The United States House of Representatives
Passes Healthcare Liability Limits

By Paul Arshagouni
Health Law & Policy Institute

Seeing medical malpractice rates rising dramatically for the past several years, medical groups, such as the American Medical Association, have increased their call for congressional action to enact some sort of federal malpractice reforms.  The 107th Congress recently heard that call and, on September 26, 2002, the House of Representatives passed HR 4600.

HR 4600, entitled the “Help Efficient, Accessible, Low-cost, Timely Healthcare Act of 2002” (“HEALTH”) would limit noneconomic damages in any healthcare related law suit to no more than $250,000.  It would also cap punitive damages to the greater of twice the economic damages or $250,000.

If HEALTH becomes law, it would do several things.  First, it would establish a uniform statute of limitations period for all healthcare lawsuits.  HEALTH would bar any actions that commence more than three years “after the date of manifestation of injury” or more than one year after the claimant discovered, or through reasonable diligence should have discovered, the injury.  Children under the age of six years would have three years after the manifestation of the injury or until they are eight years old, whichever is longer, to commence an action.  See HEALTH Section 3.  The statute of limitations may be tolled upon proof of: (1) fraud; (2) intentional concealment; or (3) the presence in the person of the claimant, of a foreign body that has no diagnostic or therapeutic purpose.  Id.  Enactment of HEALTH would shorten Texas’ current statute of limitations in healthcare actions.  Texas imposes a statutory limit of two years following the date of injury.  See Tex. Rev. Civ. Stat. art. 4590i § 10.01.  However, Texas courts have held that, due to the Texas Constitution’s Open Courts provision, the statutory period may not begin until the plaintiff knew or reasonably should have known of the injury.  See Neagle v. Nelson, 685 S.W.2d 11 (Tex. 1985).  For minors, the two-year statutory period is tolled until the minor’s eighteenth birthday.  See Medina v. Lopez-Roman, 49 S.W.3d 393 (Tex. App. 2000).

Second, HEALTH would limit all noneconomic damages to a maximum of $250,000 for all defendants.  See HEALTH Section 4(b).  Claimants would be unable to receive more than $250,000 for all pain and suffering, inconvenience, physical impairment, injury to reputation, and any other nonpecuniary losses.

The Texas legislature made an effort to limit medical malpractice awards in 1977 with the Texas Medical Liability and Insurance Improvement Act, Tex. Rev. Civ. Stat., art. 4590i. (MLIIA).  However, in 1988, the Texas Supreme Court limited MLIIA, applying the judgment caps only to wrongful death and survival actions.  See Lucas v. U.S., 757 S.W.2d 687, 691 (Tex. 1988).  Where MLIIA applies, its cap of $500,000, adjusted for inflation, applies and limits noneconomic awards to approximately $1,400,000 in current dollars.  HEALTH would therefore lower damage awards in Texas below the amounts originally contemplated in MLIIA.

Third, HEALTH eliminates joint and several liability in healthcare actions.  Under HEALTH, the trier of fact must determine the percent liability for each defendant.  Separate judgments are then rendered against each individual defendant allocating damages in direct proportion to the defendant’s percent liability.   See HEALTH Section 4(d).  Texas has limited, but not eliminated joint and several liability.  In Texas, a defendant may be held jointly liable if his fault is greater than 50% in most tort actions and greater than 15% in toxic tort actions.  See Texas Civ. Prac. & Rem. Code § 33.013.

Fourth, HEALTH limits the percentage of any award an attorney may claim as a contingency fee.  A contingency fee may be no more than: (1) 40% of the first $50,000; (2) 33 1/3% of the next $50,000; (3) 25% of the next 500,000; and (4) 15% of any amount greater than $600,000.  See HEALTH Section 5(a).  Texas law does not currently limit attorney contingency fees.

Fifth, HEALTH would eliminate the collateral source rule.  See HEALTH Section 6.  Section 6 permits any party to present evidence of an amount paid, or likely to be paid, on behalf of the opposing party.  Texas currently follows the collateral source rule.  See Century Papers, Inc. v. Perrino, 551 S.W.2d 507, 511 (Tex. App. 1977).  HEALTH would also prevent the provider of collateral source benefits from recovering any amount against the claimant.  This could affect provisions of some health insurance contracts that permit the health insurer to recover the costs of care provided to a patient.

Sixth, HEALTH places significant restrictions on claims for punitive damages.  Under HEALTH, a claimant may not initially demand punitive damages.  Subsequent to the initial filing, the claimant must file a motion with the court requesting permission to file an amended complaint asking for punitive damages.  Prior to ruling on this motion, the court must weigh the evidence and find that the claimant has established a substantial probability of prevailing on the claim for punitive damages.  Such a claim would be difficult to prove.  To be successful the claimant must prove, by clear and convincing evidence, that the defendant acted with malicious intent to injure the claimant or that the defendant failed to avoid unnecessary injury that he or she knew the claimant was substantially certain to suffer.  See HEALTH Section 7(a).  Should the claimant be successful in seeking punitive damages, such damages are limited to the greater of two times the amount of economic damages or $250,000.  See HEALTH Section 7(b)(2).

Texas law allows for punitive or exemplary damages if the plaintiff can prove, by clear and convincing evidence that the harm resulted from: (1) fraud; (2) malice; or (3) a willful act or omission or gross negligence in a wrongful death action.  See Texas Civ. Prac. & Rem. Code § 41.003.  Texas also limits to amount of punitive damages to two times the economic damages plus noneconomic damages not exceeding $750,000, or $200,000, whichever is greater.  See Texas Civ. Prac. & Rem. Code § 41.008.

HEALTH further limits punitive damages so as to prevent any punitive damages against a manufacturer or distributor in actions concerning medical products that have either been approved by the Food and Drug Administration (FDA) or have been generally recognized as safe by qualified experts.  See HEALTH section 7(c)(1).  This provision does not apply if the defendant knowingly misrepresented or withheld information from the FDA it was required to submit and if that information is material and causally related to the harm the claimant suffered.  See HEALTH Section 7(c)(4).

The provisions of HEALTH apply to all medical malpractice actions filed in state or federal court.  They also apply to all product liability actions concerning medical devices or drugs and all actions concerning persons or entities obligated to provide or pay for healthcare benefits.  See HEALTH Sections 9(7)-(10), (14).  This is a new addition to healthcare liability reform.  Not only would HEALTH limit the potential noneconomic and punitive damages for a physician’s professional negligence, it would similarly limit the damages available from pharmaceutical and medical device manufactures and distributors and all healthcare organizations, including health insurers.  As many states already have caps on physician malpractice liability, extending such protections to these groups will likely have a far greater national impact.

HEALTH preempts any state law that prevents application of the bill.  However, it limits the preemptive effect by leaving in effect any state or federal laws that address issues not governed by HEALTH.  It also leaves in effect any provisions that provide greater healthcare provider protections than allowed for in HEALTH.  Finally, in an effort to grant some state flexibility, HEALTH will not preempt any state statutory limits on damages passed before or after HEALTH’s enactment date, whether such limits are higher or lower than HEALTH’s limits.  See HEALTH Section 11.  Therefore, HEALTH’s damage limits will only apply in states that fail to impose their own statutory limits.  As Texas has no statutorily imposed medical malpractice limits for common law claims, HEALTH’s limits would apply in Texas.  In health care related wrongful death and survival actions, however, MLIIA’s statutory damage caps would apply.  With the MLIAA noneconomic damages cap currently at approximately $1,400,000, a decedent's estate could receive a significantly greater pain and suffering award than could a living plaintiff.

The debate over HR 4600 reveals two competing interests; patients’ ability to access the healthcare system and patients’ ability to seek just compensation should they be harmed by the healthcare system.  Limiting patients’ amount of recovery in the event of malpractice may improve overall access to care, but at the cost of potentially inadequately compensating some patients for harms they suffered.  Where the balance should fall is a policy question legislators are now debating.

HEALTH has yet to become law.  Before it can reach the President’s desk, the Senate must take action on a nearly identical bill, S. 2793, introduced on July 25, 2002.  The House passed HR 4600 on a near party-line vote. The Democratically controlled Senate was unlikely to pass S. 2793 without significant amendments.  With the Republicans retaking the Senate and the Bush Administration indicating that malpractice reform will be a priority, final passage of HEALTH may become reality.

You can find the complete text of HR 4600 on http://thomas.loc.gov/ by searching for HR 4600.  The direct site is at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=107_cong_bills&docid=f:h4600rfs.txt.pdf.

11/19/02