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Tuesday, 25 November 2003
Page: 22762


Mr CIOBO (6:07 PM) —You have to admire the barefaced hypocrisy of the Australian Labor Party. I will just pick up on the concluding comments of the member for Shortland. I heard her make a plea. She said: `My message to the Howard federal government is that they deal with this issue now.' I scratch my head, because this is coming from the opposition which announced, as recently as today, that they would be working in conjunction with the Greens and the Democrats in the Senate to block the government's response to this problem. We have opposition members saying, `We want the government to act and we want the government to act now.' But forget their words because, in reality, what do they do? They put obstacles in our way on each and every occasion they get. Under our new MedicarePlus package we have provided an additional $2.4 billion to help overcome the kinds of problems that the member for Shortland has been talking about. But what do we get from the opposition? We get nothing but political opportunism, demonstrated by the fact that they will work to obstruct the very kind of policy reform that is needed to make sure that we do deal with this problem in a timely way.

One of the principal concerns that I have with the whole debate about medical indemnity insurance is that so many people on the opposition benches have been willing to manipulate the truth to try to obtain politically opportunistic points against this government. Many members of the Australian Labor Party have feigned indignation at the fact that there is a medical indemnity crisis, as they call it; yet, at the same time as this government has moved to change it, they have (1) blocked it in the Senate and (2) engaged in the most horrendous scare campaign that I have seen for a long time. In fact, the Labor Party scare campaign on Medicare and the medical indemnity issue would have to be on a par with the kind of scare campaign they ran against the GST, when the member for Brand ran around saying, `The sky's falling in.'

From my perspective, I fundamentally believe that the Australian people are awake to the Australian Labor Party. We know that the Australian people are awake to the Australian Labor Party because we continue to see the way in which the Labor Party fail to get any traction whatsoever when it comes to engaging the Australian people. You see it in the opinion polls, in letters to the editor and in the national mood, which reflects the fact that the Australian people do not want politics played with health. The Australian people do not want the opposition to kick and scream and pretend that there is this massive problem. What they want is a response, and that is the reason why the Howard government's response is so far in front of what the opposition are offering up.

The fact is that this government have moved in a timely way to address concerns. This government have made sure that we have consulted broadly and widely. We have made sure that we have spoken not only with doctors but with specialists, patients and hospitals to make sure that our policy settings are informed settings that address the root causes of many of the problems that are befalling us today when it comes to the medical sector. This stands in stark contrast to an opposition that are hell-bent on making sure that, at the very least, they can improve Simon Crean's failing leadership.

In my mind the Medical Indemnity Amendment Bill 2003 and the Medical Indemnity (IBNR Indemnity) Contribution Amendment Bill 2003 are just another concrete step and another demonstration of the way in which the Howard government and our Minister for Health and Ageing, the Hon. Tony Abbott, are making sure that we work in a cooperative way not only with the industry and stakeholders in the industry but with state governments as well. When this medical indemnity problem and the challenges that have befallen us as a result of the collapse of UMP first came on the radar, the government did move swiftly. One of the things that we did was to invest $460 million of taxpayer funds into the bailout of UMP. We did so because we knew that this was a problem that needed to be rectified. As part of our investment of $460 million of taxpayer funds into the assumption of IBNR liabilities that UMP had to pay, we indicated at the time that we would prevail upon doctors to make a contribution over the next 10 years—a collection of some of that money back off doctors—given that we were assuming the liability that belonged to UMP. As a consequence of that, there were some challenges—that the government noticed—once doctors received their IBNR contribution claims. This legislation today serves to ensure that we make some changes to the operation of the IBNR contribution.

In addition to that, the legislation also addresses the theoretical potential of the personal exposure of doctors to claims that exceed their insurance limit, which are referred to colloquially as `blue sky claims'. The legislation that is before us today builds upon the comprehensive response that the Howard government has already made to a lot of the concerns that are taking place in the medical insurance industry and, indeed, more broadly, in the medical fraternity.

As I mentioned at the outset, it has been a very real concern of mine that the Labor Party have engaged in political opportunistic attacks and a scare campaign on this issue. To reinforce the point, I turn to my own backyard, my constituency of Moncrieff on the Gold Coast, where state Labor members have been doing electorate wide mail-outs in their electorates—coincidentally in the lead-up to a state election campaign—promoting fear, concern and consternation in the community about Medicare. The question could be asked: why would a state Labor member be concerned about Medicare? Presumably that falls within the domain of the federal government. So why would a state Labor member be writing to all of his or her constituents about Medicare, if it were not for the fact that there is a coordinated and comprehensive scare campaign being waged on this issue by the Australian Labor Party?


Mr Sidebottom —Don't they go to public hospitals?


The DEPUTY SPEAKER (Ms Gambaro)—The member for Moncrieff has the call. The level of noise in the chamber is too high.


Mr CIOBO —An electorate wide mail-out—in this particular case, by the state Labor member for Mudgeeraba, Dianne Reilly—was done with full approval and in a way that Peter Beattie authorised either implicitly or explicitly because Peter Beattie and his Labor mates are operating in conjunction with the federal Labor Party to make sure that this scare campaign gains traction among the Australian community. But it simply is not doing so. In this instance, when the state Labor member Dianne Reilly had written to all of her constituents—a number of whom are my constituents as well—raising concerns about Medicare, I made sure that I replied swiftly, and I put on the record the facts about Medicare and about medical indemnity. In this debate, I seek to do the same thing.

Let us look at what has brought us to where we are today. We know that the liability insurance crisis has arisen because of a number of one-off factors. First and foremost, there was the collapse of HIH. With the collapse of the HIH Insurance Group, a number of unexpected challenges befell the reinsurance market and, indeed, the insurance market. In addition, there was widespread concern about some of the significant payouts that had been made in liability cases, not only against medical practitioners but more broadly in the community. I have spoken about this matter previously—most prominently, I guess, in my grievance debate speech on Australians' growing litigiousness when it comes to suing for damages and seeking damages for matters that historically would not have been the cause of legal action.

What we now know is that that propensity to be litigious in these types of issues is becoming more common and more widespread, and all Australians are now paying the price of that increased propensity to sue. Coupled with the collapse of HIH and, in addition, the terrorist attacks—for example, the World Trade Centre attack on 11 September and the Bali bombings—this has led to a global insurance environment that has been very hostile towards modest premium increases. Quite to the contrary of that, what we now see is that many insurers and reinsurers are seeking significant premium increases to provide for insurance against an environment in which they consider they have an increased exposure. These large insurance shocks have contributed to the problems which, as I said, are currently being experienced in the medical indemnity insurance market. Prior to government assistance, medical indemnity as an industry had not provisioned properly for future claims and was structured in such a way as to avoid prudential supervision—not in all cases but in the vast majority of cases and, most notably, with respect to UMP.

As a consequence of these various challenges that befell the medical indemnity insurance market, this government put together a comprehensive and timely response. We developed a package that addressed the impact of the problems that I have been speaking about, especially in terms of the viability of the medical indemnity industry and the affordability of medical indemnity premiums. The key measure in the package this government originally put together in response to the collapse of UMP and the wholesale increases in medical indemnity premiums was our agreement to take over the unfunded liabilities across the medical indemnity sector for claims that had been incurred but not yet lodged, otherwise known as IBNR. The government also undertook to meet half of all claims that exceed $2 million, through the High Cost Claims Scheme. On 22 October this year, the Howard government reduced the threshold for the High Cost Claims Scheme from $2 million to $500,000. At the same time, it also expanded the exemption categories for the IBNR contribution.

Another plank of this scheme was to provide further assistance, through the provision of subsidies, to doctors practising in high-risk areas of practice, to bring down their premium costs. The package that the government responded with was broader than the three limbs that I have just mentioned. However, in my view, these are the primary three limbs that underscore this government's absolute commitment to the longevity, sustainability and, more importantly, affordability of the medical indemnity insurance market.

As I mentioned, the second of the bills that we are discussing today relates to the IBNR contribution scheme and some modifications that we are making to that scheme. It is a scheme that the Howard government turned its mind to following our $460 million bailout of UMP. So why did this take place? We know that, historically, medical defence organisations—MDOs—as well as state government funds and commercial insurers provide medical indemnity to health professionals such as doctors. MDOs are not-for-profit organisations. They are established for the benefit of their members, rather than for the financial benefit of shareholders. Also, MDOs are not insurers; they do not issue insurance contracts. Rather, they provide protection to their members in exchange for a subscription income for membership of the organisation.

There are seven major medical defence organisations in Australia: UMP, the Medical Defence Association of Victoria, the Medical Indemnity Protection Society, the Medical Defence Association of South Australia, the Medical Defence Association of Western Australia, the Medical Protection Society of Tasmania and Queensland Doctors Mutual Limited. Most of these MDOs relied heavily on reinsurance to protect their financial positions. From time to time, if a significant claim was brought against them, MDOs could raise additional capital under their current structural arrangements by charging increased subscriptions or by what is colloquially known as `making a call' on their members for an additional amount of money. In this new threat environment insurers are concerned about their liability and their exposure. Since 1999 four MDOs have been required to make a call on their members for additional funds.

In response to that, the Howard government introduced the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003 to ensure that we brought MDOs under the supervision of the Australian Prudential Regulation Authority, APRA. Why did we do this? We did it because of the $460 million bailout of UMP. Because UMP was not under prudential supervision, we did not know beforehand that there had not been proper provisioning for future IBNRs. As a consequence, when it was realised that UMP needed to go into provisional liquidation because it could not meet its forward responsibilities for IBNRs, we thought to ourselves, `What we need to do is make sure that we bring these organisations under APRA supervision so that we can, hopefully, prevent this problem from ever occurring again.' That is another example of the way in which we have made structural reform in the industry that should help to prevent these problems from occurring again.

That act also required that medical indemnity insurance be provided by insurers rather than mutual societies and that it be provided, as a consequence, as a contract of insurance. This is another comprehensive way in which we have achieved structural changes, systemic changes, that should ensure that we alleviate this problem in the future.

I turn to the particular bills we are discussing today. As I mentioned, as part of the government's response to the medical indemnity challenges, we introduced the High Cost Claims Scheme. There were concerns raised that, with the introduction of the High Cost Claims Scheme, there could be situations in which the liabilities and the damages that were awarded against the doctor could exceed the maximum amount of their insurance. So the legislation that we are discussing today introduces the Exceptional Claims Scheme, which provides for that theoretical environment in which there could be significant damages awarded against the doctor. What the government has promised and what these bills introduce is a reaction to ensure that, should significant damages be awarded against a doctor on either one or multiple occasions, where the doctor's limit of insurance is reached, the federal government will step in—Australian taxpayers will step in—and provide 100 per cent cover for that doctor and assume any liability that is over and above the level of insurance that is provided to that doctor.

It is worth bearing in mind that at this stage the highest ever award for medical negligence by an Australian court has been $9 million. As a consequence, this government has introduced a threshold of $15 million that applies from 1 January to 30 June 2003. This threshold means that the Exceptional Claims Scheme will cut in at $15 million, which is the amount of insurance that providers are making available in the marketplace for doctors to take. From 1 July onwards, that $15 million has been increased to $20 million, because malpractice insurers in most instances now provide $20 million or indeed $25 million of insurance coverage. So the Exceptional Claims Scheme operates such that, in the first instance, the doctor's insurer will pay for any malpractice claim. Once that insurance limit is reached, the Exceptional Claims Scheme will kick in so that taxpayers—indeed, the government—will fund any additional exposure. This prevents any personal liability that might fall on doctors under so-called blue sky claims—an important safeguard for doctors, in an area where I know many doctors were concerned.

The other important aspect was IBNR contribution changes. When the original contribution claims went out to doctors, they raised concerns, one of which was that they felt that the contribution levy may not have taken into account a decrease in likely claims brought against doctors because of torts law reform. The health minister, the Hon. Tony Abbott, has introduced in this legislation changes to make sure that, where doctors were paying the contribution, they will now have an 18-month moratorium. This is an important moratorium because it also provides an opportunity for a medical indemnity policy review committee to look at ways in which we can ensure that medical indemnity arrangements in Australia are financially sustainable, transparent and comprehensive for all parties, and affordable, comprehensive and secure in terms of their coverage for all doctors, and we can further enable Australia's medical work force to provide care and to continue to practise to its full potential. So it will provide these recommendations as a result of its review by 10 December this year.

All in all, these two bills represent a comprehensive response by this government to the medical indemnity concerns. They address in a very thorough way a lot of the concerns that doctors have raised. We have taken them on board; they have been incorporated into this legislation. Finally, I would emphasise to all Australians that the Labor Party is engaged in a scare campaign. (Time expired)