Malpractice Award Limits Considered by White House : Health care: Move to win support for reform comes after doctors balk at plan to shift liability, sources say.

WASHINGTON —  In an abrupt reversal designed to win physician support for health care reform, the Clinton Administration is prepared to seek limits on financial damages that consumers may receive for pain and suffering caused by medical malpractice, informed sources said Friday.

The sources said that the Administration seems to be backing away from its announced intention to propose a type of tort reform called “enterprise liability,” in which only provider networks that employ doctors--but not the physicians themselves--may be sued for malpractice.

Since it became known that President Clinton’s health planners were ready to incorporate enterprise liability into the Administration’s overall health care reform agenda, physicians have not hesitated to condemn it as potentially more onerous than the current system.

Robert O. Boorstin, a White House spokesman, said late Friday that no final decisions had been made but added: “We’ve heard the doctors’ concerns, and we are taking them into account in our decision-making process.”

As envisioned by Administration planners, enterprise liability would relieve doctors of any direct financial liability for medical negligence, thus eliminating their need to purchase expensive malpractice insurance. Administration officials also believe that enterprise liability would prompt hospitals, insurers and health plans to closely monitor their staff doctors for competence while developing guidelines to limit the costly practice of “defensive medicine”--the tendency of doctors to order unneeded tests and procedures to ward off possible lawsuits.

After word got out that the White House was designing enterprise liability as the centerpiece of its tort reform plans and part of its overall health reform agenda, physicians roundly criticized the concept--to the surprise of some Administration health policy analysts.

Physicians, who pay nearly $10 billion a year in malpractice insurance, said that the plan would not limit monetary awards, would not relieve doctors from having to testify in court cases and would lead to intrusive micromanagement and oversight of doctors by their employers.

Led by the American Medical Assn., doctors also argued that enterprise liability could actually encourage more lawsuits because it would create a single entity with deep pockets as the unequivocal target of malpractice lawsuits.

Instead of enterprise liability, doctors have been clamoring for something akin to a California law, enacted in 1975, called the Medical Injury Compensation Recovery Act, which limits non-economic damages in medical malpractice judgments to $250,000.

Just last week scores of local, state and specialty medical associations, led by the AMA, called for a federal law similar to the California act. They sent a letter to First Lady Hillary Rodham Clinton, who chairs the White House Task Force on National Health Care Reform, warning that enterprise liability “would not be an acceptable alternative” to a law limiting damages similar to the California statute.

Mrs. Clinton is scheduled to speak Sunday at an AMA convention in Chicago.

“Maybe they heard what we said,” said Dr. James S. Todd, executive director of the AMA, adding that he had no direct knowledge of the Administration’s policy shift.

“It’s not really surprising,” said an informed Washington health policy analyst. “All the people that enterprise liability was supposed to bring along seem not to like it.”

Yet, in backing away from enterprise liability and embracing caps on awards for pain and suffering, the Administration will be taking on other powerful opponents, including trial lawyers and consumer advocacy groups.

That trial lawyers were heavy financial contributors to the Clinton campaign has not escaped Ira Magaziner, who directs the health care task force, sources said. Some who met with him last month quoted him as having noted that trial lawyers are applying “vigorous political pressure” against any proposals to cap non-economic damages.

The sources also quoted Magaziner as having said the Administration is considering a limit on attorney fees or an absolute cap on their reimbursement.

Also likely to oppose caps on pain and suffering awards are groups such as Consumers Union.

“Is this Administration going to cave in to everything that doctors want?” asked Linda Lipson, the organization’s legislative director. “What about consumers? I think it’s inappropriate in the extreme.”

She said that caps on non-economic damage awards have not proved effective in holding down medical costs. In fact, Lipson said, studies show that the states with the most tort reform laws have the highest health care expenditures.

Such caps deny fair compensation to those most seriously injured by medical negligence, she added.

Lipson estimated that 75,000 Americans die each year as a result of medical negligence, compared with 40,000 to 50,000 who die in auto accidents.

Lipson predicted that Congress will reject the California model for tort reform. She recalled that a similar proposal was defeated in Congress in 1985 after Sen. Daniel K. Inouye (D-Hawaii), who lost an arm fighting in World War II, spoke passionately against putting limits on the value of a lost arm.