Waterford TD John Halligan believes this money should be used to put in place early interventions and supports for children with birth-related injuries.
He says vulnerable families have to go through lengthy litigation processes because of a HSE policy of delaying or withholding of liability.
Mr Halligan will raise the issue with Health Minister James Reilly in the Dáil today, where he will call for a new system to manage such claims.
This would include strict liability for medical injury at birth, with compensation decided by an independent assessment board and issues of malpractice dealt with separately by an expert body.
There to hear the debate will be the family of six- year-old Dylan Gaffney Hayes, who was catastrophically injured at birth at Waterford Regional Hospital in 2007, and who recently settled their case with the HSE for €8.5m.
Approving the settlement in November, Ms Justice Mary Irvine said it was “highly regrettable” that it took the HSE five years to admit liability.
Dylan has cerebral palsy, has to use a wheelchair, and has trouble with short-term memory. Following the settlement, his parents, Jean and Thomas Gaffney, severely criticised the State Claims Agency and the HSE for their “poker approach” to the case.
They said their life had been “torn asunder” by the way the HSE “dragged us out to the last”.
In an interview with the Irish Examiner in February, the couple said they are asked for advice from parents whose children were injured as a result of what they feel was medical negligence.
“They tell us they’re thinking of going ahead and suing, but they’re not sure what to do,” said Thomas.
“We tell them, if you’re going to take a case, you need buckets of money,” he said, as the HSE will fight to the bitter end. “There’s no humanity in it. We’re the innocent victims, yet we had to fight the State every step of the way.”
Mr Halligan said last night that “it took three years for the HSE to admit liability in the case and the subsequent damages hearing took 11 days, during which Dylan’s mother Jean was forced to relive the ordeal of her little boy’s birth on the stand, before the settlement was reached”.
Mr Halligan said a new approach would “greatly diminish the enormous stress and worry that lengthy court cases are bringing on families and children injured at birth”.
The Chartered Institute of Arbitrators has also recommended a mediation service which it said would mean settlements could be arrived at within months, instead of years.