Putting his own stamp on a long-standing Republican priority, President Barack Obama is launching a drive to overhaul state medical malpractice laws and cut down on wasteful tests doctors perform because they fear lawsuits.

Obama’s budget calls for $250 million in Justice Department grants to help states rewrite their malpractice laws in line with recommendations that his bipartisan debt reduction commission issued last year.

“I think the president is very serious about following up on this,” Health and Human Services Secretary Kathleen Sebelius told the Senate Finance Committee this week. Her agency would advise the Justice Department on awarding the grants.

Specific reforms the money could be used for exclude caps on jury awards that the American Medical Association and GOP lawmakers have pursued for years without success. But they do include measures unacceptable to trial lawyers, an interest group that contributes heavily to Democratic candidates.

House Bill

Meanwhile, the Republican-controlled House Judiciary Committee voted along party lines this week in support of a medical malpractice tort reform bill called the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011. The bill would cap noneconomic damages in medical injury cases at $250,000, or twice the amount of economic damages, whichever is greater.

The bill, sponsored by Rep. Phil Gingrey, R-Ga., who is a doctor, is modeled after California’s Medical Injury Compensation Reform Act of 1975.

Gingrey’s bill would also allow a court to restrict the payment of attorney contingency fees and limits the fees to a decreasing percentage based on the increasing value of the amount awarded. It would deny punitive damages in the case of products that meet Food and Drug Administration standards.

Obama Proposals

Topping the list of ideas in the Obama administration proposals is one for health courts. Specially trained judges — not juries — would decide malpractice cases, awarding compensation from a set schedule. Plaintiffs’ lawyers say that would undermine the constitutional right to trial by jury. But proponents say it would bring predictability, resulting in lower malpractice insurance rates for doctors.

“Health courts offer much more protection for fearful physicians than caps because you are unlikely to get a crazy verdict when you have an expert judge,” said lawyer Philip Howard, founder of Common Good, a nonprofit group that advocates for changes in the legal system. The money Obama seeks could go far, he added, estimating it would cost $5 million to $7 million for a midsize state to set up health courts.

Speaking for trial lawyers, Gibson Vance, president of the American Association for Justice, called the idea “bad policy and bad for patients.”

Obama’s proposal also got a cool reception from congressional Republicans, who feel he has a record of promising more on malpractice than he delivers. Obama first indicated an interest in the issue during the marathon debate over his health care law. But all that actually wound up in the law was $25 million in grants to study the problem and potential solutions.

It’s different this time, administration officials said. The new proposal calls for ten times more money, and the grants would be used to change laws, not conduct more studies. Nonetheless, House Republicans are moving ahead with legislation to impose caps on jury awards.

The cost of defensive medicine is difficult to estimate, but conservative estimates start at around $50 billion a year. Obama’s debt commission estimated its recommendations could save government programs $17 billion through 2020, calling for an aggressive effort to rewrite malpractice laws. Obama’s budget, however, does not claim any savings from the new proposal.

Other malpractice reforms that could be funded under Obama’s grant proposal include:

• Creating a legal defense for doctors, hospitals and other providers who follow guidelines for best clinical practices and use electronic medical records. So-called “safe harbor” laws establish the presumption that by adhering to high standards, doctors are not behaving in a negligent manner.
• Programs that require hospitals and doctors to disclose mistakes early, offer an apology and compensation, and also agree to make changes to protect other patients from being harmed in the same way. If the patient’s family still wants to go to court, the provider’s apology could not be used as evidence of liability. Such programs have been shown to reduce litigation.
• Changing legal rules that result in higher malpractice awards. For example, instead of holding all the providers involved in a case to be equally liable, a “fair share” rule would allocate malpractice payments in proportion to responsibility for the damages.

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