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Tuesday, 10 December 2002
Page: 7596


Senator PATTERSON (Minister for Health and Ageing) (5:50 PM) —I want to take a bit of time to respond to some of the issues that have been raised, because I presume that we are not going to have a long committee stage. I think it is appropriate that, in summing up, I therefore respond to some of the comments that have been made.

The Medical Indemnity Bill 2002 and related bills deal with many of the issues facing medical indemnity insurance. It is probably the most difficult thing that has not been totally health related which has faced Health. It has crossed portfolios—not just Health but Treasury, Attorney-General's, and Prime Minister and Cabinet—with the Prime Minister seeing it as such an important issue that he appointed Mr Max Moore-Wilton to chair the interdepartmental committee to address this issue.

Not only was it an issue for the Commonwealth; it was also an issue for the states in addressing tort law reform, and I have to give credit to Senator Coonan for the role she has played in driving the issue of tort law reform in the states. We had a meeting here in Canberra on, I think, 23 April with about 80 people, including all the health ministers from every state and territory, all the medical defence organisations, the chairmen and presidents of all the colleges and the plaintiff lawyers. Anybody who was anybody and who had anything interesting to say about medical indemnity was gathered in that room just after Easter to try to address the issue.

Some of the comments that have been made here are very far from the truth in the sense that the government has not consulted and has acted in haste. We have done a huge amount of work. It is not normal in the chamber to pay tribute to senior public servants, but some people in both Treasury and Health have worked inordinate hours since Easter. Some of them—this issue rose just before Easter; I think the Prime Minister had a meeting with some senior medical people on Easter Thursday—worked all over Easter and have worked weekends and day in, day out since them. For anybody to come in here and say that it is a knee-jerk reaction or it is a quick and dirty fix does not understand the process that has gone on behind the scenes.

Sometimes we were hindered. For example, with the guarantee, we had to wait until the Supreme Court in New South Wales could accept the guarantee because the court had to be sure that the various creditors of UMP-AMIL were being treated equally, not just the doctors. Some doctors thought there was something untoward about our guarantee when it was a need to make sure that all creditors were dealt with. It has been a very long process. I want to put on the public record my appreciation to my colleague Senator Coonan for her cooperation, to Mr Max Moore-Wilton, who chaired the committee, to all those officers who worked on the RDC and to all the officers who supported it. It has been an inordinately difficult task to address. I remind people that the issue was of no making of any government but arose for a whole number of complex reasons.

The package of legislation deals with many of the issues facing medical indemnity insurance. It removes the burden of unfunded incurred but not reported liabilities from the industry. This means that medical defence organisations that have properly provisioned for these liabilities can make a fresh start and have their slates wiped clean. If the government had not acted in this way, in all likelihood UMP would have been placed in full liquidation by now, with an excess of liabilities over assets of $460 million. Inordinate calls would have been made on those doctors who are members. It would have left the Australian community facing enormous difficulties in getting medical services. Some 60 per cent of doctors across Australia would have been uninsured for incidents arising from their practice over many years. We would have faced the imminent prospect of these doctors withdrawing from service until they could find appropriate cover. The remaining six medical defence organisations could well have faced considerable pressures in dealing with an influx of doctors trying to buy alternative cover.

The legislation allows UMP and any other medical defence organisation with unfunded incurred but not reported liabilities to move forward into the future in a much better financial position and ensures that they are better placed to continue to offer medical indemnity cover to their members. Some doctors have expressed concern at the prospect of having to pay for the incurred but not reported liabilities over a period of years through the contribution legislation. Frankly, without the government's action, UMP doctors would have been facing a loss of cover and considerable uncertainty. They would not have had any idea what their premiums would have been to cover those incurred but not reported liabilities. Now they are able to predict, based on what their premium was last year. For members of other medical defence organisations with some unfunded incurred but not reported liabilities, they could well have been facing a call involving a payment of an additional year's premium.

The legislation ensures that the contribution is affordable for doctors. It will be spread over a number of years and is limited to a maximum of 50 per cent of the premium that doctors paid in 2000-01—the sort of predictability that they would not have had had we not given them this guarantee. It is also important for the Senate to note that the only reason that doctors are having to make an additional contribution now is that the premiums they were paying in the past were not sufficient to cover these incurred but not reported claims. I understand that many members of one professional group withdrew from UMP several years ago because they were worried that their premiums were too low, and they looked for insurance elsewhere. It is unfortunate that the board of UMP did not share the same insight. I recently met a doctor in Queensland who had been concerned about not having had her payments taken automatically out of her bank account for two years, and she suddenly found she was not insured. She withdrew from UMP-AMIL and moved on to another insurer. So some people have looked and have decided to go elsewhere.

The legislation provides for the Commonwealth to co-fund half of all payments by medical defence organisations over $2 million in respect of claims notified after 1 January next year. This is an important measure as it will reduce the uncertainty around high-cost claims and remove one of the factors discouraging general insurers from entering the medical indemnity market. It should exert a downward pressure on premiums, as it should allow medical defence organisations to negotiate considerable reduced reinsurance premiums as their reinsurance contracts come up for renewal. This, in turn, will lead to benefits for members, with reductions in premiums that would otherwise have been payable by them.

In addition, the legislation also allows for the government to pay premium subsidies to doctors. We have already indicated that these subsidies are intended to apply to obstetricians, neurosurgeons and procedural GPs. Under the subsidy scheme, selected doctors will be subsidised half of the difference between the premiums they pay and the premium of a comparative group. The government's medical indemnity package is not limited to the legislation before the Senate today. Action is also occurring in other areas. Legislation to give statutory backing to the guarantee to the provisional liquidator of UMP was passed earlier in these sittings. Legislation to bring medical indemnity insurers under an improved regulatory regime will be introduced into parliament this week.

As senators will be aware, the Commonwealth continues to work with the states in support of coordinated national tort law reform. I cannot put enough emphasis on the fact that states really need to make sure they keep that commitment they made in that recent meeting—to come together and get tort law reform as coordinated as possible between the states. Some are moving a little faster than others. All senators here need to make sure that their states are pulling their weight. Senator Coonan established the Ipp review of the law of negligence, and we continue to encourage the states to implement its findings through the ministerial meetings on public liability insurance. As I said, it is being chaired by Senator Coonan, the Minister for Revenue and Assistant Treasurer. I do not think she could have done any more from when we met on 23 April when we tried to make sure that the states understood the need for consistent tort law reform. Senator Coonan has pursued this relentlessly over the past year. Moreover, the Australian Competition and Consumer Commission has been asked to monitor medical indemnity premiums to make sure that they are soundly based.

A number of senators have said that the government have not been active in this area. We have been very active in resolving these medical indemnity issues as they have emerged over the past year. They are complex problems to resolve and we have worked long and hard, and as quickly and as carefully as possible, to resolve them. We did not play any part in creating the problems in the medical indemnity market, but we have responded quickly from the time that problems with UMP emerged earlier this year to ensure that doctors could continue to practise and that the Australian public had continued access to services. We offered a guarantee to UMP before it placed itself into provisional liquidation. We offered a guarantee to the provisional liquidator to allow him to continue to make payments and accept renewals once UMP had gone into provisional liquidation. We have also passed legislation to give statutory backing to that guarantee. The government have not developed this package of measures in a vacuum. We have consulted widely and at length with a range of medical, insurance and other groups so that we could develop a workable solution to the problems in the medical indemnity area. The results of that process are in the legislation before us today.

A number of senators have talked about the issues of midwives and Indigenous community services. The focus of the legislation today is on ensuring that private medical services can continue to be provided to the Australian community and that medical indemnity cover is affordable for members of medical defence organisations. It is fair to say that midwives do not purchase medical indemnity insurance from medical defence organisations. When they purchase cover it is usually from a general insurer. That said, birthing services are still available in the community. Nearly all midwives can continue to provide services to pregnant women and their babies. This is because some 97 per cent of midwives are employees, so they are covered by their employers' indemnity insurance. They work either for public or private hospitals or for an agency. But, in any event, their employers ought to indemnify them.

I am aware that some self-employed midwives have had difficulty in obtaining cover. I appreciate that these midwives face issues of availability of indemnity cover rather than of its affordability. However, I do not believe that the Commonwealth should be in the business of providing cover as some sort of insurer of last resort. Indeed, not even the Midwives Association is suggesting that as an option. I was pleased to hear that the Western Australian and ACT governments have apparently extended the coverage they offer employed midwives to self-employed midwives. I would encourage other jurisdictions to consider making similar arrangements. Importantly, the legislation before the Senate does provide that the high cost indemnity arrangements extend to all health professionals required to be registered under state law. Hopefully, this will result in some downward pressure on premiums for midwives.

The Commonwealth proposes to subsidise only obstetricians, neurosurgeons and procedural GPs. It has no plans to extend premium subsidies to midwives. There are a number of reasons for that. It has been suggested that it is discriminatory to treat midwives differently from obstetricians. However, the reality is that midwives, like most other non-medical health professionals, are not covered under Medicare. Consequently, there is no reason to extend premium subsidies to them and not to other non-medical groups that are facing large increases in premiums. The High Cost Claims Scheme should provide downward pressure on premiums in the short term while tort law reform measures are put in place and begin to work. There is a need for all senators to make sure that their states are keeping up their side of the bargain in tort law reform.

With respect to comments made by Senator Ridgeway regarding Indigenous medical services, the government recognise the important role played by Aboriginal medical services. That is why we have allocated $257 million in funding to them for the year 2003-04, which is an 89 per cent increase in funding since 1996. My information is that the insurance premiums of Aboriginal medical services still represent only a small percentage of the funding we provide. My understanding is that all of these services have managed to find insurance and continue to operate. The whole community is currently experiencing the effects of the global downturn in the insurance industry in the form of higher premiums and more limited availability. Again, this is not a situation of the government's making, but we are working hard to address the broader issues of professional indemnity and public liability insurance through the joint Commonwealth-state processes chaired by my colleague Senator Coonan. In the meantime, we agree that it is regrettable that these services are suffering from increased insurance expenses, but an 89 per cent increase in funding should assist in offsetting this.

Senator Ridgeway also talked about the lack of prudential regulation in the package. In answer to Senator Ridgeway, this issue has been addressed by the government today. A bill has been introduced which sets out a comprehensive package of reforms for the prudential regulation of defence organisations. I believe that all of the concerns raised by the Democrats have been addressed in that bill.

The government considered the issue of a long-term care scheme in detail. I am aware of the personal impact on people with catastrophic injuries and those who care for them. However, we have concurred that to try and develop a long-term care costs scheme at this stage is not the best way of dealing with the current issues around medical indemnity insurance. The real impact of long-term care costs on medical indemnity is the uncertainty that such costs create for insurers. What needs to happen right now, amongst other things, is to ensure that adequate cover is available where incidents result in a catastrophic injury to a patient. This means addressing the fact that insurance markets at present have little appetite for taking on large and uncertain risks such as medical indemnity. This legislation addresses the insurance issue by meeting 50 per cent of the cost of payouts by medical indemnity providers above $2 million. This will significantly reduce the uncertainty associated with high-cost claims in medical indemnity insurance.

In reality, the vast majority of people needing long-term care are injured at work or in motor vehicle accidents, not in medical incidents. These people are covered by workers compensation and traffic accident schemes run by the states. Even now, states such as Victoria and Tasmania, which have effective long-term care schemes for traffic accident victims, could add to their scheme people with long-term care needs arising from medical misadventure if they wished to. The Commonwealth will continue to work with the states and territories through the Heads of Treasuries Insurance Issues Working Group in exploring options around long-term care costs. But we do not see action in this area as a short-term solution to medical indemnity issues.

I hope I have been able to at least deal with some of the issues that senators have raised. Senator Harradine raised an issue about a Tasmanian medical defence organisation.



Senator PATTERSON —I was just trying to respond because you mentioned it. UMP thought that they could cover the claims that were going to be made against them, too, and it was quite obvious when they had a very large claim that that was not the case. We will most likely have another opportunity to debate this, but I did not want to ignore your raising of the issue.


The ACTING DEPUTY PRESIDENT (Senator Chapman)—The question is that Senator Ridgeway's amendment to the motion for the second reading be agreed to.

Question agreed to.