An internet television program that explores the intersection of medicine and the law.

Dr. Richard E. Anderson of TDC: What are MICRA’s most Effective Provisions?

By Richard E. Anderson MD, CEO and Chairman of The Doctors Company, the nation’s largest physician-owned medical malpractice insurer to Defensive Medicine


The State of Defensive Medicine Our guest on Healthcare Matters is Richard E. Anderson MD, CEO and Chairman of The Doctors Company, the nation’s largest physician-owned medical malpractice insurer. In part 5 of our State of Defensive Medicine series, we discuss with Dr. Anderson the most effective provisions of the Medical Injury Compensation Reform Act (MICRA), and how MICRA has shaped the medical malpractice insurance climate in California since 1975. We asked Dr. Anderson questions on many different topics:
  1. Defining “Defensive Medicine” and why it’s a violation of the doctor/patient relationship.
  2. How should physicians handle patients requesting unnecessary tests?
  3. The BMJ study: Physician spending and subsequent risk of malpractice claims: observational study
  4. Alternative dispute resolution systems.
  5. MICRA’s most effective provisions.
  6. Is further tort reform necessary?
  7. The current state of the medical liability insurance landscape.
  8. Watch the full interview with Dr. Anderson.
Make sure you subscribe to our YouTube channel. You don't want to miss out on any of the upcoming guests we're going to have on the show.


Mike Matray: Okay. You live in California, a state that instituted the Medical Injury Compensation Reform Act, or MICRA, in 1975. It’s considered the gold standard of medical liability tort reforms. As a result of MICRA, California has some of the nation’s most affordable medical malpractice insurance premiums, can you walk us through MICRA and what are its most effective provisions?

Dr. Anderson: Yes, absolutely, so MICRA have four provisions. By far the most famous and the single most important, although all are important, is the $250,000 capped on non-economic damages. So I hasten to add that there is no cap in California on total damages. So all true economic damages are 100 % compensated but pain and suffering is limited to $250,000. That is a really fundamental reform and, in my mind, it actually increases the equity because what we’re saying is everyone, rich or poor, regardless will get the same pain and suffering award in a serious medical malpractice claim. We are not going to try and figure out if some person deserves more or less for the same kinds of injuries. So I actually believe it increases equity.

Be that as it may, it is the single most important reform and the reason why it’s the single most important reform is that if you don’t put in a cap on an intangible non-economic damages, pain and suffering, effectively that goes to infinity. In other words, a sympathetic enough plaintiff can easily convince a jury award that pain and suffering should be a hundred millions of dollars. Heck, it could be a billion dollars. And so those kinds of numbers are almost impossible to insure. It only takes one or $200 million non-economic damage awards a year to bankrupt smaller insurance companies and to bleed the entire system. So it puts some instability in the insurance system, in the insurance mechanism, while yet promising a 100% indemnification for actual damages.

So that’s number one. Number two is periodic payments. If an award is to be made over the lifetime of a patient, then the award…for example, an award made to cover a lifetime of care, then the award is paid out over a lifetime. So that works to make even large judgments more affordable. If you have $100 judgment but you pay it out over 30 years, the annual cost is less than a single hit of a $100 dollars. So periodic payments is important.

Collateral source is number three and also very important. And collateral source is confusing sometimes but really my explanation of it, I think, is very straightforward. Collateral source says that there really shouldn’t be double dipping. If for example, you already have health insurance and the cost of healthcare has been already paid for. Then you shouldn’t collect for it twice. So collateral source means no double dipping.

And the other is a limit on attorney contingency fees. Right now around the country, the average attorney contingency fee on professional liability cases is somewhere between 30% and 40% and as high as 50%. But those are huge fees going to an attorney. What California does in MICRA is it says if you, as a claimant’s attorney win a million dollar claim, your fee is limited to $221,000 plus all your expenses, $221,000 dollars plus all your expenses. Two hundred twenty-one thousand dollars plus all your expenses for a million dollar claim is a nice day at the office. And what it does is it keeps the money in the healthcare system. And more importantly, it keeps the money in the pockets of the person for whom these indemnities are designed in the first place. In other words, instead of putting 30 or 40 or 50% of the indemnity into the pocket of the claimant’s attorney, we’re saying that no more than 22% on a million dollar claim can go to the claimant’s attorney. So where does that money go? It goes to the actual injured party. So those are the four cardinal tenets of MICRA.

Mike Matray: Would you support a federal level legislation similar to MICRA and if so, what is the likelihood of getting such a federal act to pass congressional scrutiny?

Dr. Anderson: Well, the answer, I would say 100% to your first question. I support it 100% and the likelihood zero. We really should have a federal standard. Again, we get into state’s rights issues, and we have all sorts of other related issues, medical licenses are state-based, medical litigation is state-based. The only time we have a federal medical malpractice litigations are if the federal government itself or a healthcare provider employed by the federal government is a defendant. So it is not generally a federal issue. At the same time, standards of care, in reality, are national.

Mike Matray: Okay.

Dr. Anderson: And that’s number one. Number two is in this era where we have large medical group that practice all across the country or alternatively, we have patients who are entirely mobile. The notion that you grow up in California and that all your medical care is going to be in California is completely untrue even if you still live in California because you could be traveling anywhere in the country at any given time. So it makes a whole lot of sense to have federal form of litigation and certainly federal version of MICRA would be a very welcome reform to the entire system.