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Thursday, 19 February 2004
Page: 25225


Mr ABBOTT (Minister for Health and Ageing) (9:02 AM) —I move:

That this bill be now read a second time.

On 17 December 2003 the government announced its new medical indemnity measures. These new measures will contribute $181 million from now to 2006-07 to the cost of medical indemnity, making medical indemnity personally more affordable for doctors. Affordable medical indemnity costs for doctors mean that they will be able to keep doing what we need them to do—provide vital medical services to the Australian community.

This bill, together with the Medical Indemnity (IBNR Indemnity) Contribution Amendment Bill 2004, provides a legislative basis for several elements of the government's new medical indemnity measures. It builds on past measures and addresses some of the key problems still facing doctors about their medical indemnity costs.

The government has worked hard to solve medical indemnity problems over the last two years. In late 2002 and early 2003 it legislated to provide a secure prudential and financial framework for the medical indemnity industry and for doctors.

For the first time organisations offering medical indemnity cover were brought under the supervision of the Australian Prudential Regulatory Authority. Organisations were also required to offer cover through general insurers under contracts of insurance—a big plus for doctors as they now had certainty of cover.

The government has also invested substantially in medical indemnity:

it has taken on the liability to fund some $485 million worth of UMP's unfunded incurred but not reported liabilities (IBNR) claims—which were threatening to put UMP into permanent liquidation;

it has agreed to fund half the cost of all of claims that exceed a $500,000 threshold through the High Cost Claims Scheme (HCCS)—a scheme which reduces medical indemnity providers' costs and so limits the financial pressure on doctors' premiums;

it has ensured that doctors will not be personally liable for the amount of any claim which exceeds their level of insurance (provided they have $20 million worth of cover)—under the Exceptional Claims Scheme; and

it has provided direct financial assistance to obstetricians, neurosurgeons, procedural general practitioners and GP registrars undertaking procedural training.

The government has also continued to work closely with the state and territory governments in pursuing tort law reforms to reduce the volume and cost of claims against doctors.

These past initiatives have built a solid foundation for the long-term viability of medical indemnity, but it is fair to say individual doctors continued to feel the pinch of medical indemnity costs. Without further assistance it was clear that medical indemnity costs would continue to be a financial challenge for a number of doctors.

The government responded to doctors' concerns in October last year by setting up the Medical Indemnity Policy Review Panel—which I chaired. The panel included senior members of the medical profession and its role was to recommend ways for ensuring an affordable medical indemnity insurance system.

At the same time the government addressed doctors' more immediate concerns by introducing a moratorium on the IBNR contributions. It capped them at $1,000 per annum for the 18 months from 1 July 2003 to 31 December 2004.

The Medical Indemnity Policy Review Panel reported to the Prime Minister on 10 December last year and the government has largely adopted its recommendations. These include:

reducing the High Cost Claims Scheme threshold further to $300,000;

introducing a new, broader based Premium Support Scheme to replace the Medical Indemnity Subsidy Scheme. Under the Premium Support Scheme more doctors will be assisted with their medical indemnity costs than under the Medical Indemnity Scheme;

replacing the IBNR levy with UMP support arrangements; and

establishing a run-off reinsurance vehicle to provide free run-off cover to certain groups of doctors when they have left the medical work force.

Through these extra measures, added to those announced earlier, the government will now contribute a combined total of some $620 million over the next four years to meet medical indemnity claims.

The legislation before the House today will give effect to the the UMP support payment arrangements and provide a broad framework for the Premium Support Scheme.

I propose to introduce additional legislation later in the year to implement the run-off reinsurance vehicle. Details of the design of that scheme are currently being developed in consultation with the medical profession and the insurance industry.

A key element of the present legislation is that the new UMP support payment will replace the present IBNR contribution.

Under the previous arrangements the IBNR contribution was specifically linked to a doctor's past risk profile, irrespective of their present capacity to pay. It is fair to say that the contributions were structured in this way after consultation with the medical profession. However, when the first IBNR contribution notices were sent out it became clear that this approach had led to significant anomalies.

The government now proposes to make significant changes to the way in which it requires UMP members to contribute to the cost of meeting UMP's pre-2001 liabilities. The government will now fund three quarters of this amount with only the remaining quarter to be recouped from doctors—by affordable contributions under the new UMP support arrangements.

Under the new UMP support arrangements doctors who were members of UMP as at 30 June in 2000 will pay whichever is the least of: their original IBNR annual levy; two per cent of their gross Medicare billable income; or $5,000. The legislation now links payments explicitly to doctors' current financial circumstances.

Other features of the new UMP support payments include:

doctors with a gross Medicare billable income of less than $5,000 in the previous twelve months will be exempt from the payment;

no doctors will be required to make payments for more than six years; and

doctors who were members of UMP for less than six years before 2000 will only be required to make a payment for a number of years equal to the number of years they were members of UMP.

Given that doctors will make lower payments there will no longer be provisions for the payment to be made by instalment or lump sum under the new legislation.

While the government no longer expects that the doctors meet the total costs of UMP's unfunded IBNRs, doctors with an IBNR liability will still have to make a contribution which will now be more affordable. Importantly, the government will continue to meet the cost of funding UMP's unfunded IBNR claims accrued to 30 June 2002.

During the medical indemnity review doctors made it clear to panel members that they wanted a single billing transaction for all of their medical indemnity costs. Today's legislation will make this possible. The government is now working with the insurers to ensure that practitioners will be able to pay all of their indemnity costs including the UMP support payment and to receive a benefit, if applicable, under the new Premium Support Scheme in the one transaction. This legislation will also amend the Medical Indemnity Act 2002 to provide a framework for the Premium Support Scheme arrangements. The government proposes to administer the details of the Premium Support Scheme by way of contracts with medical indemnity insurers. In this way it will be able to achieve its objectives of:

broadening financial assistance to doctors so that where a doctor's medical indemnity premiums, together with any UMP support payment, exceed 7.5 per cent of gross private medical income 80 per cent of these costs will be subsidised by the government, irrespective of the doctor's craft group;

increasing support for procedural GPs working in rural areas by funding 75 per cent of the difference between premiums for these doctors and those for non-procedural GPs in similar circumstances; and

providing Premium Support Scheme assistance to eligible doctors automatically through their insurers—no separate application to government will now be required.

The Premium Support Scheme will come into full operation on 1 July 2004, with transitional arrangements to offer an equivalent level of assistance to insurers for the six months beginning 1 January 2004. Arrangements will be put in place to ensure that doctors currently receiving support under the current Medical Indemnity Subsidy Scheme will receive no less support under the new arrangements.

I believe that this legislation, in conjunction with the government's previous legislation, will provide certainty and reduced medical indemnity costs for doctors.

The Australian government is committed to reducing medical indemnity costs for doctors and maintaining services, but it cannot achieve these outcomes alone. It will continue to work with the states and medical organisations to achieve fairer premiums for doctors and fair outcomes for litigants.

The government will continue to work closely with state and territory governments to implement tort reform.

I know that doctors are committed to the continuing improvement of risk management in their practice and I feel sure that their efforts will also contribute to the reduction in medical indemnity costs for the profession over time.

I commend the bill to the House and I present the explanatory memorandum.

Debate (on motion by Mr Edwards) adjourned.