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Tuesday, 19 November 2002
Page: 6709


Senator COONAN (Minister for Revenue and Assistant Treasurer) (12:25 PM) —I thank all of my colleagues for their contributions to the debate on the Medical Indemnity Agreement (Financial Assistance—Binding Commonwealth Obligations) Bill 2002 and for their support for the substance of the bill. Obviously, when amendments are moved during the committee stage, I will respond to some of the matters that have been raised.

We need to focus on the fact that the purpose of the bill is to appropriate funds for payments in accordance with the guarantee between the Commonwealth and United Medical Protection Ltd—UMP—and the Australasian Medical Insurance Ltd— AMIL—and the provisional liquidator of those companies. The provisions of the bill are not intended to imply that any future Commonwealth indemnity needs to be supported by legislation. The bill simply confirms the government's existing legal obligation to make payments to UMP-AMIL and the provisional liquidator in accordance with the guarantee.

There are three elements to the government's guarantee. On 1 May this year, the Minister for Health and Ageing wrote to medical practitioners, stating that the Commonwealth would guarantee to the provisional liquidator the obligations of UMP-AMIL to pay any amount properly payable in the period 29 April to 30 June 2002 for claims under a current or past policy. The government also committed to providing a guarantee to the provisional liquidator or to any subsequently appointed liquidator to enable the provision of cover in respect of valid claims that arise at any time for holders of a current policy for events that occurred between 29 April and 30 June 2002 and holders of a policy that expires and is renewed by the provisional liquidator before 30 June 2002 for events that occurred between 29 April and 30 June 2002.

On Friday, 31 May 2002 the guarantee to UMP-AMIL was enhanced to cover claims to the end of 2002. The Prime Minister announced that the enhanced guarantee would allow the provisional liquidator to meet claims notified in the period 29 April to 31 December this year under an existing or renewed policy; to renew policies on a claims-made basis for the period until 31 December this year; and continue to meet claims that were notified before 29 April 2002 and that are properly payable in the period 1 July 2002 to 31 December 2002. This is an extension of the arrangement set out in the letter of 1 May from the Minister for Health and Ageing.

The Prime Minister also announced on 31 May that the Commonwealth would introduce a levy to fund any liability incurred by the Commonwealth under a medical indemnity agreement as a result of the extension of the guarantee on modified terms. This levy is part of broader levy arrangements to meet the unfunded incurred but not reported, or IBNR, liabilities of medical defence organisations. Separate legislation for the levy on certain medical practitioners and for funding these IBNR liabilities will be introduced once the details have been finalised. The deed of indemnity was required to give formal effect to the government's undertakings. On 25 July 2002 the New South Wales Supreme Court approved the provisional liquidator on behalf of UMP-AMIL entering into a deed of indemnity between the Commonwealth, UMP-AMIL and the provisional liquidator, and it was formally executed on 30 July 2002.

On 23 October the Prime Minister announced that the government had agreed to offer to extend the guarantee to the companies, UMP and AMIL, and their provisional liquidator for a further 12 months to 31 December 2003. This offer will be on substantially the same terms as the current guarantee and will enable the provisional liquidator to meet amounts payable in the period 29 April 2002 to 31 December 2002 in respect of claims notified or finalised prior to 29 April 2002 and amounts payable in respect of claims notified in the period 29 April 2002 to 31 December 2003, whenever the claim is finalised, including after 31 December 2003.

The extension of the guarantee to 31 December 2003 will provide certainty to doctors to enable them to continue to practise and to have their premiums renewed so that vital health services are available to all Australians. The guarantee will also provide time for the provisional liquidator to continue to pursue restructuring options in relation to the companies, UMP and AMIL. As with the previous offer of guarantee announced by the government on 31 May 2002, acceptance of this offer will be subject to the approval of the New South Wales Supreme Court and to the court allowing UMP-AMIL to continue in provisional liquidation. This bill then provides for an appropriation out of the consolidated revenue fund for the purposes of payments in accordance with the indemnity agreement. While funding is not required immediately, the bill will provide for the funds when and indeed if required. The government sees the passage of this bill as an important element of a broader strategy to stabilise the medical indemnity insurance market in Australia. The broad strategy has several component parts.

I want to take issue with some of the statements—I will obviously not be able to deal with all of them—that have been made by my colleagues in their speeches in the second reading debate. The subtext of each of the speeches seemed to suggest that somehow or other the government was sitting on its hands throughout this issue and had done virtually nothing. Nothing could be further from the truth, because the government has assumed a leadership role throughout all of the steps taken necessary to stabilise this most important industry and to develop a comprehensive response to what is indeed a complex and very multifaceted problem. It would be unfair to the government if I did not briefly run through the government's major measures and steps taken in this matter.

In September last year, the government announced that it would be amending the tax law to make structured settlements tax exempt. The purpose of this is to remove the tax incentives to accepting damages awards as lump sums instead of as a stream of payments that can better match the awards with the needs of a plaintiff. Since last year, the Australian Prudential Regulation Authority—APRA, the regulator—has been working with medical defence organisations on an appropriate model for bringing these organisations into the prudential framework and for providing out of that a discretionary medical indemnity provider. On 19 December last year, the Prime Minister announced that a high-level forum on medical indemnity insurance would be convened with the aim of developing a coordinated approach to issues including reinsurance, prudential arrangements, litigation and settlement levels. Obviously, this requires negotiation and cooperation with all of the stakeholders and the state and territory governments. UMP wrote to the government on 19 March 2002, seeking financial assistance to assist AMIL in meeting its statutory capital requirements. The government acted quickly by offering a short-term capital guarantee of $35 million to AMIL on 27 March to ensure the continued availability of medical services. On 26 March, the government released the first ACCC insurance market pricing review, which identified drivers pushing premiums upwards.

On 27 March, I chaired a meeting with state and territory colleagues to consider what measures could be undertaken by all governments to address problems as to the affordability and availability of public liability insurance, which of course brought in the very important issue of tort law reform that, quite rightly, has spread its tentacles into underpinning reforms in medical indemnity and professional indemnity. On 23 April, the Minister for Health and Ageing, my colleague Senator Patterson, convened the forum announced by the Prime Minister in December. I attended that meeting with her. On 30 May, I convened a second meeting on public liability with state and territory colleagues. Important outcomes from this meeting included the Commonwealth providing the ACCC with a watching brief over the insurance industry, and the commissioning of a report into the law of negligence by a panel chaired by Justice David Ipp. The reason for that was that, if you are going to embark on law reform, it is advisable to do it from a principled basis, particularly when you are dealing with different jurisdictions and different provisions in different jurisdictions, to get some consistency and clarity throughout the laws of negligence. I think it was a very good idea, and I commend the recommendations of the Ipp report as providing a very good blueprint and benchmark for nationally consistent law reform.

On 31 May, the Prime Minister announced an extension of the guarantee to UMP on modified terms and said that the government was working urgently to develop a comprehensive and considered package of reforms to address all aspects of the medical indemnity issue. On 6 June 2002, the government introduced into parliament the Taxation Laws Amendment (Structured Settlements) Bill 2002, the one that I referred to as having been announced last year, and on 27 June 2002 the Trade Practices Amendment (Liability for Recreational Services) Bill 2002 was introduced into parliament.

On 2 September, the government released the first of two reports provided by the Ipp panel. This report contained recommendations for reform to the law of negligence that were specifically designed to address the problems of medical practitioners. The panel was asked to deal with that issue because it was obviously significant and important. On 2 October, at a further meeting I convened of state and territory ministers, the second Ipp report was released. It contained a number of overarching recommendations to allow significant law reform for liability issues and the standard of care. On 23 October, the Prime Minister announced the government's comprehensive medical indemnity package. On 15 November, just last Friday, I chaired the fourth ministerial meeting on public liability insurance and, as I informed the Senate yesterday, the meeting reached an historic agreement for national law reform consistent across each and every state and territory in Australia. In addition, APRA is conducting preliminary work on establishing a national claims dataset and the Productivity Commission has been asked to conduct a benchmarking study into Australian insurers' claims management practices against world standards. This is a pretty extensive list apart from the ongoing work.

The government's package for medical indemnity comprises not only the guarantee that we are dealing with today but also a levy to take account of the incurred but not reported liabilities of UMP-AMIL and, indeed, other medical indemnity organisations, if appropriate. It also obviously contains arrangements to move all medical indemnity providers into the prudential network. It has also looked at the need for the Commonwealth to provide some assistance for high claims. The high claims scheme allows some assistance to both insurers and doctors and it brings down the pressure on premiums for doctors in the high claims scheme. It further contains measures to subsidise high-risk specialists who were otherwise faced with premiums that simply could not be afforded. Underpinning it all is tort law reform. There is other ongoing work. Not only are ministers working on public liability but my colleague Senator Patterson is working with her colleagues and we are looking at catastrophic care in a broader sense. While I appreciate that my colleagues want to make statements relating to this bill from their own perspectives—and, of course, they are entitled to do that—I think that it is completely unfair to suggest that the government is not taking action on the ground where it is needed to deliver much needed stability to this whole area.

It is a very complex field. I appreciate that some of the subtleties and finer details may not necessarily be clear to my colleagues. To deal with some of the points that have been brought up in the debate—I will not go again into the extensive actions taken by the government—clearly the communique that was issued just last Friday indicates that the heads of Treasury's Insurance Working Group will undertake a comprehensive review of current arrangements and possible alternatives. Part of that is to collect relevant data and to analyse the nature of problems for discussion at the ongoing ministerial meeting, which will be early in April 2003.

There are some issues that we have to appreciate are not necessarily in the province of the federal government. The federal government can play a leadership role, it can provide a coordinating role and it can encourage state and territory jurisdictions to do what they can to address what is in their own province and jurisdiction. But the Commonwealth government should not, and cannot, simply assume all obligations that might otherwise be seen to be a good idea by those on the other side of the chamber. My colleagues can certainly be assured that my colleague Senator Patterson, I and, to the extent that it was involved, the Prime Minister's office, have made a very considered response to what has been a very difficult problem which has involved many cross-portfolio interests. It is important that the assurances that we have given—that we will continue to look at what needs to be done as these matters that we have announced are bedded down—will continue and will be the subject of ongoing ministerial meetings and negotiations.

Senator Ridgeway raised the issue of the difficulties facing midwives, which I think deserves a specific response. I think that there are some difficulties facing midwives. I think that they do provide an alternate service for birthing, perhaps outside the hospital system—at least, some of them do—and we need to look carefully at whether there is anything further that can be done. I would not accept that there is a crisis. My information is that some 90 per cent of midwives are employees and are covered for insurance purposes by their employers, either in the private hospital system or in public hospitals. In relation to self-employed midwives, the ACT and Western Australian governments have extended public coverage to this group. I would certainly encourage other jurisdictions to follow their example and, to the extent that I can, I will certainly bring it up and pursue it in any of the discussions that I have.

I have met with some groups of midwives and have suggested that a way forward for them may well be to try to work further on industry standards so that those of them who may fall between the cracks and do not get any cover—and, obviously, there are not many of them if it is correct to say that 97 per cent of midwives are employees and are covered—might then, as part of a national organisation that has looked at risk management and industry standards, have better prospects. But I do not in any way disparage the efforts of midwives. In fact, I think that they are to be supported and commended on the service and alternative that they provide.

I also want to deal very briefly, in the couple of seconds I have left, with the suggestion that somehow or other you can control prices in the insurance industry. The ACCC has said—and has made very clear in its reports and in its insurance pricing review—that controlling insurance prices and premiums is unlikely to be effective. This is not me saying it; it is the ACCC saying it. As the ACCC has pointed out pretty graphically, you can control prices but you actually cannot control supply. Rather, there are obviously huge difficulties with commercial insurance relating to controlling prices and cross-subsidisation, because in the end the low-risk people end up subsidising the high-risk people. It is not a good idea, but in any event the ACCC has been charged with continuing to monitor medical indemnity issues. This is a very good bill. It is something that has been necessary as part of a considered and comprehensive package of reforms to stabilise the medical indemnity industry and to bring some of the pressure off doctors' premiums, and I do commend it to my colleagues.

Question agreed to.

Senator CHRIS EVANS (Western Australia) (12.45 p.m.)—I move:

At the end of the motion, add:

“But the Senate, while supporting the provisions of the bill:

(a) condemns the Government for not adequately recognising the medical indemnity insurance problem and not acting quickly enough to address its adverse effects, including higher medical costs and reduced availability of services for Australians and their families;

(b) recognises the ongoing problems in the general insurance, reinsurance and medical indemnity insurance industries and that confidence in those industries has been rocked by the collapse of HIH Insurance Limited and the provisional liquidation of United Medical Protection/Australian Medical Insurance Limited; and

(c) calls on the Government to:

(i) assume a leadership role in the co-ordination of reforms necessary to state and territory laws with the aim of uniformity in tort law reforms;

(ii) consider putting in place a national scheme to ensure the long term care and rehabilitation needs of catastrophically injured Australians;

(iii) ask the Australian Competition and Consumer Commision to ensure that whatever changes occur in medical indemnity insurance, no unfair or unreasonable oncosts flow to patients for the cost of their health care;

(iv) play a more active role in bringing together medical defence organisations and representing them in negotiations with reinsurers;

(v) support Australian Prudential Regulation Authority with appropriate resources to fulfil a greater regulatory role in medical indemnity insurance;

(vi) require mandatory reporting of negligence claims and national data collection on health care negligence cases to help assess where major problem areas and issues lie;

(vii) promote the enactment of national “open disclosure” legislation, including provision that an apology made as part of an open disclosure process is inadmissible in an action for medical negligence; and

(viii) ensure that medical services provided by private hospitals, midwives, family planning clinics and aboriginal medical services are not disrupted due to a lack of appropriate and affordable insurance.”

Question agreed to.

Senator RIDGEWAY (New South Wales) (12.45 p.m.)—by leave—I move:

At the end of the motion, add:

“but the Senate, while supporting the provisions of the bill:

(a) condemns the business practices of United Medical Protection Limited in engaging in a strategy of market dominance ahead of sustainable returns; and

(b) condemns the Government for allowing the insurance industry and medical defence organisations to conduct unhealthy business practices which created this indemnity/liability insurance crisis and then failed to hold them accountable”.

Question agreed to.

Original question, as amended, agreed to.

Bill read a second time.