I

103D CONGRESS

1ST SESSION H. R. 2851

To impose certain requirements on the resolution of medical malpractice

liability claims, to amend the Internal Revenue Code of 1986 to require

persons making certain medical malpractice payments to report such

payments to the Secretary of the Treasury, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

AUGUST 3, 1993

Mr. THOMAS of California introduced the following bill; which was referred

jointly to the Committees on the Judiciary and Ways and Means

A BILL

To impose certain requirements on the resolution of medical

malpractice liability claims, to amend the Internal Revenue Code of 1986 to require persons making certain

medical malpractice payments to report such payments

to the Secretary of the Treasury, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Medical Liability Im5 provement Act of 1993’’.

6 SEC. 2. GENERAL PROVISIONS.

7 (a) CONGRESSIONAL FINDINGS.—
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1 (1) EFFECT ON INTERSTATE COMMERCE.—The

2 Congress finds that the health care and insurance

3 industries are industries affecting interstate com4 merce and the medical malpractice litigation systems

5 existing throughout the United States affect inter6 state commerce by contributing to the high cost of

7 health care and premiums for malpractice insurance

8 purchased by health care providers.

9 (2) EFFECT ON FEDERAL SPENDING.—The

10 Congress finds that the medical malpractice litiga11 tion systems existing throughout the United States

12 have a significant effect on the amount, distribution,

13 and use of Federal funds because of—

14 (A) the large number of individuals who

15 receive health care benefits under programs op16 erated or financed by the Federal Government;

17 (B) the large number of individuals who

18 benefit because of the exclusion from Federal

19 taxes of the amounts spent by their employers

20 to provide them with health insurance benefits;

21 (C) the large number of health care provid22 ers and health care professionals who provide

23 items or services for which the Federal Govern24 ment makes payments; and
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1 (D) the large number of such providers

2 and professionals who have received direct or

3 indirect financial assistance from the Federal

4 Government because of their status as such

5 professionals or providers.

6 (b) APPLICABILITY.—This Act shall apply with re7 spect to any medical malpractice liability claim and to any

8 medical malpractice liability action brought in any State

9 or Federal court, except that this Act shall not apply to—

10 (1) a claim or action for damages arising from

11 a vaccine-related injury or death to the extent that

12 title XXI of the Public Health Service Act applies to

13 the action; or

14 (2) a claim or action in which the claimant’s

15 sole allegation is an allegation of an injury arising

16 from the use of a medical product.

17 (c) PREEMPTION OF STATE LAW.—Subject to section

18 12, this Act supersedes State law only to the extent that

19 State law differs from any provision of law established by

20 or under this Act. Any issue that is not governed by any

21 provision of law established by or under this Act shall be

22 governed by otherwise applicable State or Federal law.

23 (d) FEDERAL COURT JURISDICTION NOT ESTAB24 LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in

25 this Act shall be construed to establish any jurisdiction
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1 in the district courts of the United States over medical

2 malpractice liability actions on the basis of sections 1331

3 or 1337 of title 28, United States Code.

4 SEC. 3. DEFINITIONS.

5 As used in this Act:

6 (1) CLAIMANT.—The term ‘‘claimant’’ means

7 any person who alleges a medical malpractice liabil8 ity claim, or, in the case of an individual who is de9 ceased, incompetent, or a minor, the person on

10 whose behalf such a claim is alleged.

11 (2) ECONOMIC DAMAGES.—The term ‘‘economic

12 damages’’ means damages paid to compensate an in13 dividual for losses for hospital and other medical ex14 penses, lost wages, lost employment, and other pecu15 niary losses.

16 (3) HEALTH CARE PROFESSIONAL.—The term

17 ‘‘health care professional’’ means any individual who

18 provides health care services in a State and who is

19 required by State law or regulation to be licensed or

20 certified by the State to provide such services in the

21 State.

22 (4) HEALTH CARE PROVIDER.—The term

23 ‘‘health care provider’’ means any organization or

24 institution that is engaged in the delivery of health

25 care services in a State and that is required by State
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1 law or regulation to be licensed or certified by the

2 State to engage in the delivery of such services in

3 the State.

4 (5) INJURY.—The term ‘‘injury’’ means any ill5 ness, disease, or other harm that is the subject of

6 a medical malpractice liability action or claim.

7 (6) MEDICAL MALPRACTICE LIABILITY AC8 TION.—The term ‘‘medical malpractice liability ac9 tion’’ means a civil action (other than an action in

10 which the claimant’s sole allegation is an allegation

11 of an intentional tort) brought in a State or Federal

12 court against a health care provider or health care

13 professional (regardless of the theory of liability on

14 which the action is based) in which the claimant al15 leges a medical malpractice liability claim.

16 (7) MEDICAL MALPRACTICE LIABILITY

17 CLAIM.—The term ‘‘medical malpractice liability

18 claim’’ means a claim in which the claimant alleges

19 that injury was caused by the provision of (or the

20 failure to provide) health care services.

21 (8) MEDICAL PRODUCT.—The term ‘‘medical

22 product’’ means a device (as defined in section

23 201(h) of the Federal Food, Drug, and Cosmetic

24 Act) or a drug (as defined in section 201(g)(1) of

25 the Federal Food, Drug, and Cosmetic Act).
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1 (9) NONECONOMIC DAMAGES.—The term ‘‘non2 economic damages’’ means damages paid to com3 pensate an individual for losses for physical and

4 emotional pain, suffering, inconvenience, physical

5 impairment, mental anguish, disfigurement, loss of

6 enjoyment of life, loss of consortium, and other

7 nonpecuniary losses, but does not include punitive

8 damages.

9 (10) SECRETARY.—The term ‘‘Secretary’’

10 means the Secretary of Health and Human Services.

11 (11) STATE.—The term ‘‘State’’ means each of

12 the several States, the District of Columbia, the

13 Commonwealth of Puerto Rico, and any other terri14 tory or possession of the United States.

15 SEC. 4. EFFECTIVE DATE.

16 (a) IN GENERAL.—Except as provided in subsection

17 (b), this Act shall apply with respect to claims accruing

18 or actions brought on or after the expiration of the 3-year

19 period that begins on the date of the enactment of this

20 Act.

21 (b) EXCEPTION FOR STATES REQUESTING EARLIER

22 IMPLEMENTATION OF REFORMS.—

23 (1) APPLICATION.—A State may submit an ap24 plication to the Secretary requesting the early imple-
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1 mentation of this Act with respect to claims or ac2 tions brought in the State.

3 (2) DECISION BY SECRETARY.—The Secretary

4 shall issue a response to a State’s application under

5 paragraph (1) not later than 90 days after receiving

6 the application. If the Secretary determines that the

7 State meets the requirements of this Act at the time

8 of submitting its application, the Secretary shall ap9 prove the State’s application, and this Act shall

10 apply with respect to actions brought in the State on

11 or after the expiration of the 90-day period that be12 gins on the date the Secretary issues the response.

13 If the Secretary denies the State’s application, the

14 Secretary shall provide the State with a written ex15 planation of the grounds for the decision.

16 SEC. 5. ATTORNEYS’ FEES.

17 (a) LIMITATION ON CONTINGENCY FEES.—An attor18 ney shall not contract for or collect a contingency fee for

19 representing a claimant in a medical malpractice liability

20 action in excess of the following:

21 (1) 40 percent of the first $50,000 (or portion

22 thereof) of the amount recovered by the claimant.

(2) 331 23 ⁄3 percent of the next $50,000 (or por24 tion thereof) of the amount recovered by the claim25 ant.
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1 (3) 25 percent of the next $500,000 (or portion

2 thereof) of the amount recovered by the claimant.

3 (4) 15 percent of any amounts recovered by the

4 claimant in excess of $600,000.

5 This subsection applies whether the recovery is by settle6 ment, arbitration, or judgment.

7 (b) CALCULATION OF PERIODIC PAYMENTS.—If peri8 odic payments are awarded to the claimant pursuant to

9 section 8(b), the court shall place a total value on these

10 payments based upon the projected life expectancy of the

11 claimant and include this amount in computing the total

12 award from which attorneys’ fees are calculated under

13 subsection (a).

14 (c) SPECIAL RULE FOR DETERMINING AMOUNT RE15 COVERED.—In subsection (a), the term ‘‘recovered’’

16 means the net sum recovered after deducting any dis17 bursements or costs incurred in connection with prosecu18 tion or settlement of the claim, except that costs of medi19 cal care incurred by the claimant and the attorney’s office

20 overhead costs or charges shall not be deductible disburse21 ments under this subsection.

22 SEC. 6. LIMITATION ON NONECONOMIC DAMAGES.

23 The total amount of damages which may be awarded

24 to an individual and the family members of such individual

25 for noneconomic losses resulting from an injury which is
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1 the subject of a medical malpractice liability claim may

2 not exceed $250,000, regardless of the number of health

3 care professionals and health care providers against whom

4 the claim is brought or the number of claims brought with

5 respect to the injury.

6 SEC. 7. STATUTE OF LIMITATIONS.

7 (a) IN GENERAL.—No medical malpractice liability

8 claim may be brought after the expiration of the 2-year

9 period that begins on the date the alleged injury that is

10 the subject of the action should reasonably have been dis11 covered, but in no event after the expiration of the 4-year

12 period that begins on the date the alleged injury occurred.

13 (b) EXCEPTION FOR MINORS.—In the case of an al14 leged injury suffered by a minor who has not attained 6

15 years of age, no medical malpractice liability claim may

16 be brought after the expiration of the 2-year period that

17 begins on the date the alleged injury that is the subject

18 of the action should reasonably have been discovered, but

19 in no event after the date on which the minor attains 10

20 years of age.

21 SEC. 8. PERIODIC PAYMENTS FOR FUTURE LOSSES.

22 If more than $50,000 in damages for expenses to be

23 incurred in the future is awarded to the claimant in a

24 medical malpractice liability action, the court shall at the

25 request of either party, enter a judgment ordering such
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1 damages to be paid on a periodic basis determined appro2 priate by the court (based upon projections of when such

3 expenses are likely to be incurred).

4 SEC. 9. MANDATORY OFFSETS FOR DAMAGES PAID BY A

5 COLLATERAL SOURCE.

6 (a) IN GENERAL.—The total amount of damages re7 ceived by a plaintiff in a medical malpractice liability ac8 tion shall be reduced (in accordance with subsection (b))

9 by any other payment that has been or will be made to

10 the individual to compensate the plaintiff for the injury

11 that was the subject of the action, including payment

12 under—

13 (1) Federal or State disability or sickness pro14 grams;

15 (2) Federal, State, or private health insurance

16 programs;

17 (3) private disability insurance programs;

18 (4) employer wage continuation programs; and

19 (5) any other source of payment intended to

20 compensate the plaintiff for such injury.

21 (b) AMOUNT OF REDUCTION.—The amount by which

22 an award of damages to a plaintiff shall be reduced under

23 subsection (a) shall be—

24 (1) the total amount of any payments (other

25 than such award) that have been made or that will
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1 be made to the plaintiff to compensate the plaintiff

2 for the injury that was the subject of the action;

3 minus

4 (2) the amount paid by the plaintiff (or by the

5 spouse, parent, or legal guardian of the plaintiff) to

6 secure the payments described in paragraph (1).

7 SEC. 10. SPECIAL PROVISION FOR CERTAIN OBSTETRIC

8 SERVICES.

9 (a) IMPOSITION OF HIGHER STANDARD OF PROOF.—

10 (1) IN GENERAL.—In the case of a medical

11 malpractice liability action relating to services pro12 vided during labor or the delivery of a baby, if the

13 defendant health care professional did not previously

14 treat the plaintiff for the pregnancy, the trier of fact

15 may not find that the defendant committed mal16 practice and may not assess damages against the de17 fendant unless the malpractice is proven by clear

18 and convincing evidence.

19 (2) APPLICABILITY TO GROUP PRACTICES OR

20 AGREEMENTS AMONG PROVIDERS.—For purposes of

21 paragraph (1), a health care professional shall be

22 considered to have previously treated an individual

23 for a pregnancy if the professional is a member of

24 a group practice whose members previously treated

25 the individual for the pregnancy or is providing serv-
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1 ices to the individual during labor or the delivery of

2 a baby pursuant to an agreement with another pro3 fessional.

4 (b) CLEAR AND CONVINCING EVIDENCE DEFINED.—

5 In subsection (a), the term ‘‘clear and convincing evi6 dence’’ is that measure or degree of proof that will

7 produce in the mind of the trier of fact a firm belief or

8 conviction as to the truth of the allegations sought to be

9 established, except that such measure or degree of proof

10 is more than that required under preponderance of the evi11 dence, but less than that required for proof beyond a rea12 sonable doubt.

13 SEC. 11. JOINT AND SEVERAL LIABILITY.

14 The liability of each defendant in a medical mal15 practice liability action shall be several only and shall not

16 be joint, and each defendant shall be liable only for the

17 amount of damages allocated to the defendant in direct

18 proportion to the defendant’s percentage of responsibility

19 (as determined by the trier of fact).

20 SEC. 12. PREEMPTION.

21 (a) IN GENERAL.—This Act supersedes any State

22 law only to the extent that State law—

23 (1) permits the recovery of a greater amount of

24 damages by a plaintiff;
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1 (2) permits the collection of a greater amount

2 of attorneys’ fees by a plaintiff’s attorney;

3 (3) establishes a longer period during which a

4 medical malpractice liability claim may be initiated;

5 or

6 (4) establishes a stricter standard for determin7 ing whether a defendant was negligent or for deter8 mining the liability of defendants described in sec9 tion 10 in actions described in such section.

10 (b) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

11 OF LAW OR VENUE.—Nothing in subsection (a) shall be

12 construed to—

13 (1) waive or affect any defense of sovereign im14 munity asserted by any State under any provision of

15 law;

16 (2) waive or affect any defense of sovereign im17 munity asserted by the United States;

18 (3) affect the applicability of any provision of

19 the Foreign Sovereign Immunities Act of 1976;

20 (4) preempt State choice-of-law rules with re21 spect to claims brought by a foreign nation or a citi22 zen of a foreign nation; or

23 (5) affect the right of any court to transfer

24 venue or to apply the law of a foreign nation or to

25 dismiss a claim of a foreign nation or of a citizen
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1 of a foreign nation on the ground of inconvenient

2 forum.

3 SEC. 13. RETURNS RELATING TO TAXABLE MEDICAL MAL4 PRACTICE AWARDS.

5 (a) IN GENERAL.—Subpart B of part III of sub6 chapter A of chapter 61 of the Internal Revenue Code of

7 1986 (relating to information concerning transactions

8 with other persons) is amended by adding at the end

9 thereof the following new section:

10 ‘‘SEC. 6050O. RETURNS RELATING TO TAXABLE MEDICAL

11 MALPRACTICE AWARDS.

12 ‘‘(a) IN GENERAL.—If—

13 ‘‘(1) any person makes medical malpractice

14 payments to another person during any calendar

15 year,

16 ‘‘(2) a portion of such payments is includible in

17 gross income for purposes of chapter 1, and

18 ‘‘(3) the portion of such payments so includible

19 exceeds $600,

20 then the person making such payments shall make a re21 turn (at such time and in such form as the Secretary may

22 by regulations prescribe) setting forth the name, address,

23 and TIN of the person to whom such payments were

24 made, the aggregate amount of such payments, and the
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1 portion of such payments includible in gross income for

2 purposes of chapter 1.

3 ‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS

4 WITH RESPECT TO WHOM INFORMATION IS REQUIRED

5 TO BE FURNISHED.—Every person required to make a

6 return under subsection (a) with respect to payments

7 made to any person shall furnish to such person a written

8 statement showing—

9 ‘‘(1) the name and address of the person re10 quired to make such return, and

11 ‘‘(2) the information required to be shown on

12 the return with respect to the person to whom such

13 payments were made.

14 The written statement required under the preceding sen15 tence shall be furnished to the person on or before Janu16 ary 31 of the year following the calendar year for which

17 the return under subsection (a) was made.

18 ‘‘(c) MEDICAL MALPRACTICE PAYMENTS.—For pur19 poses of this section, the term ‘medical malpractice pay20 ment’ means any payment (whether by suit or agreement

21 and whether as a lump sum or periodic payment) on ac22 count of a medical malpractice liability claim (as defined

23 in section 3(7) of the Medical Liability Improvement Act

24 of 1993).’’

25 (b) PENALTIES.—
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1 (1) RETURNS.—Subparagraph (A) of section

2 6724(d)(1) of such Code is amended by striking

3 ‘‘or’’ at the end of clause (vi), by striking ‘‘and’’ at

4 the end of clause (vii) and inserting ‘‘or’’, and by

5 adding at the end thereof the following new clause:

6 ‘‘(viii) section 6050O (relating to re7 turns relating to taxable medical mal8 practice awards),’’.

9 (2) STATEMENTS.—Paragraph (2) of section

10 6724(d) of such Code is amended by redesignating

11 subparagraphs (P) through (S) as subparagraphs

12 (Q) through (T), respectively, and by inserting after

13 subparagraph (O) the following new subparagraph:

14 ‘‘(P) section 6050O(b) (relating to returns

15 relating to taxable medical malpractice

16 awards),’’.

17 (c) CLERICAL AMENDMENT.—The table of sections

18 for subpart B of part III of subchapter A of chapter 61

19 is amended by adding at the end thereof the following new

20 item:

‘‘Sec. 6050O. Returns relating to taxable medical malpractice

awards.’’

21 (d) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to payments after the date of the

23 enactment of this Act.
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