The president made his speech in Pennsylvania, a state whose doctors threatened to go on strike this month in the face of soaring malpractice insurance costs.
Without the proposed limits, Mr. Bush said, "excessive jury awards will continue to drive up insurance costs, will put good doctors out of business or run them out of your community and will hurt communities like Scranton, Pa. That's a fact."
Legislation he backed last year was approved in the House but was never brought for a vote in the Democratic-led Senate. Now the Republican Party controls both houses of Congress, and for the second time this week Mr. Bush revived a proposal that died last year. The other was welfare reform.
"The problem of those unnecessary costs don't start in the waiting room or the operating room. They're in the courtroom," Mr. Bush said in a speech at the University of Scranton in northeastern Pennsylvania, his 18th trip as president to the politically important state.
"Everybody's suing, it seems like. There are too many lawsuits in America, and there are too many lawsuits filed against doctors and hospitals without merit."
But some victims of medical malpractice disagree with the president, reports CBS News Correspondent Elizabeth Kaledin.
"I think President Bush should sit in my chair for a few days and reconsider," says Mary Anne Isdale, a nurse who was paralyzed four year ago in a malpractice case.
Because she lives in California, a state already limiting malpractice awards and the model for the president's plan, Isdale was awarded $250,000 for pain and suffering.
"I'm a wife and mother of two small boys," she tells CBS. "My life as I planned was taken a way from me, ripped from underneath me, and $250,000 doesn't even begin to cover how that has damaged our lives."
Consumer groups are also blasting the Bush plan, saying the insurance industry is to blame for raising premiums in the first place.
"You cannot fix an insurance premium problem by taking away rights of innocent victims of medical negligence," says consumer advocate Jamie Court.
But Brian Klepper, who runs the Center for Practical Health Reform, thinks the president has no choice.
"On this issue the president is correct," says Klepper. The health care system is hemorrhaging, Klepper says, but there has been a little less bloodshed in states like California, where caps exist.
"Medical malpractice premiums for physicians went up in California about 167 percent. Everywhere else on average it went up over 500 percent," Klepper says.
Any proposal for tort reform cranks up opposition, and Democrats are already howling loudly about the president's proposals.
"These proposed changes in law would deprive seriously injured patients of fair compensation and do nothing to guarantee that doctors could obtain malpractice insurance at a fair price," said a letter sent to Mr. Bush Wednesday by Sen. Edward Kennedy, D-Mass., and three other Democratic senators.
"At every stage of the legal process, the administration's plan systematically rewrites the rules of civil law to tip the balance against patients."
One of the senators signing the letter was North Carolina's John Edwards, a hopeful for the Democratic presidential nomination and a lawyer who made millions trying personal injury lawsuits before he was elected to Congress.
The senator said Thursday that Mr. Bush was "once again standing with his insider friends in the insurance industry and standing against seriously injured children and families."
"The truth is the insurance industry has done poorly in the market and is simply passing those costs on to doctors and patients," Edwards said. "Evidence from 30 years shows that the things President Bush is proposing will do nothing to reduce the premiums that doctors pay."
Edwards called for stopping frivolous lawsuits and cracking down on the small percentage of doctors responsible for the majority of malpractice cases.