Malpractice Cap Won’t Be Sought : Health: Clinton will not try to limit awards for pain and suffering, sources say. But he wants a 33 1/3% ceiling on contingency fees. Doctor and lawyer groups protest.

Rebuffing the nation’s doctors, President Clinton has decided not to seek financial limits on damages for pain and suffering that patients may collect in malpractice cases, sources said Wednesday.

But he is proposing to set a 33 1/3% cap on contingency fees that plaintiffs’ attorneys may receive in such cases--a move certain to alienate trial lawyers, the sources said.

The related decisions were among the last of the major ones facing Clinton as he completes the first full draft of his health care reform proposal. The decisions appear intended to cut down frivolous malpractice suits, control health insurance costs and encourage settlement of disputes before they are taken to court. The Administration had promised tort reform as part of its health care package.

But the proposals were immediately denounced by both the American Medical Assn. and the Assn. of Trial Lawyers of America, who vowed to fight the provisions.

“It’s a mixed bag,” a consumer advocacy group official said of Clinton’s emerging proposals on tort reform, long seen as a crucial part of the President’s plan to overhaul the nation’s $900-billion health care system.

Clinton’s tort reform provisions, sources said, would leave the way open for states to set their own limits on damages for pain and suffering--as California already does--and to reduce even further any federal cap on contingency fees. That result would be in keeping with one of the President’s guiding principles: that national health care reform must give states maximum flexibility.

The President’s tort reform proposals require parties to a potential medical malpractice lawsuit to attempt to resolve a dispute through non-binding negotiations before resorting to litigation, informed sources said. In addition, a so-called certificate of merit requirement would prevent a malpractice claim from moving forward to litigation until an impartial physician has agreed in an affidavit that the claim might have merit.

Also under Clinton’s plan, the Health and Human Services Department would publicize the names of doctors repeatedly found guilty of malpractice, sources said. Details of this provision could not be learned.

Finally, the President intends to propose a principle known as the “collateral source rule,” sources said. Under the rule, attorneys explained, when a patient is determined to have been harmed by a physician, the patient’s medical insurance plan would pay first for any treatments. Only after those benefits are exhausted would the offending doctor’s insurance plan come into play.

“What’s not covered by the patient’s own plan will be covered by the doctor’s plan,” one analyst said.

White House officials emphasized Wednesday that any presidential decisions on health reform should be regarded as tentative--and subject to change as a result of the Administration’s continuing consultations with Congress and various industry and consumer groups. Officials pointed out that some alterations in other provisions already are being made, even as members of Congress, their staff members and representatives of interest groups are being shown the plan.

“The President has said from the beginning that we’ll have serious tort reform that will focus on cutting down on frivolous lawsuits and controlling costs and promoting settlement of disputes outside the courtroom, and that is what we will call for,” said Kevin Anderson, a White House spokesman for the health care issue.

Word of the proposed tort reform provisions drew sharp reaction from doctors and lawyers on Wednesday.

“We’re certainly not going to sit by and watch this happen,” vowed Washington lawyer Barry J. Nace, Assn. of Trial Lawyers president. He was referring to the proposed caps on contingency fees, which are paid to attorneys by plaintiffs only when a case is won. By contrast, attorneys who work for doctors and hospitals generally are paid by the hour or by retainer, win or lose.

Although Nace and other attorneys conceded that a 33 1/3% contingency fee is fairly standard in personal injury cases, they said in medical malpractice cases the plaintiff’s lawyer frequently gets a higher fee because such cases are complex and often require extensive preparation time, elaborate exhibits and expert witnesses.

Nace said: “If we are going to put limits on attorneys’ fees, why not put limits on doctors’ fees? On the salaries of CEOs of insurance companies and hospitals?”

Nace said it came as “good news,” however, that Clinton does not intend to seek federal limits on damages for pain and suffering. “There’s no relationship between malpractice cases and health care,” he said.

Another trial lawyers’ spokesman, speaking on the condition of anonymity, noted that the association gave $2.4 million last year to 383 candidates, and said pointedly: “We’ve worked with a lot of representatives and senators and we’ve also supported Clinton.”

Federal elections records show that members of the trial lawyers group contributed $481,179 to Clinton last year, contrasted with $75,015 to former President George Bush.

Speaking for the nation’s doctors, Dr. James Todd, AMA executive vice president, said his membership will be deeply disappointed by the absence of monetary caps for pain and suffering in malpractice cases.

The absence of such caps will be “an immediate cause for great concern,” Todd said, because physicians had hoped that such limits would form “the centerpiece” of the President’s malpractice reforms.

The Clinton Administration has had a difficult time developing a tort reform agenda. Initially, the Administration advanced a concept called “enterprise liability,” which would relieve doctors of any direct financial liability for negligence, thus eliminating their need to purchase expensive malpractice insurance.

The White House theorized that enterprise liability would prompt hospitals and insurers to closely monitor doctors for competence while developing guidelines to curtail the costly practice of defensive medicine, in which doctors order unneeded tests and procedures as a protection against lawsuits.

But much to the surprise of Administration health policy analysts, doctors roundly criticized the untested concept. “It was something they (the analysts) never bothered to check with the political folks,” one informed source said.

Physicians, who now pay nearly $10 billion a year in malpractice insurance, said enterprise liability would not limit monetary awards, would not relieve them from having to testify in court, would lead to intrusive micro-management and would encourage more lawsuits by creating a single entity with deep pockets as the unequivocal target of lawsuits.

It was then that doctors began clamoring for something akin to a 1975 California law, the Medical Injury Compensation Recovery Act, which limits non-economic damages to $250,000.

“It’s been a very emotional issue for the doctors,” one Washington health analyst said.

Also on Wednesday, as key members of Congress and their staffs continued getting their first glimpses of Clinton’s health plan details, the President lobbied for his proposal at a meeting with congressional leaders of both parties.

Clinton expressed the hope that his plan could win support from Republicans as well as Democrats, in stark contrast to the partisanship that marked passage of his budget.

“They are different issues with different constituencies and they can be presented in a different way,” he said. “I think the chances are very good.”

Times staff writer Karen Tumulty contributed to this story.