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Tuesday, 10 December 2002
Page: 7590


Senator WEBBER (5:32 PM) —Like the previous two speakers, I rise to express some concern about the narrowness of the government's response to the medical indemnity crisis confronting this country. In my view, these bills underpin the government's response to the medical indemnity crisis. They illustrate the bandaid approach that it adopts on most difficult issues. This reflects a very conservative approach to governing Australia. I think it was Woodrow Wilson who once said, `A conservative is a man who sits and thinks, but mostly sits.' This solution is the best that the government can come up with for a problem that has been confronting our country for quite some time. In a shallow view of the problem, the government addresses only the immediate difficulties confronted by UMP, AMIL and their members. The government does not examine whether the entire system of professional indemnity coverage is broken and in need of major reform. Rather, it uses this opportunity to apply a bandage and hopes that the system will limp along. The government does not seem to concern itself with the problems inherent in the system; it just concerns itself with papering over the cracks.

In my view, there are two issues working within this crisis. The first relates to the need to provide medical indemnity coverage for UMP, AMIL and their members and for other organisations. The second relates to other professionals, particularly other health professionals, who are denied any form of cover at all. In the case of the members of UMP the bottom line is that this problem stems in part from one simple premise: it is not just the underfunding or the lack of fully funded policy but that, as with most medical defence organisations, their members pay the same fees for coverage regardless of their claim history. It is common practice in other forms of insurance that your claim history determines your level of risk and therefore your premium. It is incumbent on individuals and organisations, therefore, to reduce their risk—to engage in risk management as the main method of reducing premiums.

Most medical defence organisations take a different approach. Whether you have no claims, one claim or 100 claims, you get to pay basically the same premium. There is no benefit, therefore, in being a good doctor— one who has no claims made against them and one who has engaged in transparent and accountable risk management practices. You get to pay the same as the doctor down the road who has had claim after claim lodged against them. As I have mentioned before, the apologists for the current system and for the proposal to paper over the cracks will tell you that that is because this is not really an insurance scheme. We are told instead that it is a medical defence fund. It seems to me that professional indemnity coverage needs to be like any other kind of insurance fund and there needs to be a fully accountable and transparent process. When we are told that it is a medical defence fund, as I have said, we are told that if people have claims of negligence made against them then the fund steps in and either contests the action or settles the claim. Strictly speaking, that is correct. However, the general principles that hold true for other types of insurance should hold true in this case—including that if you take steps to minimise the causes of litigation then litigation is reduced.

Insurance companies expend enormous effort in ensuring that risk is minimised to limit costs. A medical defence fund should operate on the same basis. As John Castles, the President of Professions Australia, has said recently, `Good risk management averts litigation.' So here the government has a chance to address a major failing of the system. Why did the government not insist that UMP and other like organisations look to risk management as a means of operation? Instead, from day one the government focused on using a bandaid to address this crisis. The government initially sat on its hands and then extended support to the fund to allow it to continue operating only when it looked like it was going to fall over. The government claims that the problem was that the cost of membership of UMP and other funds had reached the point where the indemnity cover was becoming unaffordable. The perceived result was that doctors would withdraw from practice or restrict their activities to low-risk procedures.

But the fact remains that this government has singularly failed to take full advantage of this opportunity to fix the entire system. A scheme should have been created that rewarded those doctors who engaged in risk management. Indeed, a scheme should have been created that covered all health professionals, not just doctors. A scheme should have been created that rewarded those doctors who did not make any claims. Instead, we get another bandaid approach, the Australian taxpayers get to foot the bill and still we have no firm commitment as to what it is going to cost in the long run.

This approach is similar to that which has been adopted with insurance generally—that is, the major reform to the system will restrict the rights of individuals to seek redress for injury as a result of negligence. But did the government fully examine all of the other options? We are told that they did, but the bottom line is that the government decided that real reform of this system was way beyond them. What we get instead is window-dressing. We get a cobbled together solution that does not address the underlying problems and solves only the immediate need of ensuring that all doctors—and, as Senator Lees has pointed out, only doctors—who are members of medical defence organisations have medical indemnity cover.

The second failure of this government is in not addressing the needs of health and other professionals. There is a crisis; there is no doubt that there is a crisis. But this crisis extends much more broadly than just to doctors. All this government has addressed so far in this debate is the specific issue confronting doctors. As Senator Ridgeway has raised in this place a number of times and as Senator Lees has spoken of more recently, the crisis of cover extends to other professionals, especially to independent midwives. I have had several meetings with independent midwives in Western Australia in relation to this problem. Without the foresight of Western Australia's own Minister for Health, Bob Kucera, and his willingness to find a solution, there would now be no independent midwives practising in my home state.

The government's short-term expedient solution only works for doctors. One has to wonder whether it is because they are running scared from the AMA. Solutions in this day and age should not be constructed in isolation; solutions should require an approach that addresses all elements of the problem. The government provide a single approach for a very complex issue. They will fix the immediate concerns of all doctors who are members of UMP, AMIL and so on, and the rest of the medical professions can look after themselves. Just like their approach in other portfolios, they shift the responsibility to others—in this case, the states. The states can go out and fix tort law and limit or extinguish individuals' rights to seek redress. Rather than look at the whole system, we get a stop-gap, short-term solution.

Why did the government not consider a system that addressed these problems for all health and other professionals? One has to wonder whether it is because it was all too hard. The key, as Professions Australia point out, is not to do with proportionate liability, because that approach is all about benefiting mainly the professions, not the community they serve. Rather than just accepting a stop-gap, bandaid approach to the problem, this group seem to be prepared to offer alternatives. The alternative offered by Professions Australia, which they recommended to COAG recently, is the adoption of a risk management strategy as it applies in New South Wales under the Professional Standards Act. As their recent correspondence to most of us in this place states:

Professional standards schemes are designed to help protect consumers. They are legally binding arrangements which aim to improve the standards of members of professional and other occupational groups.

Whereas the government's response is about propping up, as a temporary expedient, a system that is not working, Professions Australia recommend changing the system entirely to allow it to operate more effectively in the future. Rather than simply restricting consumers' rights, surely the government should be keen to look at any change to the system that would reduce the number of cases litigated. Risk management and other reforms have a major impact on the number of cases and the way they are litigated. But, perhaps again, that is all too hard. Professions Australia go on to say:

Risk management has other benefits too. Having effective complaints and discipline arrangements means that shonky practitioners can be weeded out following customer complaints, be expelled from their association, and become ineligible for limitations on liability.

In other words, it is not just about reducing the rights of individuals to seek redress, it is not just about getting the states to engage in law reform, it is not just about propping up the existing system.

The government had an opportunity with this legislation to bring about very real reform. There was an opportunity to look at the success of the New South Wales Professional Standards Act and how it has reduced litigation. The government also had the opportunity to develop a transparent and accountable mechanism for regulating professional conduct. Instead, the government took the soft option. It refused to take on the members of what is perhaps Australia's most militant union, the AMA, and just bailed them out with little or no requirement for them to make any real changes.

In my view, this legislation fails on two grounds. Firstly, it does not fully attempt to enforce risk management or other strategies to limit litigation. There is no real attempt to identify the shonky practitioners or identify procedures that would minimise risk. Secondly, there is no attempt to address the legitimate concerns of other professionals, particularly midwives. This legislation is, of course, required because the government has taken so long to address this problem and has done nothing. Without this legislation there is a very real risk that Australians will be without adequate medical practitioner coverage. However, the fact that it is required should not exonerate the failings of the government's approach. Ad hoc, short-term, expedient approaches do not provide lasting solutions.

Senator RIDGEWAY (New South Wales) (5.44 p.m.)—On behalf of Senator Allison, I seek leave to incorporate her speech in the second reading debate on these medical indemnity bills.

Leave granted.

The speech read as follows.

I rise to speak on the Medical Indemnity and Associated Bills 2002

The explanatory memorandum states that these Bills provide for

· Commonwealth payments in relation to claims forming part of unfunded incurred but not reported (IBNR) liability of medical defence organisations as at 30th June 2002;

· Commonwealth payments in relation to the part of the cost of large claims against MDOs or medical indemnity insurers in relation to incidents notified after 1 January 2003;

· Subsidies to assist medical practitioners in meeting the cost of indemnity coverage;

· Payments by members of MDOs to the Commonwealth to cover the cost to the Commonwealth of payments in relation to unfunded incurred but not reported liabilities;

· Payments to members of United Medical Protection Limited (UMP) to the Commonwealth to cover the cost to the Commonwealth of any payments under the deed of indemnity between the Commonwealth, UMP, Australasian Medical Insurance Limited (AMIL) and the provisional liquidator of UMP/AMIL.

The package of legislative reforms is designed to ease the pressure being placed on providers of medical indemnity. However there are grave concerns that the Bills do not prevent the situation providers have found themselves in, from happening again.

This situation is a direct result of the business practices of MDO's who have failed to ensure that their risks were covered. There has been a total failure of insurers who had a responsibility to the doctors and specialists who were paying them and to the general public who were relying on the doctors.

The general public already pay, they pay for Medicare and in many cases as is encouraged by this government pay for private health insurance. They have an expectation that the doctors and specialists will be there to treat them.

The crisis in Medical Indemnity insurance has shaken that expectation. People can no longer be confident that their doctors will be available. They certainly cannot be confident that midwives will be available for home births. This affects all areas of health provision, from specialists to GPs and midwives, from public to private hospitals.

There are essentially two options open to the Government: take no action, and let market forces determine a solution; or intervene to address the IBNR issue, reduce uncertainty around large claims, and ensure that doctors could have access to affordable indemnity cover.

Not taking action in relation to UMP would lead to large numbers of doctors covered by UMP becoming uninsured and consequently withdrawing from providing medical services. It would also result in many persons with successful claims against doctors arising from past incidents arising in the course of medical practice being unable to recover damages except from the doctor's own assets.

One of the features of liability insurance and the main cause of the current crisis, is the many years between when an injury occurs and the time an insurer receives notice of the claim.

These claims have occurred but cannot be notified to the Medical Defence Organisations. The MDO is unable to access the amount of money they will need in reserve to meet the costs of these claims.

Medical Defence Organisations chose not to calculate the costs of these IBNR's when they were charging for insurance. This failure has led to the collapse of the industry and the need for the government to help these MDO's to pay for claims, which they had not adequately provided for in the past.

The Medical Indemnity Bill 2002 puts in place a scheme to fund the incurred but not reported liabilities of medical defence organisations where they do not have adequate reserves to cover these liabilities.

It is estimated that one MDO alone; UMP which has insured over 60% of the medical workforce, has unfunded IBNR's of $460 million. Meeting the cost of unfunded IBNR's as they emerge will remove the liability in relation to these costs from the balance sheets of MDO's that have not fully provided for these liabilities and ensure that these claims will be met as they emerge.

The Government has said it will fund IBNR's of doctors that were in MDO's at 30 June 2000 where the IBNR's are unfunded. For unfunded IBNR's there will be a levy imposed on the members. A contribution, spread over a number of years, from members of medical defence organisations with unfunded IBNR's to cover the cost of Commonwealth assistance in meeting those liabilities.

Beginning in 2003-2004 financial year, the levy payment by doctors to meet the cost of IBNR payments will run over five years. Doctors who have to pay the levy, which will be limited to 50% of their 2000-2001 premium, can either pay a lump sum, pay by instalments or they can defer payments for a year.

There is no doubt that this will place our GPs under additional financial pressure, in fact the government has recognised this, that is why they are attempting to ease the pain by spreading the contribution out over a number of years.

There has already been a large increase in the cost to medical practitioners of subscribing to MDO's. In some cases doctors have been paying over a third of their income for indemnity cover, and deciding to leave the profession altogether or cease certain high-risk procedures such as obstetrics.

The second systemic issue is that the uncertainty around large claims had led to commercial insurers either deciding not to enter the market or else deciding to leave the market, thus reducing competition.

Increased financial pressure is the last thing doctor's need. We are already seeing a crisis in bulk billing due to the costs facing doctors.

We have seen the second consecutive largest annual decline in GP bulk billing.

Australian families are paying more for a trip to the GP than ever before. Health Insurance Commission figures for the September quarter saw the average cost to see a doctor who does not bulk bill is now $12.57. Up 51 since the Howard Government came to office.

The government has made much of the argument that bulk billing is still practiced by an average of 70% of doctors. An average figure means little to those who live in rural and regional areas, little to those who live in suburbs where they have to travel to find the doctors that do bulk bill.

In rural areas the odds of seeing a bulk-billing doctor are stacked against you. There are few GP's available and those that are cannot afford to practice bulk billing.

These people don't have the luxury of making the choice many people are being forced to make; that is of travelling out of their way to visit a doctor who bulk bills. The reality is that if your area doesn't have a bulk-billing doctor you have three choices; pay the money, go to the public hospital or don't see a doctor.

Medicare was not designed to give access to a health system through the public hospital system. There is simply no way a hospital can run a medical service similar to the local doctor surgery and it should not have to, but increasingly that is what it has been forced to do.

So we have a rolling effect, the problems with medical indemnity have added to the pressure on GPs who are already under enough pressure and have already begun to cut back on bulk billing, those who can't afford to see a doctor go to the public hospital and add to the problems the public hospital is experiencing by clogging up the emergency section with ailments that should be seen to by a GP.

Whilst the debate on these bills has focussed quite rightly on catastrophic injury claims and access to specialists, I would like to draw you a simple example of the effect of the loss of bulk billing to your average family in any part of Australia.

A trip to the doctor can cost between $32-$4l. Many will send the claim straight off to Medicare for you, but many don't so that means paying upfront. Now $32 may not mean much to those of us here, but it can be quite a bit out of one's budget. Anyone who has had children will know that they often need to go back to the doctor within the same week, bringing the cost to $64. Most families will tell you that when one child is ill the others tend to follow so a family of three or more can face costs that go over $96 for doctors' visits. Add prescription medicine to that cost and you have quite a hole in your weekly expenditure.

I would like to remind the Senate that one of the first actions of this government was to close Medicare offices around Australia. This has made it almost impossible to recoup money quickly enough to assist the weekly budgeting of the average family. This has affected those with small children; it has affected the elderly, those who work and those without transport. They now have to add the stress of travel to Medicare offices to the stress of coping with an illness.

Many parents faced with this stress won't take the kids back for the second check up, they may not collect the second lot of antibiotics and they risk their children developing illnesses such as ear infections which can lead to long term levels of deafness. It can lead a parent who has two sick children already to hold off taking the third to the doctor when they need to. Or lead to three children waiting for hours at night in the public hospital emergency room to see a doctor.

Medicare was put in place to protect these people. Too often we hear of the necessary but dramatic examples of people needing doctors when we talk of Medicare but we need to stay aware of the day-to-day burdens on GP's and families. Your GP is your first line of defence in protecting you and your children. A childhood illness or illness affecting the elderly can develop into a medical emergency all to easily. A GP should be able to present an accessible determination and treatment before that stage.

Medicare was designed to be a universal system to provide access to health regardless of your ability to pay. It was built on the premise that people in a country like Australia, should not have to risk their health or their family's health because they cannot afford a doctor.

We need to be protecting this premise, and as a government working to restore the public's faith in a system designed to assist them. Our nation cannot afford to be in the situation it finds itself today.

In closing I would like to note that although the Government has undertaken to keep the medical indemnity sector under review and ask the ACCC to monitor the costs of medical indemnity cover. This package does not contain measures to monitor the effectiveness of the Governments assistance in reducing costs of medical indemnity or any prudential measures to address the operations of medical indemnity providers.

Senator Ridgeway has carriage of this legislation for the Democrats but I will be moving an amendment in the committee stage on the subject of tobacco smoking. It may be the case that the definition of recreational services under the Trade Practices Amendment (Liability for Recreational Services) Bill 2002 does not include smoking but we would like to be absolutely sure that this is the case.