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Monday, 9 December 2002
Page: 7506


Senator CHRIS EVANS (9:36 PM) —I rise to indicate the opposition's support for this package of bills in respect of medical indemnity insurance.


The ACTING DEPUTY PRESIDENT (Senator Hutchins)—Senator Evans, before you go on, could you wait a moment while a few senators finish their conversations.


Senator CHRIS EVANS —Thank you, Mr Acting Deputy President. I am sure there is a great deal of interest in my speech from the government benches. I understood that is why we had such a good attendance. While Labor support these bills, we do so noting that there are many steps the government should have taken and still must take before medical indemnity in Australia is sustainable in the long term. In this light, Labor believe it is important to emphasise that medical indemnity is not just an issue for doctors but one that impacts directly on the availability and affordability of medical services for all Australians. Inadequate measures to address medical indemnity in the long term will result in a reduced availability of medical services and patients paying higher prices.

These bills represent the government's package of measures to address rising medical indemnity insurance premiums, announced on 23 October this year. The core plank of this package was the extension of a guarantee to United Medical Protection and Australasian Medical Insurance Ltd, UMP-AMIL, to 31 December 2003. On 23 October, the government also announced partial subsidies for insurance premiums for obstetricians, neurosurgeons and GPs performing procedures; a scheme to meet 50 per cent of the cost of claims payments greater than $2 million; funding of the incurred but unreported liabilities for medical defence organisations, or MDOs, that have not set aside money to cover their liabilities; and a levy to recoup the cost of the funding for unreported liabilities for members of the MDOs over an extended period.

The announcement of these measures followed the passage of the Medical Indemnity Agreement (Financial Assistance— Binding Commonwealth Obligations) Bill 2002. The purpose of that bill was to appropriate funds for payments in accordance with an indemnity agreement between the Commonwealth and UMP and its wholly owned subsidiary, AMIL, and to confirm the government's commitments relating to UMP-AMIL.

It is worth while to discuss in somewhat more detail the three main measures that these bills give effect to. The first measure is the unreported liability scheme. This will assist those medical defence organisations that had unfunded liabilities as at 30 June 2002 to pay the claims when they crystallise. In other words, the Commonwealth will help these MDOs to pay for claims which they have not made adequate provision for in the past. Part of this cost will be recouped by a levy payable by any person who on 30 June 2000 was a member of an MDO that was assessed as having unfunded, unreported liabilities at 30 June 2002. For practitioners who are liable to pay the levy, the levy will be set as a proportion—a maximum of 50 per cent—of their medical indemnity premium paid for the 2000-01 financial year.

The second key measure that the package of bills gives effect to is the High Cost Claims Scheme. The High Cost Claims Scheme aims to lower premiums by reducing the potential cost of large claims to insurers. Under this scheme, the Commonwealth will meet 50 per cent of the cost of claims payments greater than $2 million. This scheme will apply to claims notified on or after 1 January 2003 but will not apply to claims relating to the provision of public hospital services.

The third main measure that this package of bills gives effect to is subsidies. A subsidy will be provided to obstetricians, neurosurgeons and procedural GPs who undertake Medicare billable procedures. It will be the equivalent of 50 per cent of the difference between the cost of their premiums plus the unfunded, unreported levy, and a corresponding cost for gynaecologists, general surgeons and non-procedural GPs respectively, in their relevant state or territory. In light of the particularly high premium costs faced by some neurosurgeons, the subsidy rate will increase to 80 per cent on the portion of their premium plus the levy, if applicable, that exceeds $50,000.

This package of bills provides for the implementation of these key measures of the government's package. Although positive and necessary measures, they are inadequate in the long term to address Australia's medical indemnity shortfalls. The bills provide an administrative framework for the policy response made by the government so far. For instance, the Medical Indemnity Bill 2002 establishes a mechanism to determine which MDOs have incurred but unreported liabilities. So far as financial implications of the bills are concerned, the Mid-Year Economic and Fiscal Outlook documents indicated that funding of $246.5 million over four years will be provided for the medical indemnity insurance assistance package. However, disappointingly, the MYEFO documents do not disclose the amount budgeted for the UMP-AMIL guarantee or the amount expected to be raised from the unreported liabilities levy to fund the guarantee.

As I have indicated, the opposition supports these measures. However, it is important to get on record again Labor's view that the government's handling of medical indemnity problems in Australia has been far from satisfactory. The government was slow in recognising that there was a problem at all, and it has not been prepared to make its eventual response comprehensive or far-reaching enough to address the range of medical indemnity problems that exist. It is also worth remembering that, whilst the crisis in medical indemnity insurance was publicly brought to a head by the financial difficulties experienced by UMP and by the appointment of a provisional liquidator, problems with medical indemnity insurance are not of recent origin. For example, as far back as 1991 the then Labor federal government established a review of professional indemnity arrangements for health care professionals. This review was chaired by Fiona Tito. It was responsible for examining the arrangements relating to professional indemnity and the experience with compensation for medical misadventure.

Fiona Tito's report was completed at the end of 1995. Amongst other things, that report identified the need to develop evidence based medicine and define best practice; called on health care institutions to develop a system for error identification and analysis to deal with errors in a positive manner; discussed the need to ensure that people with severe disabilities obtained early access to rehabilitation services; recommended the wider use of structured settlements; recommended that medical defence organisations, using common accounting and reporting standards, ensure that members and policyholders be able to assess their relative financial strength; and recommended the establishment of an MDO fund to cover the costs of claims incurred but not reported, which is of course one of the major problems that this bill attempts to deal with, albeit seven years after the Tito report identified it.

The Tito report was largely ignored by the Howard government. That is in contrast to the Labor Party, which in the run-up to the last federal election identified what areas of medical indemnity insurance remained neglected and in need of reform. Labor's medical indemnity reform package was accordingly announced in July 2001. It drew attention to the following requirements: the need to reduce the frequency of medical injuries by setting national benchmarks and guidelines and by promoting the use of information technologies to help doctors decide on the best treatment and avoid misdiagnosis or incorrect treatment, the need to promote structured settlements by changing the tax treatment of periodic payments to ensure injured patients have adequate regular payments to cover their health care costs for the rest of their lives and the need to establish a national database on health care litigation to target the problem areas and ensure that adequate support mechanisms are in place.

The Labor package responded to these health system needs in a range of specific, targeted ways. In particular, the ALP sought state and territory law reforms encompassing court procedures, calculation of damages and the regulation of medical indemnity organisations. Labor sought to tighten the prudential regulation of medical indemnity insurance, in order that all funds operate soundly and have transparent accounts; to require all doctors to hold the appropriate insurance for the work they undertake; to reduce red tape by harmonising requirements, from doctor registration to improving risk management by medical indemnity funds; and to refer the current problems with indemnity insurance for midwives to the then Senate inquiry into nursing, in order to develop options for keeping homebirth as an option for expectant mothers.

The Howard government has proved reluctant to address any of these problems with medical indemnity insurance, taking only preliminary steps after the last federal election. In December 2001, the Prime Minister announced a national medical indemnity insurance summit, which was ultimately convened in late April 2002. The summit's communique, which was issued following the summit, simply announced that work would begin on a range of issues that had been identified much earlier.

Problems surrounding medical indemnity insurance are complex and there is no single solution. As a consequence, action is required by all governments and change is required of medical defence organisations, the medical profession and lawyers. However, any comprehensive plan for solving the medical indemnity insurance problem must be coordinated at the Commonwealth level. Given this, the government's response to medical indemnity problems has been inadequate in the following ways.

Firstly, almost all of the efforts for reform have focused on tort law and not on the need to improve clinical outcomes and reduce clinical risk. Comparatively little attention has been given to reducing the number of adverse events through the encouragement of safer medical practice. Improvements in the quality and safety of medical care would lead to better health outcomes for patients and reduce the likelihood that doctors would be sued for inappropriate treatments. Whilst it is certainly the case that Australia performs well internationally, we can always do better. As a consequence, the Howard government should make the reduction of clinical risk a much greater priority.

Secondly, more work needs to be done to consider the viability of setting up a national scheme for the long-term care of the most catastrophically injured. Labor has consistently advocated that a special national scheme is necessary to address high-cost cases in which catastrophic injury has resulted from medical procedures. It is clearly the case, both anecdotally and statistically, that the majority of these cases involve brain and spinal injuries and obstetrics. Complex cases involving catastrophically injured people take years to resolve through the courts and waste millions of dollars in legal fees. These cases place a disproportionate burden on the cost of medical indemnity insurance. Putting in place a catastrophic injury scheme would be a significant contribution to stemming the exponential increase in premiums for the cost of medical indemnity insurance.

The Commonwealth also has a significant role to play in assisting medical defence organisations to secure reasonably priced reinsurance. Australia has a multiplicity of state based organisations that provide medical indemnity insurance. With a more united front, Australian MDOs would be much more likely to succeed in obtaining affordable reinsurance and helping to stop medical indemnity insurance costs from increasing exponentially. Changing the way in which medical indemnity insurance is regulated would also be a helpful advance. Medical indemnity insurance has historically been provided by MDOs that have offered doctors membership rather than insurance. It is important that the Commonwealth ensure that APRA has sufficient resources to fulfil this greater regulatory role.

The Commonwealth should also ensure the prevention of price exploitation resulting from premium increases, by way of an increased role for the ACCC. It is now well known that very many patients are being asked by their specialist to make large up-front payments before surgical procedures are carried out, with the explicit justification that these up-front fees are necessary to defray the increased costs of medical indemnity insurance. We have also seen, in more recent times, indications from the Australian Private Hospitals Association that, in the course of next year, up-front fees in the order of $150 will be imposed to cover the difficulties that Australian private hospitals now find in gaining medical indemnity insurance.

While it is expected that medical service providers will not be able to absorb the increased costs of medical indemnity insurance premiums and will pass those costs on to patients, Labor believes that consumers should not be required to pay amounts that bear no relation to the increased premium costs. The Howard government envisages the ACCC playing a role so far as monitoring the increase in medical indemnity insurance premiums is concerned. However, the ACCC should be tasked to ensure that, whatever changes occur, no unfair or unreasonable costs flow on to patients for the cost of their individual health care.