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 this 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, HMOs, 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 benefitting 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
HENRY A. WAXMAN
EDOLPHUS TOWNS
RICK BOUCHER
BART STUPAK
MIKE DOYLE