Obama's budget calls for $250 million in Justice Department grants to help states rewrite their malpractice laws in line with recommendations that his bipartisan debt reduction commission issued last year.

"These grants will help states reform their laws to pursue innovative approaches that will improve the quality of health care, reduce medical costs and liability, and protect patient safety," Justice Department spokeswoman Tracy Schmaler said Tuesday.

Specific reforms the money could be used for exclude caps on jury awards that the American Medical Association and GOP lawmakers have pursued for years without success. But they do include measures unacceptable to trial lawyers, an interest group that contributes heavily to Democratic candidates.

Topping the list of ideas in an Obama administration summary of the proposal are health courts. Specially trained judges – not juries – would decide malpractice cases, awarding compensation from a set schedule. Plaintiffs' lawyers say that would undermine the constitutional right to trial by jury. But proponents say it would bring predictability, resulting in lower malpractice insurance rates for doctors.

"Health courts offer much more protection for fearful physicians than caps because you are unlikely to get a crazy verdict when you have an expert judge," said lawyer Philip Howard, founder of Common Good, a nonprofit group that advocates for changes in the legal system. The money Obama seeks could go far, he added, estimating it would cost $5 million to $7 million for a midsize state to set up health courts.

Speaking for trial lawyers, Gibson Vance, president of the American Association for Justice, called the idea "bad policy and bad for patients."