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Wednesday, 15 March 2000
Page: 12815


Senator EGGLESTON (12:45 PM) —Today I would like to talk about the so-called crisis in medical defence insurance as it affects medical practitioners and the reasons for it. Because this will take me some time, in a subsequent speech I intend to propose a solution to this problem. Over the past decade medical practitioners across the country have had to contend with marked increases in their professional indemnity fees, with those providing specialist services, such as obstetrics, being particularly hard hit. This is demonstrated by a comparison of the subscription rates of procedural GPs—that is, those GPs providing services such as obstetrics and plastic surgery—and non-procedural GPs who are members of United Medical Protection, which represents some 70 per cent of all medical practitioners in the country. In 1984, UMP's subscription rates were $300 for both procedural and non-procedural GPs. By 1994—a decade later—in contrast the rates for procedural GPs had increased to $4,050, whereas those for non-procedural GPs were only $1,450. By 1999—the most recent year that figures are available—subscription rates for procedural GPs had risen to $9,796 per annum and the rates for non-procedural GPs were $2,375 per annum.

In the case of specialists in obstetrics and gynaecology there is something of a variation across the states, but the fees paid by these specialists for medical insurance are very high. In Victoria, for instance, the Medical Indemnity Protection Society has increased fees for obstetricians and gynaecologists from $9,900 per annum in 1994-95 to $27,000 per annum in 1999-2000. Furthermore, the MIPS has recently made a call on its members, resulting in the doubling of the fees payable for this year to $54,000 for each obstetrician taking insurance with them—a very high sum indeed. A number of factors are feeding this growth in medical indemnity insurance. Medical negligence litigation is the most commonly perceived reason for the increases. Indeed, burgeoning medical litigation is commonly cited by the medical defence organisations as a major, if not themajor, contributing factor to the increase in their subscription fees. The general perception, fed by the media, is that the profession is experiencing a crisis in litigation. A 1998 survey by the Medical Defence Union indicated that nine in 10 Australian doctors are afraid of being sued by patients. Although, anecdotally, medical negligence litigation is increasing, in fact there is little hard evidence of a crisis.

The 1995 Tito report found no evidence of a claimed `litigation explosion' and noted the lack of publicly available data which would have sustained this conclusion. Similarly, a 1997 report by the Victorian Law Reform Committee concluded that a number of high profile cases, particularly in New South Wales, had led to a widespread belief that there was a crisis in medical negligence litigation when, in fact, there was not. The recent Senate Community Affairs References Committee report, entitled Rocking the cradle, found that the existing publicly available data did not provide enough evidence from which to draw conclusions about the existence or otherwise of a litigation crisis. The committee went on to find that data from the County Court of Victoria, while relatively limited—being from one court in one state only—provided some support for the assertion that, overall, an increasing number of cases are being brought against doctors, though the number of cases remains relatively low.

A vast number of patients who have at least a potential action against their doctors choose to do nothing at all. Indeed, studies in the United States, which is often cited as a litigious nation, have established that only 10 per cent of the occurrences which might give rise to a claim have led to proposed or actual litigation against doctors. In addition, many threatened actions do not get to the first stage in litigation and many that are issued are abandoned. Of those actions which do make it to court, on most occasions the doctor is the successful party. As for the damages awarded in medical litigation, contrary to the impression given by the media it is only a very small number of cases that attract a massive damages award.

As previously noted, obstetrics and gynaecology are specialities that have borne the brunt of increases in medical indemnity subscription fees. The perception has been that this has been due to a rapidly increasing number of successful claims. However, a more accurate analysis is that the number of claims have remained the same or have increased only slightly but the awards of damages have increased substantially. This is especially the case in a field such as obstetrics, where a doctor's negligence or lack of concern can have lifelong implications for the child, particularly where he or she is neurologically impaired or severely injured, and this is reflected in the quantum of damages awarded in these cases. A major factor in this burgeoning of the quantum of damages is the cost of future care and increases in life expectancy.

United Medical Protection claims that in the area of obstetrics:

Judgements involving severe personal injuries have increased from around the $1.5 - 2 million range early in the decade to a range of $7 to 12 million in the past two years.

This has meant that, while obstetricians comprise only two per cent of the medical defence organisations' membership, 25 per cent of all claim costs can be attributed to this specialty. This situation is exemplified by the tragic case of Lipovac v. Black involving a GP rather than a specialist obstetrician. Due to a doctor's negligence the plaintiff suffered profound brain damage. As a result, he has been left with the intellectual capacity of a 3-year-old, exhibits profoundly disturbed behaviour and has to be fed through a feeding tube. It means, for example, that the morning feed can take from 2½ to three hours. Tom's condition is such that he is incapable of looking after himself and consequently requires 24-hour supervision.

Damages were awarded on the assumption that Tom had a life expectancy of 60 years. He was awarded total damages of $7,364,345, but the future care component of this was $3,896,807. Nearly $4 million was allocated to future care. This represents more than 50 per cent of the total award. In other words, the future care component of the damages which were awarded to this person more than doubled the total cost of the damages awarded. When seen in their proper context, such large awards are perhaps not necessarily excessive in terms of the future care component. Given this person's condition and need of constant care, it is entirely possible that, rather than being excessive, the award might be exhausted some time before this individual dies. The future care component has greatly increased these damages awards.

The second factor in the dramatically increased subscription fees of medical defence organisations is the decline of cross-subsidisation. Previously, all doctors were charged the same subscription fee by their medical defence organisations, regardless of their area of practice. This meant that those doctors in the lower risk areas of medicine were in effect subsidising those in higher risk specialties. The Chairman of the United Medical Protection society, Dr Richard Tijong, has himself said that this has been a relevant factor. He said, `Subscription fees have gone up because we've differentiated them.' Different levels of fees are now being charged for people in different specialties. People in high risk specialties have to pay a higher subscription rate than people in lower risk areas of medicine.

The third reason medical indemnity subscription fees have risen so dramatically is that there has been a need to fund the long-term liabilities of the medical defence organisations, which have been largely underfunded in the past. Medical defence organisations in Australia offer `claims incurred' cover. Under this form of cover, a doctor is indemnified against `any claim which arises from an incident which occurred' while she or he was a member of the medical defence organisation. That means that, many years after the doctor has ceased to practice or after the incident occurred, an individual can take out a claim against a medical practitioner, and the medical defence organisation which they belonged to at the time is required to meet the damages bill, which may be very high indeed. This means that the medical defence organisations have needed to build up their financial reserves to provide sufficient funds to meet damages, which may be awarded many years after an incident occurs.

As the Senate Community Affairs References Committee stated in its report, `catch-up' in terms of providing funding for reserves has played a big part in the rises in medical defence organisation premiums in the late 1980s to the 1990s. The Senate report stated that, over the preceding 15 years, there has been a gradual increase in the number of negligence claims, which were largely underfunded by medical defence organisations. They added that, while the incidence and cost of claims rose, the contribution rates remained low.

Despite the extremely large increases in medical defence organisation subscriptions, unfortunately the level of reserves in these organisations remains of great concern. Unfortunately, the 1995 professional indemnity review considered that these reserves were quite seriously insufficient to meet likely demands in the future. Given all of these factors, the upward trend of subscription rates for medical defence fees looks likely to continue unabated. This has significant implications for medical practice around this country and is a major factor, for example, in general practitioners withdrawing from the provision of obstetric services in country areas or withdrawing from surgery and other procedures. (Time expired)