Order Code RS22054
Updated March 7, 2005
CRS Report for Congress
Received through the CRS Web
Medical Malpractice Liability Reform:
H.R. 534, 109th Congress
Henry Cohen
Legislative Attorney
American Law Division
Summary
H.R. 534, 109th Congress, would preempt state law regarding some aspects of
medical malpractice liability, and liability for defective medical products, including
drugs. It would not, however, preempt any state law that imposes greater procedural or
substantive protections for health care providers and health care organizations from
liability. In medical malpractice and defective medical products suits, H.R. 534 would,
among other things, place caps on noneconomic and punitive damages (but only in states
that have not enacted and do not enact caps), eliminate joint and several liability, modify
the collateral source rule, limit lawyers’ contingent fees, enact a federal statute of
limitations, and provide for periodic payment of future damages.
Preemption of State Laws
Medical malpractice suits are governed by state law, but, because they affect
interstate commerce, the U.S. Constitution would permit Congress to regulate them and
to preempt state laws that regulate them. H.R. 534, 109th Congress, the Help Efficient,
Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2005, would impose federal
standards on some aspects of medical malpractice suits, but would leave other aspects to
continue to be governed by state law.1 Actually, H.R. 534 would apply to all “health care
liability claims,” which it defines to include not only medical malpractice suits, but
product liability suits that allege injuries resulting from defective medical products.2
This report will summarize the main provisions of H.R. 534, and will do so not in
the order of the bill’s sections, but in the order of the following subjects that the bill
1 H.R. 534, 109th Congress, is virtually identical to H.R. 5 and H.R. 4290, 108th Congress, as
passed by the House. Those two bills were identical except for one non-substantive word change.
H.R. 534 is similar to, but has several substantive differences from, S. 354, 109th Congress; for
information on S. 354, see CRS Report RS22075.
2 The phrase “medical malpractice” in this report, when used in reference to H.R. 534, should be
read to include all “health care liability claims.”
Congressional Research Service ˜ The Library of Congress

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addresses: (1) cap on noneconomic damages, (2) standard for and cap on punitive
damages, (3) limiting joint and several liability, (4) modifying the collateral source rule,
(5) limiting lawyers’ contingent fees, (6) creating a federal statute of limitations, and (7)
periodic payment of future damages. Another CRS report, without making reference to
any particular legislation, discusses these same subjects in the same order, explaining the
legal concepts each involves (in greater depth than the present report does) and offering
pros and cons of each.3

Even with respect to those aspects of medical malpractice suits on which H.R. 534
would impose federal standards, H.R. 534 would not preempt every state law. It would
not preempt any state 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” (§ 11(b)).4 It would also not
preempt “any State law (whether effective before, on, or after the date of 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 . . .”
(§ 11(c)).5
(1) Cap on Noneconomic Damages
H.R. 534 (§ 4(b)) would impose a $250,000 cap on noneconomic damages in any
health care lawsuit, “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.” As noted above, this cap would apply only in states that have no cap before
enactment of H.R. 534 and that do not enact one subsequently.6
Economic damages refer to monetary losses that result from an injury, such as
medical expenses, lost wages, and rehabilitation costs; H.R. 534 would not cap economic
damages. Noneconomic damages consist primarily of damages for pain and suffering.
Both economic and noneconomic damages are compensatory damages, as opposed to
punitive damages.
3 CRS Report RL31692, Medical Malpractice Liability Reform: Legal Issues and Fifty-State
Survey of Caps on Punitive Damages and Noneconomic Damages
.
4 This provision does not mention sellers of medical products, but it seems likely that the bill is
intended to preempt state law in suits alleging an injury caused by a defective medical product.
5 This provision raises the question whether a state that wishes to have no cap may enact a cap
that is so high — say, $1 billion — that it is effectively no cap, and thereby not be subject to the
bill’s cap.
6 H.R. 534 (§ 4(c)) provides that, for purposes of applying the $250,000 cap, “future
noneconomic damages shall not be discounted to present value.” This apparently means that, if
a jury awards, say, $260,000 in future noneconomic damages, and such amount could be paid in
the form of an annuity that costs $240,000, the higher figure would control, and the future
noneconomic damages would be reduced to $250,000, not to $240,000.

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(2) Standard for and Cap on Punitive Damages
H.R. 534 (§ 7(a)) provides that punitive damages may be awarded if otherwise
permitted by state law, if the claimant proves “by clear and convincing evidence” that the
defendant “acted with malicious intent to injure the claimant, or . . . deliberately failed to
avoid unnecessary injury that [the defendant] knew the claimant was substantially certain
to suffer.” H.R. 534 would thus preempt state law regarding the burden of proof and
standard for awarding punitive damages, except in states that provide greater protection
for defendants.7
H.R. 534 (§ 7(b)(2)) would also impose a cap on punitive damages of $250,000 or
two times the amount of economic (not of all compensatory) damages awarded, whichever
is greater. As with H.R. 534’s cap on noneconomic damages, the cap on punitive
damages would apply only in states that have no cap before enactment of H.R. 534 and
that do not enact one subsequently.
H.R. 534 (§ 7(c)(1)) would provide that “[n]o punitive damages may be awarded
against the manufacturer or distributor of a medical product, or a supplier of any
component or raw material of such medical product,” if the product has been approved
by the Food and Drug Administration or is generally recognized as safe and effective
under FDA regulations. This prohibition of punitive damages would not apply, however,
if a person (1) “knowingly misrepresented to or withheld from the Food and Drug
Administration information that is required to be submitted . . . that is causally related to
the harm which the claimant allegedly suffered,” or (2) made an illegal payment to an
official of the Food and Drug Administration for the purpose of either securing or
maintaining approval, clearance, or licensure of such medical product.” FDA regulations
require that, even after a drug is approved, drug companies report to the FDA new
information they obtain about adverse drug experiences.8 Therefore, a company that fails
to do so could, under the bill, apparently be subject to punitive damages, state law
permitting.
(3) Limiting Joint and Several Liability
H.R. 534 (§ 4(d)) would eliminate joint and several liability in medical malpractice
suits. Joint and several liability is the common-law rule that, if more than one defendant
is found liable for a plaintiff’s injuries, then each defendant may be held 100 percent
liable. With joint and several liability, the plaintiff may not recover more than once, but
may recover all his or her damages from fewer than all liable defendants, with any
defendant who pays more than its share of the damages entitled to seek contribution from
other liable defendants.
The main argument for eliminating joint and several liability is that it allows a
plaintiff to recover his entire damage award from a “deep pocket” defendant who was
only minimally liable. The main argument for retaining joint and several liability is that
7 See CRS Report RL31721, Punitive Damages in Medical Malpractice Actions: Burden of Proof
and Standards for Awards in the Fifty States.

8 21 C.F.R. § 314.80(b),(c), § 314.81(b)(2).

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it is preferable for a wrongdoer to pay more than its share of the damages than for an
injured plaintiff to recover less than the full compensation to which he is entitled.
(4) Modifying the Collateral Source Rule
The collateral source rule is the common-law rule that allows an injured party to
recover damages from the defendant even if he is also entitled to receive them from a
third party (a “collateral source”), such as a health insurance company, an employer, or
the government. To abolish the collateral source rule would be to require courts to reduce
damages by amounts a plaintiff receives or is entitled to receive from collateral sources.
Often a collateral source, such as a health insurer or the government, has a right of
subrogation against the tortfeasor (the person responsible for the injury). This means that
the collateral source takes over the injured party’s right to sue the tortfeasor, for up to the
amount the collateral source owes or has paid the injured party. Though the collateral
source rule may enable the plaintiff to recover from both his insurer and the defendant,
the plaintiff, if there is subrogation, must reimburse his insurer the amount it paid him.
If the collateral source rule were eliminated, then the defendant would not have to pay the
portion of damages covered by a collateral source, and the collateral source would
apparently not be able through subrogation to recover the amount it paid the plaintiff. In
the medical malpractice context, therefore, eliminating the collateral source rule would
benefit liability insurers at the expense of health insurers and other collaterals sources.
H.R. 534 (§ 6) would provide that, in any health care lawsuit, any party (usually the
defendant) may introduce evidence of collateral source benefits, and the opposing party
(usually the plaintiff) may introduce evidence of amounts paid to secure those benefits
(e.g., health insurance premiums). H.R. 534 does not state that collateral source benefits,
minus amounts paid to secure such benefits, would have to be deducted from damage
awards.
H.R. 534 would also eliminate the right of subrogation. In cases in which collateral
source benefits are deducted from damage awards, the plaintiff would not recover any
money from the defendant against which the collateral source would have a right of
subrogation, even if H.R. 534 did not eliminate the right of subrogation. In cases in which
collateral source benefits are not deducted, the plaintiff could apparently recover from
both the defendant and the collateral source.
(5) Limiting Lawyers’ Contingent Fees
A contingent fee is one in which a lawyer, instead of charging an hourly fee for his
services, agrees, in exchange for representing a plaintiff in a tort suit, to accept a
percentage of the recovery if the plaintiff wins or settles, but to receive nothing if the
plaintiff loses. Payment is thus contingent upon there being a recovery. Plaintiffs agree
to this arrangement in order to afford representation without having to pay anything out-
of-pocket. Lawyers agree to it, despite the risk of not being compensated, because the
percentage they receive if they win or settle — usually from 33a to 40 percent —
generally amounts to more than an hourly fee would.

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H.R. 534 (§ 5) would impose a cap with a sliding scale in medical malpractice cases:
40% of the first $50,000 the plaintiff recovered, 33a% of the next $50,000, 25% of the
next $500,000, and 15% of any additional amount.
(6) Creating a Federal Statute of Limitations
The statute of limitations — the period within which a lawsuit must be filed — for
medical malpractice suits under state law is typically two or three years, starting on the
date of injury. Sometimes, however, the symptoms of an injury do not appear
immediately, or even for years after, malpractice occurs. Many states therefore have
adopted a “discovery” rule, under which the statute of limitations starts to run only when
the plaintiff discovers, or in the exercise of reasonable diligence should have discovered,
his injury — or, sometimes, his injury and its cause.
H.R. 534 (§ 3) provides:
The time for the commencement of a health care lawsuit shall be three years
after the date of manifestation of injury or one 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 three years after the date of manifestation of injury unless
tolled [i.e., the three years does not start to run] 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.
This provision, rather than imposing a time limitation that begins on the date of
injury or on the date of discovery of the injury, would cut off the right to sue upon the
earlier of two different periods — three years and one year — that begin, respectively, on
the date of manifestation of injury and discovery of the injury. H.R. 534 defines neither
term, but, in its report on the 108th Congress’s identical bill, the House Committee on
Energy and Commerce explained the former term: “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.”9
The discovery of the injury, then, would apparently occur on the date that the patient
learns that his blood is tainted, which date may not occur until after “manifestation of
injury.” Suppose that medical tests reveal the tainted blood one year after the plaintiff
experienced his first symptoms. There would still be two years to run on the three-year
manifestation period, but the plaintiff would apparently have to sue within one year of
discovering that his blood is tainted — even if it takes more than one year to learn that his
blood is tainted as a result of a transfusion. A patient could also apparently discover his
injury, perhaps through a routine medical test, before symptoms become manifest, and,
again, the one-year discovery period would apparently apply.
9 H.Rept. 108-32, Part 2 (Mar. 11, 2003) at 28.

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It is not clear whether this provision is, strictly speaking, a statute of limitations.
(H.R. 534 does not call it that.) A statute of limitations is typically an affirmative defense,
which means that the defendant must raise it; if the defendant fails to raise it, then the
plaintiff may sue regardless of how much time has passed.10 H.R. 534, by contrast, could
be interpreted to place the burden of proof on the plaintiff to show that his injury occurred
within the time period allowed.
(7) Periodic Payment of Future Damages
Traditionally, damages are paid in a lump sum, even if they are for future medical
care or future lost wages. In recent years, however, “attorneys for both parties in damages
actions have occasionally foregone lump-sum settlements in favor of structured
settlements, which give the plaintiff a steady series of payments over a period of time
through the purchase of an annuity or through self-funding by an institutional
defendant.”11
H.R. 534 (§ 8) provides:
In any health care lawsuit, if an award of future damages, without reduction to
present value, equaling or exceeding $50,000, is made against a party with
sufficient insurance or other assets to fund a periodic payment of such a
judgment, the court shall, at the request of any party, enter a judgment ordering
that the future damages be paid by periodic payments. In any health care
lawsuit, the court may be guided by the Uniform Periodic Payment of
Judgments Act promulgated by the National Conference of Commissioners on
Uniform State Law.
Though this provision states that an award of future damages shall not be reduced
to present value to determine whether it equals or exceeds the $50,000 minimum
necessary for a party to require the court to order periodic payments, it does not state
whether the amount of the award of future damages would be converted to present value.
Not to require such conversion “could be a very major change, significantly reducing
awards, if it is intended to allow a defendant to pay, for example, a $1 million award over
a 10-year period at $100,000 a year. On the other hand, if it requires the jury award to be
converted into present value terms — an annuity with a present value of $1 million — the
reform doesn’t mean that much; as a practical matter, the defendant would be paying the
same amount as before.”12 The defendant, that is, would have to spend $1 million for an
annuity that, as it earned interest over the years of its distribution, would yield the plaintiff
more than $1 million. Had the defendant paid the plaintiff a lump sum of $1 million, then
the plaintiff could have purchased that same annuity.
10 See, e.g., Federal Rule of Civil Procedure 8(c).
11 Annotation, Propriety and Effect of “Structured Settlements” Whereby Damages are Paid in
Installments Over a Period of Time, and Attorneys’ Fees Arrangements in Relation Thereto
, 31
ALR4th 95, 96.
12 Victor Schwartz, Doctors’ Delight, Attorneys’ Dilemma, Legal Times, Health-Care Law
Supplement (Feb. 28, 1994) at 30.