If states pass laws that put caps on malpractice settlements, they lose federal funding. If that don't beat all. Pelosi Health-Care Bill Lacks Malpractice Reform - WSJ.com Buried in Speaker Nancy Pelosi's 1,990-page bill is a provision that provides "incentive payments" to each state that develops an "alternative medical liability law" that encourages "fair resolution" of disputes and "maintains access to affordable liability insurance." Sounds encouraging. Read on, however, and you come to this nugget: The state only qualifies if its new law "does not limit attorneys' fees or impose caps on damages."