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Wednesday, 26 November 2003
Page: 18106


Senator KEMP (Minister for the Arts and Sport) (5:08 PM) —I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

MEDICAL INDEMNITY AMENDMENT BILL 2003

This bill, together with the Medical Indemnity (IBNR Indemnity) Contribution Amendment Bill, provides a legislative basis for several additional elements of the Government's medical indemnity package.

The package of Medical Indemnity legislation passed in 2002 and 2003 forms the basis of the Government's response to the medical indemnity problems that emerged in early 2002, and culminated in United Medical Protection (UMP) applying to be put into provisional liquidation.

The Government was confronted by an industry which had not provisioned properly for future claims and which was structured in such a way as to avoid prudential supervision. The industry had also been badly affected by the failure of HIH, international increases in the costs of reinsurance, and a sustained increase in the number and cost of claims against doctors.

The earlier legislation, together with a guarantee to the Provisional Liquidator of UMP, addressed these problems. The Government agreed to take over unfunded liabilities across the medical indemnity sector for claims that had not yet been lodged—the so-called “Incurred But Not Reported” or IBNR claims. It also undertook to meet half the cost of settlements or judgements in excess of $2 million up to the limit of the doctor's insurance, and subsidise the costs of premiums for doctors in high risk areas of practice. The Government has subsequently reduced the threshold for its contribution from $2 million to $500,000 in regulations gazetted on 22 October 2003.

The legislation also required doctors who were members of medical defence organisations (MDOs) with unfunded IBNRs to contribute to the cost to the Government of meeting those liabilities over time.

Finally, the Government also brought MDOs under supervision by the Australian Prudential Regulatory Authority for the first time, and required them to offer contracts of insurance rather than discretionary cover to member doctors.

In addition, the Government has worked closely with State and Territory Governments in pursuing tort law reforms to reduce the volume and cost of claims against doctors, and has passed amendments to the Trade Practices Act to complement State and Territory legislation.

The two pieces of earlier legislation brought stability to the medical indemnity sector and a considerable measure of certainty to doctors.

This legislation addresses two remaining matters: the possibility that doctors will be exposed to claims beyond the cover provided by their insurance; and a number of issues around the operation of the Incurred But Not Reported contribution.

Before medical defence organisations were required to offer doctors contracts of insurance, doctors theoretically had access to unlimited indemnity cover, at the discretion of the MDO. In reality, of course, the cover was limited by the capital held by the MDO, and in an environment where MDOs were not prudentially supervised, it is quite possible that the available capital would not have been sufficient to meet all claims against doctors.

Now that MDOs are required to offer contracts of insurance and are prudentially supervised to ensure that they can meet their obligations under the contracts they offer, doctors can be confident that they have solid cover up to the limit of their insurance contract.

However, this leaves open the theoretical possibility that a doctor will be faced with an exceptionally large claim which will exceed their insurance limit. If this did happen a doctor would be personally liable for any damages in excess of the insurance limit.

The Exceptional Claims Scheme provided for in this bill addresses this possibility, by providing for the Australian Government to meet payments in excess of the limit of a doctor's insurance contract.

Let me stress that the risk of claims in excess of an insurance contract is a theoretical risk only. Two MDOs are currently offering medical malpractice cover limits of $20 million and the other five are offering $25 million.

These cover limits exceed the highest amount awarded for medical malpractice in an Australian court. This means that the cover that doctors in Australia are able to access is, on average, double the highest claim amount ever awarded in Australia.

Put another way, a doctor could be the subject of two $10 million claims in a year and still be covered by their existing insurance contract.

However, the medical profession indicated that the risk of being personally exposed to large claims was a major concern. We have listened to their concerns, and we are addressing them through this legislation even though we believe the risk to be minimal.

The Exceptional Claims Scheme is set out in Schedule 2 of the current bill. It will apply to claims arising from incidents occurring from 1 January 2003 when MDOs began to offer cover solely under contracts of insurance with no discretionary element.

The Scheme will effectively `mirror' a doctor's insurance policy, covering the same events and incidents as their policy. However, it will not cover the treatment of public patients in public hospitals, as this is covered by State and Territory government indemnity arrangements. Nor will it cover treatment of patients overseas, as it is not appropriate for Australians to be held financially responsible for the decisions of overseas courts.

Under the Scheme, the Australian Government will assume liability for 100 per cent of any damages payable against a medical practitioner that exceeds the greater of a defined threshold or the doctor's level of cover under an insurance contract.

Doctors who were members of UMP for the period of 1 January to 30 June 2003 were covered by contracts with a $15 million limit, with other MDOs introducing cover limits to their insurance from 1 July 2003 of $20 million or $25 million.

The threshold for the Scheme has been thus set at $15 million for claims arising from incidents that occurred between 1 January and 30 June 2003 and $20 million for claims from 1 July 2003 to reflect the cover available to doctors.

To encourage insurers to provide the highest level of insurance cover that can be backed by reinsurance, the threshold will be reviewed regularly and adjusted as necessary.

The Government understands that sometimes it is not simply one large claim that may cause a doctor to exceed their insurance cover and become personally liable. The Scheme will thus cover doctors where multiple payments during a contract period taken together exceed the limit of insurance cover under the contract.

The Scheme will operate for a minimum of three years. However, the Scheme will operate on a claims incurred basis. This means that as long as the incident giving rise to the claim was notified or occurred during the operation of the Scheme it will be covered.

The States and Territories have been implementing tort law reforms so the time patients have to make a claim and the amount that can be awarded are reasonable. Over time these reforms may make the Exceptional Claims Scheme unnecessary.

The Government has consulted extensively with medical groups and MDOs in developing the Scheme, and is confident that it will operate efficiently and effectively to address doctors' concerns.

The second element of the legislation addresses concerns expressed by the medical profession about the operation of the Incurred But Not Reported contribution legislation. As I said earlier, an important part of the Government's medical indemnity package was the IBNR scheme. Under the scheme the Government has assumed responsibility for the entire IBNR liability of UMP, which has been estimated as around $460 million in today's dollars. In return the Government required doctors to contribute to the cost of this assumption of liability over a period of up to ten years, with contributions based on their 2000-01 UMP premiums.

Even though the structure of the contribution was set out in legislation passed late last year, it is fair to say that it was not until doctors actually received notices of their liabilities under the legislation that a number of apparent anomalies in the operation of the law emerged. These caused great concern to the medical profession.

In response to this concern I announced a Medical Indemnity Policy Review to be carried out by a Panel that I chair, and including four eminent doctors and several legal and financial experts, as well as the Minister for Revenue and Assistant Treasurer. The Panel is to report to the Prime Minister by 10 December 2003 on ways to ensure that medical indemnity arrangements in Australia:

are financially sustainable, transparent and comprehensible to all parties;

provide affordable, comprehensive and secure cover for all doctors;

enable Australia's medical workforce to provide care and continue to practice to its full potential ; and

safeguard the interests of the consumers and the community.

I announced that the operation of the IBNR contribution legislation would be suspended pending consideration of the Panel's Report. I also announced an 18 month moratorium on contributions by doctors of more than $1,000.

Schedule 1 of this bill amends the Medical Indemnity Act 2002 to give effect to these announcements. The Medical Indemnity (IBNR Indemnity) Contribution Amendment Bill makes supporting amendments.

While this legislation, together with the other measures the Government has previously implemented, will resolve many of the serious issues in medical indemnity and improve certainty and confidence for doctors, it cannot alone provide a long-term solution. The States and Territories must support these measures through tort and legal system reforms. MDOs must continue to strive to operate efficiently and resolve legitimate claims quickly and fairly. And doctors must contribute through constant improvements in their practice and in their relationships and communication with patients.

Let there be no doubt that this Government remains committed to ensuring that doctors can continue to practise, confident that they are covered by appropriate insurance for any liabilities they may incur.

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MEDICAL INDEMNITY (IBNR INDEMNITY) CONTRIBUTION AMENDMENT BILL 2003

This bill amends the Medical Indemnity (IBNR Indemnity) Contribution Act 2002 to give effect to the moratorium on IBNR contributions announced on 3 October 2003.

Debate (on motion by Senator Crossin) adjourned.

Ordered that the resumption of the debate be made an order of the day for a later hour.