or Federal law 
that imposes greater procedural or substantive protections for health 
care providers and health care organizations from liability, loss, or 
damages than those provided by this Act or create a cause of action.
  (c) State Flexibility.--No provision of this Act shall be construed 
to preempt--
          (1) any State law (whether effective before, on, or after the 
        date of the enactment of this Act) that specifies a particular 
        monetary amount of compensatory or punitive damages (or the 
        total amount of damages) that may be awarded in a health care 
        lawsuit, regardless of whether such monetary amount 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.

SEC. 13. SENSE OF CONGRESS.

  It is the sense of Congress that a health insurer should be liable 
for damages for harm caused when it makes a decision as to what care is 
medically necessary and appropriate.

                          PURPOSE AND SUMMARY

    H.R. 5 seeks 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.

                  BACKGROUND AND NEED FOR LEGISLATION

    One of the primary purposes of the tort system is to 
provide an avenue for compensation for injured victims. The 
tort system also serves to deter behaviors that can cause harm 
to individuals and society as a whole. Nevertheless, excessive 
litigation can distort these useful functions, and lead to 
impacts that are the opposite of what is intended--harming the 
very people the system aims to protect. In the health care 
sector, excessive litigation has been extremely harmful to 
patient access to care.
    Medical liability insurance rates have skyrocketed in 
several states across the country causing major insurers to 
drop coverage or raise premiums. St. Paul's Companies, the 
largest malpractice carrier in the United States covering 9 
percent of doctors, announced in December 2001 that it would no 
longer offer coverage to health care providers. In addition, 
MIXX, PHICO, Frontier Insurance Group, and Doctors Insurance 
Reciprocal have either limited their coverage or left the 
medical liability insurance market. States that had not enacted 
meaningful medical liability reforms (such as Nevada, Georgia, 
Oregon, Mississippi, Ohio, Pennsylvania, and Washington) were 
particularly affected.
    In some cases, the new premiums are more than the actual 
income a health care provider accumulates annually. Even 
doctors that have never lost a single medical malpractice 
judgment or ever had a claim filed against them are seeing huge 
increases in medical liability premiums. The Medical Liability 
Monitor reports that medical liability insurance premiums are 
increasing at the highest rate since the mid-1980's. In 
Florida, medical liability insurance coverage for pregnancy-
related care is as high as $202,000 in some counties. Medical 
liability insurance rates are up 81 percent in Pennsylvania, 
and higher for some health care specialties.
    Doctors unable to afford medical liability insurance are 
being forced to drop part of their specialty practice, retire 
early, or move to another state to practice. In several states 
patients are being left without access to high-quality care. 
For example, the University of Nevada Medical Center closed its 
trauma center in Las Vegas for ten days, causing the most 
severely injured patients to be transported to the next nearest 
Level I trauma center, located five hours away. The trauma 
center was only able to re-open because some of the surgeons 
agreed to become county employees for a limited time, which 
capped their liability for non-economic damages if they were 
sued. In Mississippi, over a third of the neurosurgeons have 
left the state in the past year. In rural areas of West 
Virginia, such as Putnam and Jackson counties, the sole 
community provider hospitals have closed their obstetrics units 
because the price of medical malpractice insurance is 
unaffordable. Without access to an obstetrician, women will be 
without access to prenatal care and the support of specialists 
if pregnancy complications arise.
    The mere threat of a health care lawsuit is so perverse 
that many doctors engage in defensive medicine. Stanford 
economists Daniel Kessler and Mark McClellan have conducted 
studies using national data on Medicare populations and 
concluded that patients from states that adopted medical 
liability reforms--such as a reasonable limit on non-economic 
damage awards (pain and suffering)--incur significantly lower 
hospital costs while suffering no increase in adverse health 
outcomes associated with the illness for which they were 
treated. Based on these studies, the authors have quantified 
the cost of ``defensive medicine'' in which doctors perform 
tests and prescribe medicines that are not necessary to better 
the health of the patient, but rather serve as a precautionary 
step just in case the doctor is named in a lawsuit. Published 
in the Quarterly Journal of Economics, their study, ``Do 
Doctors Practice Defensive Medicine,'' estimates that direct 
medical care litigation reforms could lead to reductions of 
well over $50 billion per year in health care expenditures 
without serious adverse consequences for patients.
    In 1975, California Governor Jerry Brown signed into law 
California's Medical Injury Compensation Reform Act (MICRA), 
which has helped to stabilize the California medical liability 
insurance market. MICRA reforms permit recovery of 100 percent 
of economic loss and up to $250,000 in non-economic loss. In 
order to ensure the complete recovery of damages for injured 
patients, MICRA prevents bankruptcies in which plaintiffs would 
receive only pennies on the dollar by authorizing courts to 
require periodic payments for future damages. Toinstill 
fairness and prevent double recoveries, MICRA provides authorization 
for defendants to introduce evidence showing the plaintiff received 
compensation for losses from outside sources. MICRA's reforms also 
allow more money to go directly to injured patients by including limits 
on contingency fees lawyers can charge in health care cases.
    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 
has experienced a 505% rate of increase. The price of some 
lines of medical liability insurance has even gone down 
significantly in California since MICRA was enacted. According 
to the Doctor's Company, in 1976 when California's MICRA law 
went into effect, the average medical malpractice premium was 
$23,698 in 2001 dollars. In 2001, the average premium was only 
$14,107. Furthermore, injured patients in California find that 
medical malpractice disputes in California are resolved 23 
percent faster than the rest of the country. H.R. 5, the Help 
Efficient, Accessible, Low-Cost, Timely Healthcare (HEALTH) Act 
of 2003 includes several provisions modeled after California's 
MICRA.

                                HEARINGS

    The Subcommittee on Health held a hearing on ``Assessing 
the Need to Enact Medical Liability Reform,'' on February 27, 
2003. The Subcommittee received testimony from: Mr. Fred 
Hiestand, CEO and General Counsel, Californians Allied for 
Patient Protection; Mr. Jim Hurley, on behalf of the American 
Academy of Actuaries; Ms. Heather Lewinski; Donald J. 
Palmisano, MD, JD, President, American Medical Association; Ms. 
Sara Rosenbaum, Hirsch Professor of Health Law & Policy, George 
Washington University Medical Center School of Public Health 
and Health Services; Mr. Harvey Rosenfield, President, 
Foundation for Consumer and Taxpayer Rights; Mr. Lawrence E. 
Smarr, President, Physicians Insurers Association of America.
    The Subcommittee on Oversight and Investigations held a 
field hearing on ``The Medical Liability Insurance Crisis: A 
Review of the Situation in Pennsylvania'' on February 10, 2003. 
The Subcommittee received testimony from: The Honorable Edward 
G. Rendell, Governor, Commonwealth of Pennsylvania; Julia W. 
Johansson, MD; Mr. Gregory Wozniak, President and Chief 
Executive Officer, St. Mary Medical Center; David J. Eskin, MD, 
Chief of Staff, Abington Memorial Hospital; Edward H. Dench, 
Jr., MD, President, Pennsylvania Medical Society; Donald J. 
Palmisano, MD, JD, Member, American Medical Association Board 
of Trustees; Ms. Leanne Dyess; Ms. Heather Lewinski; Mr. 
Lawrence E. Smarr, President, Physicians Insurers Association 
of America; Mr. James Hurley, ACAS, MAAA, Chairperson, Medical 
Malpractice Subcommittee, American Academy of Actuaries; Mr. 
Scott Diener, President and Chief Operating Officer, PMSLIC; 
Mr. Alan G. Rosenbloom, President & Chief Executive Officer, 
Pennsylvania Health Care Association and Center for Assisted 
Living Management; Thomas J. Nasca, MD, FACP, Dean of Jefferson 
Medical School, Senior Vice President Thomas Jefferson 
University; Mr. Harvey Rosenfield, President, Foundation for 
Consumer and Taxpayer Rights; Ms. Diane A. Menio, Executive 
Director, Center for Advocacy for the Rights and Interests of 
the Elderly (CARIE); Mr. John H. Reed; Neil Vidmar, Ph.D., 
Professor of Law, Duke Law School; and, Mr. James Mundy.

                        COMMITTEE CONSIDERATION

    On March 4, 2003, the Subcommittee on Health met in open 
markup session and approved H.R. 5 for Full Committee 
consideration, as amended, by a voice vote, a quorum being 
present. On March 6, 2003, the Full Committee met in open 
markup session and favorably ordered H.R. 5 reported to the 
House, as amended, by a voice vote, a quorum being present.

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
following are the recorded votes taken on amendments offered to 
the measure, including the names of those Members voting for 
and against. A motion by Mr. Tauzin to order H.R. 5 reported to 
the House, as amended, was agreed to by a voice vote.


                      COMMITTEE OVERSIGHT FINDINGS

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held oversight hearings 
and made findings that are reflected in this report.

         STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

    The goal of H.R. 5 is 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.

   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
5, the Help Efficient, Accessible, Low-Cost, Timely Healthcare 
(HEALTH) Act of 2003, would result in no new or increased 
budget authority, entitlement authority, or tax expenditures or 
revenues.

                        COMMITTEE COST ESTIMATE

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  CONGRESSIONAL BUDGET OFFICE ESTIMATE

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974.

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, March 10, 2003.
Hon. W.J. ``Billy'' Tauzin,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 5, the Help 
Efficient, Accessible, Low Cost, Timely Healthcare (HEALTH) Act 
of 2003.
    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), Leo Lex (for the 
state, local, and tribal impacts), and Stuart Hagen (for the 
private-sector impact).
            Sincerely,
                                       Douglas Holtz-Eakin,
                                                          Director.
    Enclosure.

H.R. 5--Help Efficient, Accessible, Low-Cost, Timely Healthcare 
        (HEALTH) Act of 2003

    Summary: H.R. 5 would impose limits on medical malpractice 
litigation in state and federal courts by capping awards and 
attorney fees, modifying 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 other fringe benefits. As a 
result, CBO estimates that enacting H.R. 5 would increase 
federal revenues by $15 million in 2004 and by $3 billion over 
the 2004-2013 period.
    Enacting H.R. 5 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 $14.9 billion 
over the 2004-2013 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. 5 would reduce discretionary spending for the 
FEHB program by about $230 million over the 2004-2013 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 ($59 million 
in 2003, adjusted annually for inflation) would not be 
exceeded.
    H.R. 5 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 
($17 million in 2003, adjusted annually for inflation) in all 
but the first year the mandate would be effective.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 5 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.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               By fiscal year, in millions of dollars--
                                             -----------------------------------------------------------------------------------------------------------
                                                2004     2005     2006     2007      2008      2009      2010      2011      2012      2013    2004-2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   CHANGES IN REVENUES

Income and HI Payroll Taxes (on-budget).....       10       70      170       210       220       230       250       270       290       330      2,050
Social Security Payroll Taxes (off-budget)..        5       20       60        90       100       110       120       130       140       150        925
                                             -----------------------------------------------------------------------------------------------------------
    Total...................................       15       90      230       300       320       340       370       400       430       480      2,975

                                                               CHANGES IN DIRECT SPENDING

Estimated Budget Authority..................     -170     -480     -910    -1,250    -1,570    -1,820    -1,990    -2,130    -2,220    -2,350    -14,900
Estimated Outlays...........................     -170     -480     -910    -1,250    -1,570    -1,820    -1,990    -2,130    -2,220    -2,350    -14,900

                                                      CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level...............       -2      -10      -20       -20       -20       -30       -30       -30       -30       -30       -230
Estimated Outlays...........................       -2      -10      -20       -20       -20       -30       -30       -30       -30       -30       -230
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note.--HI = Medicare Hospital Insurance program.

Basis of estimate

    This estimate assumes that H.R. 5 will be enacted in July 
2003. It would apply to lawsuits initiated on or after the date 
of enactment.

            Major provisions of the bill

    H.R. 5 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 three years after the injury alleged 
to have happened as a result of malpractice occurs or one 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. 5 would limit the liability of each defendant 
to the share of damages attributable to his or her 
responsibility.
    The bill would allow evidence of collateral-source benefits 
to be introduced at trial by either claimants or defendants. 
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. 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 and claims data for 
medical malpractice insurance coverage in states that have and 
have not enacted laws that limit awards for medical malpractice 
torts. The data include information on malpractice awards and 
insurance premiums, the characteristics of state insurance 
markets, state laws regarding malpractice torts, and 
socioeconomic measures. Data were provided by several 
organizations including Medical Liability Monitor; Insurance 
Services Office, Inc.; Physician Insurers Association of 
America; National Association of State Insurance Commissioners; 
and the U.S. Census Bureau. 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 for unpaid claims, changes in 
market structure in certain states, and increases in the price 
of reinsurance.
    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. 5 would significantly lower premiums 
for medical malpractice insurance from what they would 
otherwise be under current law. That effect would increase 
somewhat over the ten-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 also took into consideration 
the likelihood that, in the future, some additional states 
would enact laws limiting malpractice torts in the absence of 
federal legislation.
     CBO estimates that, under this bill, premiums for medical 
malpractice insurance ultimately would be an average of 25 
percent to 30 percent lower than what they would be under 
current law. However, other factors noted above may affect 
future premiums, possibly obscuring the anticipated effect of 
the legislation. The effect of H.R. 5 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-fifth 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. 5 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 reductionin 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. A substantial 
portion of collateral source benefits are provided by 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 few 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 spending for a small number of ailments. One 
study analyzed the impact of tort limits on Medicare hospital 
spending for patients suffering acute myocardial infarction or 
ischemic heart disease, and observed a significant reduction in 
spending in states with such laws. Other research examined the 
effect of tort limits on the proportion of births by Caesarean 
section. It also found savings in states with tort limits, 
albeit of a much smaller magnitude. Using a longitudinal 
database of Medicare spending for fee-for-service beneficiaries 
between 1989 and 1999, CBO found no effect of tort controls on 
medical spending in an analysis that considered a broader set 
of ailments. Moreover, using a different data set, CBO could 
find no statistically significant difference in per capita 
health care spending between states with and without 
malpractice tort limits. These findings are preliminary, 
however, and CBO continues to explore this issue.

            Federal revenues

    CBO estimates that, over a three-year period, enacting H.R. 
5 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. In the short term, some of the savings would be 
retained by employers as higher profits, and would result in 
higher collections of income taxes from employers. Ultimately, 
however, 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 $65 
million in calendar year 2004 to $1.4 billion 2013.
    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 $15 million in 2004 and 
by a total of $3 billion over the 2004-2013 period if H.R. 5 
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. 5 would reduce direct spending for 
federal health insurance programs by $14.9 billion over the 
2004-2013 period.
    CBO estimates that premiums for the 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. 5 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 0.2 
percent.
    Federal spending for annuitants in the FEHB program is 
considered direct spending. CBO estimates that H.R. 5 would 
reduce direct spending for annuitants in FEHB by $230 million 
over the 2004-2013 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. 5 would 
reduce discretionary spending for FEHB by about $230 million 
over the 2004-2013 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 Center 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. 5 would 
have no effect on Medicare spending in 2003, because payment 
rates have already been set for hospital and physician 
services. CBO estimates that incorporating lower malpractice 
premiums in Medicare payment rates would reduce Medicare 
spending by $11.2 billion over the 2004-2013 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. 5 
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). Estimates that H.R. 5 would reduce direct spending for 
Medicaid and DoD by $3.5 billion over the 2004-2013 period.
    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 
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. 5 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 
($59 million in 2003, adjusted annually for inflation) would 
not be exceeded.
    Other Public-Section Impacts. State, local, and tribal 
governments would realize net savings as a result of provisions 
of the bill. 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 the health care premiums, CBO estimates 
that state and local governments would save about $6 billion 
over the 2004-2013 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 2004 to $185 
billion in 2013 and an expectation that savings would phase in 
over a three-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 spending for Medicaid would decrease by $2.5 billion over 
the 2004-2013 period.

            Private-sector mandates and other inputs

    The bill would impose a private-sector mandate on attorneys 
in malpractice cases by limiting the size of the awards they 
would receive. CBO estimates that the direct cost of that 
mandate to affected attorneys would be less than $100 million 
in 2003, and about $340 million per year in 2004 through 2007. 
Those costs would exceed the annual threshold specified in UMRA 
($117 million in 2003, adjusted annually for inflation) in all 
but the first year the mandate would be effective.
    Previous cost estimate: On September 24, 2002, CBO provided 
a cost estimate for H.R. 4600 as ordered reported by the 
Committee on the Judiciary. The current estimate differs from 
the earlier estimate in three ways. It:
          Reflects the exclusion of the Medicare and Medicaid 
        programs from the collateral-source benefits provision 
        in the bill, thus allowing them to continue to be 
        secondary payers in medical malpractice cases. This 
        change increases the estimated savings to the Medicare 
        and Medicaid programs;
          Corrects the previous estimate, which overstated on-
        budget savings in the FEHB program because it included 
        off-budget effects related to the Postal Service;
          Reflects changes in projections under current law of 
        tax-sheltered health expenditures, as well as changes 
        in projections of spending under current law for the 
        Medicare, Medicaid, and FEHB programs.
    Estimate prepared by: Federal revenues: Alexis Ahlstrom; 
Federal outlays: Medicaid--Jeannee De Sa and Eric Rollins; 
Medicare--Julia Christensen and Alexis Ahlstrom; and FEHB--
Alexis Ahlstrom.
    Impact on State, local, and tribal governments: Leo Lex.
    Impact on the private sector: Stuart Hagen.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis.

                       FEDERAL MANDATES STATEMENT

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   CONSTITUTIONAL AUTHORITY STATEMENT

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  APPLICABILITY TO LEGISLATIVE BRANCH

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Authority Act.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title

    Section 1 establishes the short title of the bill as the 
``Help Efficient, Accessible, Low Cost, Timely Health Care 
(HEALTH) Act of 2003.''

Section 2. Findings and purpose

    Section 2 states the findings and purpose of the bill.

Section 3. Encouraging speedy resolution of claims

    Section 3 states that a health care lawsuit shall be 
commenced 3 years after the date of manifestation 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 after the 
manifestation of injury unless tolled for any of the following: 
(1) upon proof of fraud; (2) intentional concealment; or, (3) 
the presence of a foreign body, which has no therapeutic or 
diagnostic purpose or effect, in the person of the injured 
person. There is an exception for 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 manifestation of injury, or 
the date onwhich the minor attains the age of 8. This time 
period is tolled for minors for any period during which a parent or 
guardian and a health care provider or health care organization have 
committed fraud or collusion in the failure to bring an action on 
behalf of the injured minor. The Committee does not intend the term 
injury to include business injuries. The term ``manifestation of 
injury'' means the injury has become reasonably evident. Thus, if 
someone unknowingly receives tainted blood, ``manifestation of injury'' 
is not the date of receiving the blood. Instead, it is the date on 
which adverse symptoms become reasonably evident.

Section 4. Compensating patient injury

    Section 4 sets forth new guidelines regarding patients' 
ability to recover for certain types of damages. Subsection 
4(a) provides that in any health care lawsuit, nothing in this 
Act shall limit a claimant's recovery for the full amount of 
available economic damages, notwithstanding the limitation in 
subsection (b). Under subsection 4(b), there can be no more 
than $250,000 in non-economic damages with respect to the same 
injury.
    The cap in this section can apply separately to each party 
with a direct personal injury. For example, if there is a 
single class-action lawsuit where a drug manufacturer sold 
drugs that were taken by several individuals and those 
individuals suffered adverse events, each of those individuals 
could receive up to $250,000 in non-economic damages. 
Similarly, if a pregnant mother and her baby sustain physical 
injuries during an operation and a health care provider is 
found liable, then the mother and the baby could each recover 
damages up to the cap permitted in subsection 4(b).
    The Committee notes that the limitation on damages in 
subsection 4(b) does not necessarily apply per claimant. Under 
section 9, the term claimant may include numerous parties who 
do not suffer direct injuries, including parties with 
derivative claims.
    Subsection 4(c) makes clear that courts should apply the 
$250,000 cap for non-economic damages without calculations that 
include discounting to present value. Whether a given award 
below the cap involves discounting, however, remains a function 
of separate state and Federal law. Juries will not be informed 
about the maximum award for non-economic damages.
    Subsection 4(d) provides that each party shall be liable 
for the amount of damages allocated to such party. This 
allocation shall be determined in direct proportion to such 
party's percentage of responsibility for the damages. The 
Committee notes that this subsection does not override 
principles of vicarious liability. Furthermore, the ``fair 
share'' rule only applies when a judgment of liability is 
rendered.

Section 5. Maximizing patient recovery

    Section 5 requires that courts supervise the arrangements 
for payment of damages to protect against conflicts of 
interests. This section also establishes a sliding fee schedule 
for the payment of attorneys' contingency fees. Payments are 
allocated as follows: 40 percent of the first $50,000 recovered 
by the claimant; 33\1/3\ percent of the next $50,000 recovered 
by the claimant; 25 percent of the next $500,000 recovered by 
the claimant; and 15 percent of any amount by which the 
recovery by the claimant(s) is in excess of $600,000.
    The requirements for court supervision in the first 
paragraph do not apply outside of judicial proceedings. Thus, 
disputes settled prior to filing a lawsuit would not 
necessitate court supervision. The sliding fee schedule, by 
contrast, applies in all cases.

Section 6. Additional health benefits

    Section 6 ensures that in any health care lawsuit involving 
injury or wrongful death, a party may introduce evidence of 
collateral source benefits received--or reasonably likely to be 
received--from other parties. This section also restricts a 
provider of collateral source benefits from subrogating a 
claimant's recovery or obtaining any lien or credit against the 
claimant's damage award.

Section 7. Punitive damages

    Section 7 specifies new guidelines for the awarding of 
punitive damages. Under this section, punitive damages may be 
awarded, if otherwise permitted by applicable state or Federal 
law, against any person in a health care lawsuit. The amount of 
punitive damages awarded may be as high as two times the amount 
of economic damages awarded or $250,000, whichever amount is 
greater.
    This section does not permit juries to be informed of the 
formula for calculating punitive damages. Moreover, punitive 
damages may only be awarded if it is first proven by clear and 
convincing evidence that a defendant 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. This section 
states that no demand for punitive damages shall be included in 
a health care lawsuit as initially filed. Further, punitive 
damages in healthcare lawsuits may not be awarded if 
compensatory damages are not awarded.
    Paragraph 7(c)(1) shields manufacturers and distributors of 
medical products from punitive damages in certain instances. 
The provision is intended to shield those companies that are 
fully compliant with all Federal Food, Drug, and Cosmetic Act 
(FFDCA) laws and regulations (in the case of biological medical 
products, full compliance with the FFDCA and section 351 of the 
Public Health Service Act (PHSA) is required). The FFDCA 
ensures the safety and effectiveness of drugs, devices, and 
biological products, all of which are covered by this section. 
Unless a claimant can demonstrate by clear and convincing 
evidence a lack of compliance with any FFDCA or PHSA section 
351 law or regulation, then a manufacturer, distributor or 
supplier is shielded from punitive damages. All other damages, 
if proven, are still available to the claimant.
    Under paragraph 7(c)(1), if a claimant can prove by clear 
and convincing evidence that a manufacturer, distributor or 
supplier has not complied with the FFDCA or section 351 of the 
PHSA, the claimant must then further prove that the harm 
attributed to the medical product resulted from the proven 
compliance failure. A technical violation of the Act that is 
wholly unrelated to the harm will not remove the shield 
provided for in this section. Rather, punitive damages will 
only be available to claimants who prove both a violation of 
the Act or regulations, and then draw the nexus between failed 
compliance and harm.
    Paragraph 7(c)(1) applies to medical products, as defined 
in section 9. Included in this definition are nonprescription, 
over-the-counter (OTC) drugs. Many OTC drugs are marketed after 
approval of a new drug application (NDA) or abbreviated new 
drug application (ANDA). Many OTC drugs are also marketed 
pursuant to monographs or tentative final monographs 
promulgated by the Agency. While a final monograph is a 
regulation, a tentative final monograph represents the Agency's 
current position on the requirements for safe and effective 
labeling, formulation and marketing of the OTC drug product. In 
some instances, tentative final monographs have been in 
existence for decades, yet have never been finalized. Companies 
follow these so-called ``tentative'' monographs and deliver 
safe and effective drug products. The Committee believes that 
the mere fact that the FDA has not taken the last step to 
finalize monographs in existence for decades should not 
preclude a manufacturer, distributor or supplier of such 
products from claiming the protections afforded by section 
7(c).
    Subsection 7(c) does not create an affirmative obligation 
on the part of the FDA to demonstrate compliance or 
noncompliance for the purposes of private litigation. The 
section also revokes the shield for persons: (1) who knowingly 
misrepresent information to the FDA; (2) who bribe government 
officials for the purpose of obtaining approval of medical 
products; or, (3) who prevent governmental enforcement actions.
    Paragraph 7(c)(2) prohibits a health care provider who 
prescribes, or who dispenses pursuant to a prescription, a 
medical product that is approved by the FDA from being named as 
a party in a product liability lawsuit. Nothing in the 
paragraph prevents a court from consolidating cases involving 
health care providers and cases involving products liability 
claims.

Section 8. Authorization of payment of future damages to claimants in 
        health care lawsuits

    Section 8 requires the court, at the request of any party, 
to order that the award of future damages equaling or exceeding 
$50,000 be paid by periodic payments.

Section 9. Definitions

    Section 9 defines many of the terms included in the 
legislation. The term ``health care lawsuit'' does not include 
a claim or action which is based on criminal liability; which 
seeks civil fines or penalties paid to Federal, State or local 
government; which is grounded in antitrust; or in which the 
dispute is over the price of health care goods or services. The 
latter exclusion addresses cases concerning price-fixing or 
over charging, not cases involving personal injury. Finally, 
the Committee intends the term ``health care goods and 
services'' to include those involving ``the assessment or care 
of the health of human beings.'' Such terms include the 
monitoring, supervision, and provision of direct assistance to 
claimants.

Section 10. Effect on other laws

    Section 10 states that this legislation does not apply to 
civil actions brought for a vaccine-related injury or death 
which is covered under provisions of the Public Health Service 
Act. It also states that nothing in the Act should 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 state's rights

    Section 11 specifies many of the rules governing the 
relationship between the HEALTH Act and state and Federal laws. 
Specifically, subsection 11(a) provides that provisions 
governing health care lawsuits outlined in the legislation 
preempt state law to the extent that state law prevents the 
application of these provisions. The legislation also 
supersedes the Federal Tort Claims Act (FTCA) to the extent 
that the FTCA 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 application of periodic payments 
of future damages. The FTCA is also superseded if it prohibits 
the introduction of evidence regarding collateral source 
benefits, or mandates or permits subrogation or a lien on 
collateral source benefits.
    Under subsection 11(b), if an issue is not addressed by a 
provision of law established by this legislation, it shall be 
governed by otherwise applicable state or Federal law. The 
subsection further states that the Act does not preempt or 
supersede any law that imposes greater procedural or 
substantive protections for health care providers and health 
care organizations from liability, loss, or damages.
    Subsection 11(c) states that this legislation does not 
preempt any state law (enacted before, on, or after the date of 
enactment of H.R. 5) that specifies a particular amount of 
compensatory or punitive damages (or the total amount of 
damages) that may be awarded in a health care lawsuit. The 
subsection also provides that the Act does not preempt any 
defense available to a party in a health care lawsuit under any 
other provision of state or Federal law.
    Finally, the Committee notes the interrelationship of a 
number of provisions of H.R. 5. H.R. 5 does not create a cause 
of action or provide for a remedy or recovery that is not 
available or permitted under other provisions of applicable 
law. Moreover, any protections, defenses, or restrictions that 
are legally enforceable or available under contracts would 
still apply. Before applying the provisions of H.R. 5, courts 
should first review the law applicable to the appropriate claim 
or cause of action without reference to H.R. 5. Courts should 
then apply the limitations of H.R. 5 where appropriate.

Section 12. Applicability; effective date

    Section 12 states that the provisions of the legislation 
apply to any health care lawsuit brought in Federal or state 
court, or subject to alternative dispute resolutions system, 
that is initiated on or after the date of the enactment of the 
Act, except that any health care lawsuit arising from an injury 
occurring prior to the date of the enactment of the Act is 
governed by the applicable statute of limitations provisions in 
effect at the time the injury occurred.

Section 13. Sense of Congress

    Section 13 states the sense of Congress that a health 
insurer should be liable for damages for harm caused when it 
makes a decision as to what care is medically necessary and 
appropriate. Because section 13 is a sense of Congress, this 
provision has no direct legal impact.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    This legislation does not amend any existing Federal 
statute.

                            DISSENTING VIEWS

    We are concerned that many health care providers face 
difficulty obtaining reasonably priced medical malpractice 
insurance. This is a serious problem that could restrict 
patient access to care, and it merits attention. The Majority, 
however, rushed this legislation through the Committee in a 
partisan fashion. The legislation is unclear with respect to 
many important points of law, and it does not reflect a 
deliberative effort to craft a comprehensive and workable 
legislative solution. Since H.R. 5 would preempt the tort laws 
of all 50 states, its poorly drafted and ambiguous provisions 
will lead to excessive litigation for years to come.
    The Subcommittee on Health held only one hearing on this 
matter in February. The Subcommittee received testimony about 
the detrimental effect this legislation would have on injured 
patients, the need to understand all factors that contribute to 
insurance premium increases, and the confusion resulting from 
many unclear provisions of the bill. Minimal changes were made 
to the legislation, leaving many questions unanswered. During 
full Committee Markup, every one of over a dozen amendments 
offered by the Minority was defeated on a partisan basis. This 
was not a process of bipartisan collaboration nor one that 
would lend itself to addressing the problem thoroughly. The 
legislation is now being rushed to the House Floor less than 
one week after being reported.
    The bill offers a ``solution'' prior to having discovered 
the root of the problem. Instead of reducing the occurrence of 
frivolous lawsuits, providing direct assistance to health care 
providers and communities, and examining every aspect of the 
problem, this legislation restricts the legal rights of those 
who have been truly wronged.
    We do not dispute that there is a problem. Providers have 
seen insurance rates increase dramatically in recent years, and 
some specialties are finding it impossible to secure coverage. 
The situation is leaving doctors with few options. Those who 
can afford it will pay the increased cost of providing medical 
services. Those who cannot afford the increase are forced to 
assume significant personal liability, leave high-risk 
specialties, or leave the profession altogether. At best, 
health care will become more expensive for patients. At worst, 
in addition to higher prices, patients will be denied access to 
care, and lifesaving treatments will not be provided.
    While the rising cost of malpractice insurance is a real 
concern for doctors and patients alike, we have serious 
reservations about the proposed ``solution'' for three primary 
reasons. First, what has caused the increase in malpractice 
insurance premiums is not easily identified. Moreover, it is 
not clear that this legislation will reduce the medical 
malpractice premiums that providers must pay to insurance 
companies. Second, the scope and severity of the provisions in 
H.R. 5 impose unreasonable restrictions on an injured patient's 
ability to hold wrongdoers accountable. Third, the legislation 
is over-broad, protecting the interests of large corporations, 
such as Health Maintenance Organizations (HMO's) and drug 
companies, at the expense of health care providers and 
patients. The legislation provides nothing more than a shield 
for bad actors rather than meaningful reforms for overburdened 
doctors and providers.
    To find an effective solution, we must closely examine the 
insurance industry and how its conduct affects medical 
malpractice premiums, an activity not undertaken by this 
Committee. We know that many factors completely unrelated to 
jury verdicts and the civil justice system affect insurance 
rates: changes in state law and regulatory requirements; 
competitiveness of the insurance market; the types of policies 
issued within the industry; interest rates; and national 
economic trends. Moreover, there is scant evidence to date that 
various state tort reforms have realized appreciable premium 
savings. In a comparison of states that enacted severe tort 
restrictions during the mid-1980's and those that resisted 
enacting tort reform, a recent study found no correlation 
between tort reform and insurance rates.
    Insurance markets are subject to cycles, periods of 
underpricing of premiums to increase market share and book 
premium dollars, followed by a hardening of the market. Once 
the market hardens, competition intensifies, underwriting 
results deteriorate, and investment incomes fall. Insurance 
companies then need to raise premiums to cover losses. We are 
now in the midst of a ``hard'' phase of the insurance cycle and 
increases in malpractice premiums are consistent with overall 
market trends. This problem is not unique to malpractice 
insurance. While medical malpractice insurance premiums for the 
three riskiest specialties increased 10% from 2000 to 2001, 
auto insurance premiums saw similar increases of 8.4% during 
that same period.
    A serious effort to provide relief to providers from high 
malpractice premiums would have looked at these and other 
issues. A number of Congressional Democrats have requested the 
General Accounting Office look into these questions. The 
Committee, however, chose to take a one-sided approach. Reps. 
Brown, Pallone, and Capps offered amendments that would 
encourage insurance reforms both on the state and federal 
levels. Each of those amendments was defeated on a partisan 
basis. Rep. Dingell offered an amendment in the nature of a 
substitute during the full Committee Markup of H.R. 5. The 
Democratic substitute would have provided direct assistance to 
health care providers and communities, reduced frivolous 
lawsuits, and established an independent advisory commission to 
thoroughly examine the problem and propose long-term solutions. 
It was also defeated on a partisan basis.
    There are many flaws in the legislation, but our dissenting 
views will focus on three of the most egregious: the cap on 
non-economic damages, the cap on punitive damages, and the 
overly restrictive and ambiguous statute of limitations.

                          NON-ECONOMIC DAMAGES

    H.R. 5 limits non-economic damages to $250,000 for all 
claims against negligent hospitals and doctors, drug and device 
manufacturers, nursing homes, HMOs and other insurers. This cap 
is an aggregate cap; no matter how many defendants participated 
in causing the injury or the severity of the injury, the most 
an injured patient can recover is $250,000. Non-economic 
damages compensate patients for very real injuries such as the 
loss of a limb or eyesight, the loss of mobility, the loss of 
brain or organ function, the loss of fertility, severe 
disfigurement and excruciating, chronic pain. Juries are not 
informed of this cap, presumably because proponents of this 
legislation do not want them to compensate for such a harsh 
limit by increasing the amount of damages in other areas.
    The severity of this cap is astounding. The intent is to 
parallel the cap in California's MICRA law, which was enacted 
in 1975 and never indexed to inflation. The value of this cap 
has declined to a mere $40,389 in 2002 dollars. Using the 
Consumer Price Index for medical care, this cap today would be 
more than $1,500,000. In addition, the California law only 
applies to medical malpractice cases and not claims against 
drug and device manufacturers, HMO's, insurance companies, or 
nursing homes covered under H.R. 5. Rep. Rush offered an 
amendment that would have indexed the cap to the rate of 
inflation, and Rep. Pallone offered an amendment that would 
have prohibited HMO's and drug and device manufacturers from 
benefiting from the protections of this legislation. Both 
amendments were defeated on a partisan basis.
    In addition, by capping non-economic damages, H.R. 5 
discriminates against women, children, the elderly, minorities, 
the unemployed and others who cannot show substantial economic 
loss (e.g., lost wages or salary). A child who suffers brain 
damage or other catastrophically debilitating injury would 
recoup little in economic damages, and would be left with a 
maximum of $250,000 for the remainder of his life, which could 
exceed 70 or 80 years.
    Non-economic damages are also an important measure of 
compensatory damages for older persons, and in particular 
nursing facility residents. These individuals have neither long 
life expectancies nor large earning capacities, the traditional 
measures of economic damages. By so stringently limiting non-
economic damages, H.R. 5 would remove a strong financial 
incentive to nursing facilities to provide residents with 
decent care. Rep. DeGette offered an amendment to remove the 
cap on non-economic damages from the bill, and Ms. Schakowsky 
offered an amendment that prohibited nursing homes from 
benefitting from the protections of the legislation. Both 
amendments were defeated on party-line votes.

                            PUNITIVE DAMAGES

    The legislation sets a nearly impossible standard for 
awarding punitive damages and then limits such damages to twice 
economic damages or $250,000, whichever is greater. By basing 
punitive damages on the level of economic losses, the bill 
discriminates against injured women, children, elderly and 
others who tend to have lower incomes. For example, if a CEO of 
one of the drug companies that this legislation protects were 
injured, his economic damages would be worth millions upon 
millions of dollars. If a stay-at-home mother were injured, she 
would have minimal economic damages awarded to her.
    In order to assess punitive damages, H.R. 5 imposes a 
federal standard of ``clear and convincing'' evidence that (1) 
the defendant acted with malicious intent to injure or (2) the 
defendant understood the plaintiff was substantially certain to 
suffer unnecessary injury yet deliberately failed to avoid such 
injury. This standard of ``malicious intent'' requires more 
than criminal misconduct; such a standard would likely protect 
a drunk doctor who kills a patient because a court would likely 
hold that the doctor was unable to form the necessary intent.
    The bill also could increase the length and cost of 
malpractice actions because it prohibits plaintiffs from 
seeking punitive damages in an initial suit. Only at the 
court's discretion, after a finding by the court that there is 
a substantial probability that the plaintiff will prevail, may 
the plaintiff file an amended proceeding to request punitive 
damages be awarded. This requirement for a separate proceeding 
in essence turns one trial into two.

                         STATUTE OF LIMITATIONS

    H.R. 5 also sets a stringent federal statute of limitations 
on state tort cases. The statute of limitations for bringing an 
action is the earlier of three years after the date of 
manifestation of injury or one year after the date of 
discovery, but in no event shall the time for commencement of a 
lawsuit exceed three years. This provision also was subject to 
considerable debate in Committee, with particular focus on the 
meaning of manifestation. Proponents of the legislation were 
not certain what manifestation meant, but referred to Blacks 
Law Dictionary for guidance. In response to questioning by Rep. 
Dingell, Legislative Counsel noted that manifestation is not a 
term used in Federal law nor is it defined in the legislation. 
Since H.R. 5 includes one time frame from the reasonable 
discovery of an injury (one year) and a separate time frame 
from the manifestation of an injury (three years), 
manifestation of an injury must be something different than the 
reasonable discovery of that injury. Exactly what manifestation 
means remains unanswered.
    While some injuries are discovered immediately, often 
malpractice or product defects are not discovered or diagnosed 
for some time. For example, a hemophiliac who contracts HIV 
from tainted blood may not learn of the disease until five 
years later. Certainly it can be argued that HIV may manifest 
itself long before anyone could reasonably be expected to 
discover that injury. By establishing an absolute time limit 
for filing a case, this legislation would completely preclude 
many injured patients from any recourse and would therefore 
shield negligent practitioners, facilities, and manufacturers 
from any liability whatsoever. Moreover, use of the ambiguous 
term, manifestation, will lead to years of excessive and 
unnecessary litigation in both state and Federal courts. Rep. 
Engel offered an amendment to replace the statute of 
limitations with a clear and equitable alternative that was 
defeated on a party-line vote.

                         DEMOCRATIC SUBSTITUTE

    Unlike H.R. 5, the Democratic substitute directly addressed 
the needs of health care providers. Unlike H.R. 5, the 
Democratic substitute directly addressed the issue of frivolous 
law suits. Unlike H.R. 5, the Democratic substitute sought to 
find the true causes and the best long-term solutions to this 
problem by establishing an independent advisory commission.
    The scope of liability reforms in the Democratic substitute 
were limited to hospitals, physicians, nurses and other health 
professionals who pay malpractice insurance premiums. Unlike 
H.R. 5, it did not protect HMO's, insurance companies and drug 
and device manufacturers.
    The amendment established an equitable statute of 
limitations that would begin three years from the date an 
injury is discovered or reasonably should have been discovered. 
For children who discover their injury while under the age of 
18, they would have three years after turning 18 to file an 
action.
    As officers of the court, attorneys have an obligation to 
keep frivolous law suits from clogging the system. The 
Democratic substitute would have expanded that obligation by 
requiring attorneys to certify affirmatively that each of their 
medical malpractice actions has merit. If an attorney files a 
false certificate, the attorney would be subject to strict 
penalties by the courts. Unlike H.R. 5, this provision directly 
addresses the problem of frivolous law suits.
    The Democratic substitute would have also limited the 
circumstances under which punitive damages can be awarded to 
the most egregious of circumstances--gross negligence, reckless 
indifference to life, or intentional acts such as intoxication 
or sexual abuse. If punitive damages are awarded, half of the 
proceeds will be directed into a fund to reduce medical errors 
and improve patient safety.
    Where H.R. 5 does not provide any direct assistance to 
health care providers, the Democratic substitute included three 
provisions that were designed to help providers with their 
malpractice insurance costs. The first provision required 
malpractice insurance companies to pass along at least half of 
any savings achieved from this legislation to physicians on an 
annual basis. The second provision provided grants and 
contracts administered through the Department of Health and 
Human Services (HHS) to assist geographical regions of the 
country that are experiencing a shortage of physicians due to 
increased malpractice insurance costs. The third provision 
allowed HHS to send physicians from the National Health Service 
Corps to trauma centers that are about to close because of 
increased malpractice insurance costs.
    To conclude, the legislation before us today focuses on 
drastic reforms of the judicial system and extends those 
draconian reforms beyond the realm of medical malpractice. 
Rather than focusing on the underlying causes of malpractice 
premium increases and providing immediate assistance to health 
care providers, H.R. 5 limits the legal rights of patients with 
meritorious claims. H.R. 5 also limits the legal rights of 
providers against insurance companies, HMO's and drug and 
device manufacturers. As the Democratic amendments 
demonstrated, any reforms of the judicial system should be 
narrowly tailored to reduce frivolous lawsuits and add 
stability to the courts. For example, Rep. Allen offered an 
amendment to encourage state pre-litigation screening panels, 
which was defeated on a partisan basis. H.R. 5 restricts claims 
with merit and brings uncertainty and confusion to the courts 
that will lead to excessive litigation for years to come.
    The rise in malpractice premiums is a real problem that 
calls for real reform. Failure to examine all aspects of this 
problem is irresponsible, and in this instance will 
disproportionately harm women, children, the elderly, and 
others who are injured. Above all, any legislative solution 
should strike a careful balance that preserves an injured 
patient's right to just compensation and the delivery of health 
care without unreasonable costs of insurance.

                                   John D. Dingell.
                                   Lois Capps.
                                   Jan Schakowsky.
                                   Frank Pallone, Jr.
                                   Ted Strickland.
                                   Hilda L. Solis.
                                   Sherrod Brown.
                                   Edward J. Markey.
                                   Eliot L. Engel.
                                   Henry A. Waxman.
                                   Edolphus Towns.
                                   Rick Boucher.
                                   Bart Stupak.
                                   Mike Doyle.

                            DISSENTING VIEWS

    We believe that H.R. 5 is a gross violation of the 
constitutional concept of federalism. H.R. 5 would make many 
changes to the common law that severely limit the traditional 
rights of plaintiffs seeking damages from the malpractice of 
physicians and negligence from a variety of health related 
entities including Health Maintenance Organizations and 
pharmaceutical manufacturers and distributors. This bill is not 
a matter to be decided by Congress because it proposes tort 
reforms that are traditionally, and possibly constitutionally, 
areas for decisions by state legislatures.
    Because this issue has a long tradition in the state 
courts, they have taken a wide variety of views on the issue. 
In 20 states, courts have ruled that caps on damages are 
unconstitutional and 18 state courts have ruled that their 
statutes of limitations are unconstitutional. It is 
inappropriate for Congress to limit the rights of individuals 
when state courts have ruled that those rights are protected 
under state constitutions.
    Furthermore, H.R. 5 would make sweeping changes to common 
law traditions by eliminating joint and several liability, 
capping the amount of non-economic damages, limiting punitive 
damages, and severely restricting the time for recovery by 
victims of medical malpractice. Under common law, defendants 
are joint and severally liable for harm to plaintiffs to ensure 
that the victims can actually recover damages for their 
injuries. Yet, H.R. 5 entirely eliminates joint and several 
liability for medical malpractice lawsuits, which means victims 
are less likely to receive compensation for their injuries and 
the defendants who caused harm are insulted from having to pay 
for their mistakes.
    Additionally, H.R. 5 caps non-economic damages at $250,000 
in the aggregate. Non-economic damages compensate victims for 
injuries that are very real, like the loss of a leg, 
disfigurement, pain and suffering, and the loss of fertility. 
Under common law, non-economic damages are not capped. By 
limiting non-economic damages to $250,000, H.R. 5 ensures that 
victims receive arbitrary compensation for the horrendous and 
oftentimes permanent injuries they suffer, rather than allowing 
a jury to determine the appropriate level of compensation in 
each individual case.
    High malpractice insurance rates are a problem for our 
nation's physicians. But capping damages to legitimate victims 
of medical malpractice will not solve the problem of high 
premiums. We believe other factors--like the cyclical nature of 
the insurance industry, the management of reserves, and the 
impact of increased medical costs on the ways that doctors 
provide care--significantly affect the rates of malpractice 
insurance. For example, the proponents of HR 5 credit MICRA 
with stabilizing rates in California. However, there is 
credible evidence that the stabilization of malpractice 
insurance rates resulted from the impact on the insurance 
industry of Proposition 103, rather than any caps on damages in 
malpractice lawsuits.
    Furthermore, there is no correlation between the level of 
malpractice insurance rates in a particular state and the caps 
on damages that state may have. For example, four of the five 
states with the highest malpractice premiums--Florida, 
Michigan, Texas, and Illinois--are states that have adopted 
some level of caps. H.R. 5 will not reduce malpractice 
insurance premiums for physicians, but it will significantly 
limit the rights of malpractice victims to receive fair 
compensation for their harm. We believe that is necessary to 
conduct a comprehensive examination of the many factors that 
impact the pricing of insurance rates in order to appropriately 
address the problem of high malpractice insurance costs.
    H.R. 5 is an affront to the rights of states and 
malpractice victims. While H.R. 5 is silent on the very issue 
it purports to solve, malpractice insurance rates, it asks 
victims of medical negligence to accept arbitrary limits on the 
amount of compensation they may receive for their injuries. 
Congress should not act as an uber-state legislature by passing 
a bill to significantly restructure what is most appropriately 
a matter for state governments and take away the rights of 
citizens who have been harmed by medical malpractice.
                                   Diana DeGette.
                                   Lois Capps.
                                   Edolphus Towns.
                                   Rick Boucher.
                                   Edward J. Markey.
                                   Gene Green.
                                   Henry A. Waxman.
                                   Bart Stupak.

                                
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