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Tuesday, 25 November 2003
Page: 22767


Mr ADAMS (6:27 PM) —I think the member who preceded me still has a bit to learn, because there is a long way to go yet in medical indemnity. Anyone who watches the TV show MDA will by now be aware of what medical indemnity insurance is all about. For those who do not watch this award-winning ABC program, it is about a medical defence team which defends doctors who are alleged to have been negligent in their treatment of a patient, when the patient is suing for damages. It points out the extremes of what happens if medical negligence is considered by a patient to have occurred, and what sorts of lengths the patients have to go to for compensation.

I find it quite illuminating in that it shows the sorts of pressures that are going on in this professional world. It pits one set of professionals—doctors—against another set of professionals—lawyers. Surprisingly, it makes very good television. It also highlights that medical indemnity insurance in Australia is a mess. The provision of indemnity insurance has been in crisis since early 2002, when United Medical Protection-Australasian Medical Insurance went into liquidation. Before May 2002, this medical defence organisation provided indemnity to approximately 60 per cent of medical practitioners nationally.

Historically, MDOs provided their members with `claims incurred' cover. Under a claims incurred policy, doctors were insured against injuries to patients brought about through conduct that took place during the term of that policy. However, a patient's claim could be notified at any time, either during the policy or after it had lapsed. If it was after, it was a claim that was incurred but not reported. UMP/AMIL had unfunded claims of this nature approximating $460 million. Three other companies were also in the red as at June 2002, but UMP was, of course, in the worst situation.

The government, who were trying to sort out the whole mess with Medicare as well, rushed to try to address the elements of the medical indemnity crisis by acting as guarantor for claims arising out of medical procedures provided by doctors covered by UMP/ AMIL. They also covered the `incurred but not reported' liability of doctors who were members of the MDO at 30 June where that liability was unfunded. The government also covered the high-cost claims—those exceeding $500,000—where the incident had been notified on or after 1 January 2003.

The company then put up the fees for medical indemnity and the government added a levy to get back their money, and the howls of protest were very loud. The government agreed to subsidise baby doctors, neurosurgeons and procedural GPs who undertook billable medical cases, but they also had to subsidise the levy for those who had retired or who were about to retire, those employed in public hospitals or those who had their private medical income returned to those hospitals. They also looked at covering claims over $20 million under the exceptionally high claims scheme, where a claim exceeded the limits of the capped amount of $20 million. This also put the whole industry under the Australian Prudential Regulation Authority for the first time and required policyholders to adopt risk management techniques—we are into risk management now; that is a good idea—which apparently had not happened before, although they had been recommended in various reports and many papers.

When United Medical Protection came out of liquidation a couple of weeks ago through those interventions, some in the government—and the previous speaker is one of them—thought that the crisis of indemnity was over as doctors could continue to insure through this company. But on Saturday a very worrying story appeared in the Australian Financial Review entitled `Exposed: a sickening situation with the doctors' by Brian Toohey, which described how the government has not been able to solve the problem indefinitely. Doctors will still have to inject a lot more capital before their insurance scheme becomes viable and it is unlikely there will be any return of the $460 million to the taxpayer. Toohey also pointed out that UMP will not be the only company getting a taxpayer bailout. The question he raises is whether further structural reforms are needed. He points out that some areas of the medical profession would like to shift to a more radical no-fault scheme in which patients no longer have to prove negligence to receive compensation for medical injuries, although he says that negligent doctors would still face disciplinary tribunals.

Even with reform, it appears that there are still fears that policyholders will have to put more capital into the insuring bodies. Another increase in premiums, which many regard as being too high, is going to put people out of the industry. What happens if the doctors refuse to pay the levy that is supposed to recoup the $460 million of taxpayers' money, even if it were provided as a rescue remedy to cover doctors that were becoming uninsured? Some doctors were threatening not to pay—and probably will not—and were considering resigning altogether, particularly the older ones, who are in the majority these days. This is going to lead to severe shortages of doctors in most of the specialist fields and put even more pressure on local GPs. This domino effect will also have the greatest impact in rural and isolated areas.

This is obviously going to be an ongoing problem until we can come up with some innovative solutions, and we have not done that with these bills. Perhaps we should revisit the report from a review carried out over five years from 1991 as a result of a government inquiry. The report gave rise to a paper entitled Compensation and professional indemnity in health care,written by Fiona Tito in 1995. In it there were strong, early warnings of the problems we are currently facing. It heralded the start of a rise in premiums and the growing claim amounts. As far as I know, few of the recommendations from that report have seen the light of day.

Other countries have been faced with this problem. The US seems to have dealt with it by pushing the costs onto consumers and thus pushing up the costs of health care to impossible levels. What of others? I have looked briefly at New Zealand and Sweden, which have adopted no-fault schemes. These schemes have a simple administration of streamlined adjudication pathways handling straightforward claims with expert panels reviewing more contentious cases, which is keeping the lawyers out. Both schemes function with little attorney involvement. Evidence on the administration costs suggests that no-fault schemes absorb drastically lower costs than their tort counterparts. These schemes have been operating in these countries for nearly 25 years. Other countries that have been using this type of scheme are Finland, Denmark and Norway.

Tort schemes seek to confine compensation to events in which negligence causes injury, whereas no-fault schemes offer compensation to a wider class of events. The Swedish example shows that basic eligibility for compensation is based on how avoidable an event is and the most rational basis to compensate, and this best facilitates a quality improvement in medicine. As Australia has a no-fault scheme operating for compulsory motor insurance, it would not be difficult to introduce such a scheme—as in the US—because the bones of it are already here and are tried, true and tested.

The Tito report briefly discusses that no-fault costs or strict liability should come from taxation revenue. But it argues that, if such a position were adopted without any contribution from those who currently pay for negligence cases, the effect would be to increase the proportion of the cost of negligence paid by the community and the injured person and to reduce the contribution to these costs met by those who are negligent. But by using community based funding schemes, the first and only call for all care needs and for primary income support would be more simply applied and available when the need is there—that is, close to the time a person becomes incapacitated.

One of the recommendations of the report relevant to this debate was that the government examine the potential for longer-term reform of compensation arrangements by removing payments for future care from lump sum payments under the tort scheme in exchange for a right to case-managed individual assistance for people—a bit of human intervention; think about the person; a `put the person back together' approach. It is a report from the consumer's perspective, and it is well worth revisiting as little has been done since that report, yet it holds many early warnings of our current predicament. But this report was not acted on—it goes back to 1995. There have been a lot of years for people to look at it and make policy changes in that time. Although we can blithely continue along the current line without considering the consequences later, I really believe we are building up problems down the track, and the government will be paying through the nose at every turn. As it is, we have no idea of what amounts we will be up for to top up the $460 million. I understand there are no costings in these bills and there is no indication from the minister of what the costs will be in the future. We presently have $7 billion, I think, in surplus. Maybe some of that is going to be spent to prop up more of these indemnity schemes.

I believe doctors want a new indemnity scheme in which the problems are addressed and the costs are not beyond everyone. We should be looking for a complete restructuring of the system. It is not just medical indemnity, of course. Another issue that has still not gone away is public liability. Judging from what I have read, many of the issues involved are similar and they may need a similar approach to solve them. Of course, risk management is one of them. As with all things, this government seem to take the crisis approach and will not step back and work out a proper solution. Given the 18-month moratorium, I strongly suggest that they take a look at what is happening elsewhere and start putting some alternatives in place. It is obvious that the Howard government have grossly mishandled the medical indemnity issue, but it is important that we do not lose any more doctors at this stage. So we on this side of the House support this interim arrangement and hope that action is taken to improve the system forthwith. I think it is a failure of this government not to have done some costings on what this bill involves. I believe that that is an indictment of the government.

The major reforms of the tort laws that are occurring in the states are very important, and I think that they will help in the long-term to rectify these problems. There is a real need a look at a no-fault scheme, and it is something that this country should have done about five years ago. This will give us a scheme based on human need and not on some people winning the lottery and others probably going onto social security. On most occasions that never achieves the human outcome that we would like. We had a crisis coming, we had reports to that effect, and we had plenty of evidence that things were happening, but we failed. Therefore, the nation failed to see what was going to occur and, in that sense, it was the government's responsibility, and the Howard government have failed us dismally. With these bills, they are trying to provide some rectification. The opposition will support this interim scheme, but some of us believe that this will not be the answer and that there will be many more bills and taxpayers' dollars required to rectify the problem.