Tort Reform and Federalism: The Supreme Court Talks, Bush Listens

Vol. 29 No. 4

By

Allison H. Eid is an associate professor of law at the University of Colorado School of Law and specializes in tort law, the legislative process, and federalism issues.

After a six-decade hiatus, the U.S. Supreme Court has reentered the federalism debate with a bang. The Court’s "New Federalism" decisions have reinvigorated federalism norms in constitutional jurisprudence across a broad array of doctrinal categories, including the Tenth Amendment, the Eleventh Amendment, and the Interstate Commerce Clause. Where this movement will end is anyone’s guess, but its beginnings are clear. The Court’s message appears to be that the federal government should think twice before it injects federal regulations into a state’s business.

While the Court’s audience appears primarily to be Congress, there is no question that the Bush administration is listening as well—as it should. The president is not constitutionally empowered to pass legislation, of course, so his authority is not directly implicated by the New Federalism decisions. But in many ways, he is the legislator-in-chief. His position at the national bully pulpit, coupled with his power of the veto, makes him a major player in federal policymaking. His legislative agenda needs to be sensitive to the Court’s New Federalism jurisprudence. Otherwise, he risks sacrificing some of his key legislative priorities on the New Federalism altar.

Take the president’s position on tort reform. This issue has him in something of a bind. On the one hand, tort reform at the federal level is an important issue to Republicans; in fact, it is one of the few unfinished pieces of business left over from the 1994 Contract with America. The president used his support for federal tort reform measures to distinguish himself from Al Gore during the 2000 presidential campaign. On the other hand, the president is a former governor who says he is committed to principles of federalism, and tort law is an area of regulation that has traditionally been left to the states. The critical question is whether Bush can deliver on his campaign commitments on federal tort reform while remaining loyal to his federalism principles—principles that seem to mirror the Court’s recent New Federalism decisions.

The president has not shied away from this balancing act. Last summer, he delivered a major speech in North Carolina in which he outlined his plan to reform medical malpractice law—a plan essentially identical to the Help Efficient, Accessible, Low-Cost, Timely Healthcare (HEALTH) Act of 2002, which passed by a 217-203 vote in the Republican-controlled U.S. House of Representatives in late September 2002 (the legislation faces a much stiffer hurdle in the Senate). The HEALTH Act would, among other things, (1) limit noneconomic damages to $250,000 while leaving economic damages unlimited (section 4(a) and (b)); (2) abolish joint and several liability (section 4(d)); (3) place a variable cap on contingency fees (section 5); (4) limit punitive damages to twice the economic damages or $250,000, whichever is greater (section 7(b)(2)); and (5) require a suit to be brought within three years of the date of injury or one year after the claimant discovers or should have discovered the injury, whichever comes first (section 3).

The HEALTH Act would apply to any "health care lawsuit"—defined as "any health care liability claim concerning the provision of health care goods or services affecting interstate commerce" brought against a health care provider or other health organization—filed in state or federal court (section 9(7)). It would largely preempt state law on the subject (section 11), but—in an obvious bow to federalism concerns—it would preserve any state statute that caps the amount of compensatory or punitive damages, regardless of the amount of the cap (section 11(c)(1)).

What is significant about the president’s support of the HEALTH Act is not the fact that he gave it but how he gave it. In his North Carolina speech, he clearly anticipated that there would be objections to his plan based on federalism concerns. He stated: "People say, well, is [medical malpractice] a federal responsibility?" Not surprisingly, he answered "yes." "It’s a national problem," he declared, "that requires a national solution. The federal government ought to set a minimum federal standard to reform the medical liability system."

He then went on to lay out the case for such federal intervention, essentially summarizing a report issued that same day by the U.S. Department of Health and Human Services entitled "Confronting the New Health Care Crisis: Improving Health Care Quality and Lowering Costs by Fixing Our Medical Liability System" (http://aspe.hhs.gov/daltcp/reports/

litrefm.htm). The HHS report could easily be mistaken for a brief in support of the legislation filed with the U.S. Supreme Court, with President Bush taking the lead at oral argument.

The administration’s strategy in defense of federal intervention appears to be twofold. First, it argues that the federal limitations on medical malpractice suits are justified by the expenditure of federal funds on health care. The Bush administration points to the fact that the federal government provides direct care to members of the armed forces, veterans, and patients served by the Indian Health Service, in addition to funding Medicare and Medicaid. It also points to the fact that the federal government provides tax breaks to workers who obtain health insurance through their employers. The administration estimates that the federal government would save at least $25 billion a year in taxpayers’ money if its proposed medical malpractice reforms were put in place. "[A]ny time a malpractice lawsuit drives up the cost of health care, it affects taxpayers. It is a federal issue," the president declared in his North Carolina speech.

In essence, the Bush administration is making a Spending Clause argument—i.e., since we put up the funds, we can put some strings on how those funds are spent. The Court has already said such strings, if reasonably related to the aim of the expenditure, are just fine ( South Dakota v. Dole, 483 U.S. 203 (1987)).

Second, the administration makes an Interstate Commerce Clause argument. The HHS report and the president’s speech are chock full of examples of physicians who have been forced to move to other states—or to close up shop altogether—due to hikes in malpractice premiums, forcing patients to drive hundreds of miles across state lines to find health care. The Bush administration is making the argument, in essence, that excessive malpractice litigation results in increases in malpractice premiums, which in turn force physicians and patients to cross state lines. The administration hopes that all of this adds up to a "substantial effect" on interstate commerce—the test expounded upon by the Court in United States v. Lopez (514 U.S. 549 (1995)) and United States v. Morrison, 529 U.S. 598 (2002)).

There are several rejoinders to the administration’s case. The Spending Clause argument would appear to go only so far as federal funds are spent. The scope of the HEALTH Act, however, extends to all "health care lawsuits"–not just those brought by or against recipients of federal funds, either direct or indirect.

Along these same lines, the Court made it clear in the Lopez and Morrison cases that the regulated activity must be "economic" in nature to qualify for regulation under the Interstate Commerce Clause—a test that gun possession near a school ( Lopez) and violence directed toward women ( Morrison) both flunked. The success or failure of the Bush administration’s argument depends on how one defines the regulated activity in the HEALTH Act. If the regulated activity is characterized as the infliction of personal injury, that activity would not seem particularly "economic" in nature. On the other hand, the physician is receiving compensation for his or her services—a characterization much closer to the "economic" realm.

The significance of the Bush administration’s approach is not that it is presenting a bulletproof legal defense of the legislation, because it is not. Any time the federal government regulates in an area traditionally governed by the states, a significant federalism challenge can and will almost certainly be mounted. The point is that the Bush administration is crafting a legal strategy that it hopes will bear fruit if the legislation is eventually passed and challenged. It is listening to the Court and thinking twice before diving into the federal tort reform debate.

Moreover, the president’s respect for federalism concerns runs contrary to all of the institutional pressures of his job. Indeed, prior to the New Federalism decisions, the prevailing wisdom in the legal academy (and echoed in the Court’s opinions at the time) was that there was no need for judicial intervention in federalism matters because the Constitution’s "procedural safeguards of federalism" would protect states’ interests. For example, the procedural safeguards theory pointed to the fact that Congress was composed of individual members elected from states. Naturally, the theory went, members of Congress would look out for their own states’ best interests and block any legislation that would unduly interfere with those interests.

The "political safeguards" theory came under criticism for putting the fox in charge of the henhouse. In other words, the critique claimed that, contrary to the political safeguards theory, it is actually in the inherent nature of Congress to "eat" the states. The cycle of federal regulation begins when an issue rises to national prominence, and the clarion call for federal action—"Congress has to do something about this problem"—inevitably follows. It is just too difficult, the critique concluded, for Congress to pass up an opportunity to regulate, even when the "problem" has traditionally been (and perhaps should be) left to states to fix. When an opponent runs a television ad attacking an incumbent for failing to regulate, the incumbent doesn’t win many votes by responding "I did it all in the name of federalism." The New Federalism decisions implicitly reject the political safeguards theory on these grounds.

To continue the analogy, President Bush is an even hungrier "fox" than Congress. He is, after all, the president of the United States. He is the only politician in the country who is elected by the entire United States. His position is inherently Washington oriented, even more so than membership in Congress. Governor Bush is now President Bush. When an issue like health care reform garners the national spotlight—and when survey after survey shows that it is at the top of many voters’ lists—the president is expected to do something, and that usually means pushing for federal regulation on the subject. The important difference is that President Bush appears to be taking legitimate state interests, as articulated by the Court’s New Federalism decisions, into account. The fact that he issued what amounts to a "federalism impact statement" in connection with his endorsement of the HEALTH Act shows that the Court’s "think twice" message is coming through loud and clear.

As published in Human Rights, Fall 2002, Vol. 29, No. 4, p.10-11.

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