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Medical Indemnity Amendment Bill 2004

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2002-2003-2004

 

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

MEDICAL INDEMNITY AMENDMENT BILL 2004

 

MEDICAL INDEMNITY (IBNR INDEMNITY) CONTRIBUTION AMENDMENT BILL 2004

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Health and Ageing,

the Honourable Tony Abbott MP)



 

 

MEDICAL INDEMNITY AMENDMENT BILL 2004

 

AND

 

MEDICAL INDEMNITY (IBNR INDEMNITY) CONTRIBUTION

AMENDMENT BILL 2004

 

 

Introduction

 

These Bills give effect to two new aspects of the Government’s medical indemnity package, announced on 17 December 2003 by the Minister for Health and Ageing and the Minister for Revenue and Assistant Treasurer.

 

The Bills provide for replacing the Incurred But Not Reported (IBNR) Claims Contribution with the United Medical Protection (UMP) support payment and implementing the Premium Support Scheme (PSS).  Other aspects of the medical indemnity package in relation to the Run-off Reinsurance Vehicle will be dealt with in later legislation.

 

These aspects of the Government’s medical indemnity package aim to address concerns of doctors by providing a single financial transaction for doctors to pay their insurance premium and UMP support payment and to receive their PSS premium reduction (if applicable).  Doctors will generally only have to deal with their medical indemnity insurer (MII) or their medical defence organisation (MDO), not the Health Insurance Commission (HIC) or the Department for these transactions.

 

These Bills build on the measures provided under the Medical Indemnity Act 2002 , the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003 and the Medical Indemnity (IBNR Indemnity) Contribution Act 2002 .



OUTLINE

 

MEDICAL INDEMNITY AMENDMENT BILL 2004

 

Schedule 1 - Exemptions

 

This Schedule provides for amendments to the Medical Indemnity Act 2002 with respect to the administration of the medical indemnity contributions.  It calculates the UMP support payment in a different manner to the calculation of the former Incurred But Not Reported (IBNR) Contribution by limiting the amounts payable through a new exemption for persons with low income and capping the number of contribution years that a person will have to pay.  It clarifies the administration of the existing exemption for persons with retroactive cover.

 

Schedule 2  - Payment and collection

 

This schedule replaces the arrangements for the former IBNR contribution with new arrangements for the UMP support payment.  It provides for persons to pay their UMP support payment through their medical indemnity insurer (MII) if insured or through their medical defence organisation (MDO) if not insured but still a member of an MDO, or in all other cases, through the HIC. 

 

As the manner of calculating the UMP support payment and the new exemptions significantly reduce the liability of each person and link their liability to their capacity to pay (with reference to their current income), the existing provisions for making IBNR payments through a lump sum payment or through instalment are repealed. This will streamline payment administration.

 

Schedule 3 - Renaming the IBNR contribution

 

This schedule provides for renaming the IBNR contribution to UMP support payment, renaming medical indemnity contribution to medical indemnity payment and renaming contribution to payment.

 

Schedule 4 - Other Matters

 

This schedule enables the new Premium Subsidy Scheme to be implemented and clarifies the definition of health care related vocation.

 

 

MEDICAL INDEMNITY (IBNR INDEMNITY) CONTRIBUTION AMENDMENT BILL 2003

 

This Bill makes amendments to the Medical Indemnity (IBNR Indemnity) Contribution Act 2002 which imposes the IBNR indemnity contribution as a tax.  It provides for calculation of each person’s liability by reference to their capacity to pay (with reference to their current income) and significantly limits each person’s liability through caps on payment for each contribution year.



FINANCIAL IMPACT

 

The amendments to the IBNR indemnity contribution will result in the Commonwealth collecting $25m less revenue over the next 4 years.    

 

The Premium Support Scheme will cost the Commonwealth an additional $100 million, in support to doctors, over the next 4 years.

 



REGULATION IMPACT STATEMENT 

 

BACKGROUND

 

The Government intervened in the medical indemnity market following the collapse of United Medical Protection/Australasian Medical Indemnity Limited (UMP/AMIL) and its application to be placed under provisional liquidation in April 2002.  On 30 April 2002, the Government provided a guarantee to take effect from 29 April 2002 to allow members of UMP/AMIL to continue practising whilst longer-term solutions were developed.  UMP/AMIL came out of provisional liquidation on 14 November 2003.

 

Following on from its initial guarantee, the Government implemented a package of measures to ensure the long-term viability of the medical indemnity industry and affordability of medical indemnity cover for doctors.  These measures were:

·          an extended guarantee to UMP/AMIL to continue trading until 31 December 2003;

·           a scheme to address the unfunded Incurred But Not Reported (IBNR) liabilities of medical defence organisations (MDOs);

·           a scheme to provide assistance with high cost claims;

·           direct financial support for doctors undertaking high-risk specialities of obstetrics, neurosurgeons, general practitioners performing procedures, and GP registrars undertaking procedural training, who pay relatively high premiums; and

·           a scheme to meet 100 per cent of any damages payable against doctors that exceeds a specified threshold.

 

The Government legislated to bring medical indemnity provision into an insurance framework subject to regulation by the Australian Prudential Regulation Authority (APRA) and to impose product standards on the industry.

 

Medical indemnity cover had been offered to doctors in Australia for over 100 years through MDOs, which are mutual associations of doctors.  Traditionally, MDOs provided cover on a ‘claims incurred’ basis, meaning that doctors paid a premium for a year and knew that they would be covered forever for any incident in that year.  Following pressure from the reinsurance market, MDOs moved to provide cover on a ‘claims made’ basis, whereby doctors have to maintain cover by continuing to pay annual premiums to the same indemnity provider.  The move to claims made has taken several years starting in 1997.  All providers now offer claims made cover.  If doctors wish to change provider or leave practice, they have to purchase run-off cover. 

 

Following the introduction of prudential and product reforms on 1 July 2003 through the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003, medical indemnity insurance has been provided by general insurers as legally enforceable contracts of insurance.  As a result, MDOs no longer directly provide medical indemnity cover for their member medical practitioners but have established insurers through which they now provide this cover.  These medical indemnity insurers (MIIs) are ‘captive’ of the MDOs that establish them. Therefore in practice medical practitioners who are members of an MDO may take up insurance with that MDO’s captive insurer. Currently there are seven MDOs with five insurers (three MDOs access insurance for their members through the same captive insurer).

 

The Government continued to consult with representatives of the medical profession in the lead-up to the amount and conditions of the IBNR contribution being concluded.  It extended the scope and cost of the package to provide exemptions from the IBNR payment for:

·           members of UMP/AMIL who are 65 and over;

·           members who at the beginning of an IBNR contribution year have a physical, intellectual, psychiatric or sensory impairment of 20 points or more under the Impairment Tables in Schedule 1B to the Social Security Act 1991 ;

·           members who die during an IBNR contribution year;

·           the estates of deceased members;

·           members who did not practise in Australia after 31 December 2001;

·           members who have a medical income on or after the financial year starting 1 July 2001 that is less than $5,000 per financial year;

·           student members as at 30 June 2000;

·           members who have purchased comprehensive insurance cover for all incidents covered by the IBNR scheme; and

·           salaried medical practitioners employed in the public sector, or with arrangements where their private medical income is returned to those hospitals as long as their private medical income, outside of that returned to hospitals, is less than $5,000.

 

The change to medical indemnity insurance products caused concern for doctors, especially those in high-risk areas of medicine.  Contracts of insurance have limits on cover (unlike the discretionary assistance provided by MDOs and paid for with subscriptions).  Doctors were concerned that a claim against them might exceed their level of insurance cover.

 

The Government responded to these concerns by the introduction of the Exceptional Claims Scheme (ECS).  Under this Scheme, the Government will meet 100 per cent of a claim that exceeds $20m or a medical practitioner’s cover limit, whichever is the greater.

 

Once IBNR contribution notices were issued, the medical profession universally responded adversely to it, culminating in threats of resignation of doctors.  Following discussions with the medical profession, the Government announced a number of changes to medical indemnity arrangements.  Among these were an 18 month moratorium on IBNR payments of more than $1,000 per year and a Medical Indemnity Policy Review.

 

The Medical Indemnity Policy Review Panel (the Panel) conducted a review of medical indemnity affordability, sustainability and the IBNR levy.  The Panel, which reported to the Prime Minister on 10 December 2003, was chaired by the Minister for Health and Ageing, the Hon Tony Abbott MP.  Other members of the Panel included the Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, representatives of the medical profession, a lawyer and a financial expert.  The Panel made a series of recommendations to address medical indemnity issues.  The report has been made public.

 



PROBLEM

 

Three key concerns that doctors continue to have about medical indemnity insurance are:

 

1.       The affordability of cover;

2.       The Incurred But Not Reported liabilities (IBNR) levy; and

3.       The security of cover

 

These concerns remain despite the steps the Government, in consultation with the medical profession, has already taken over the eighteen months to December 2004. 

 

Affordability

One of the features of the current arrangements for medical indemnity is that increased competition between MDOs and their captive MIIs, combined with pressure from lower risk doctors, has led to increased risk ratings for different sectors of the profession.  This means there are now considerable differences in premium prices between high and low risk areas of practice.  This is leading doctors to withdraw from particular specialties and so adding to workforce problems.

 

Increasing premium costs also lead to the issue of the cost of medical indemnity insurance relative to income.  Before Government subsidies, some 7,600 doctors (18 per cent of doctors working under Medicare) are paying more than 10 per cent of their Medicare billable income (including gap payments) on premiums.  This cost has been identified as unsustainable and as a contributor to doctors leaving the profession.  Medical indemnity premiums have been increasing steadily since the late 1990s as MDOs moved to improve their overall financial position.  Some MDOs also made “calls” on their members (equivalent to one year’s subscription, payable over several years).  Premiums have risen more sharply since 2000-2001.  As a result of these changes, MDOs are now in a better position to fund fully previously unfunded IBNRs.

 

Premiums for doctors covered by some other MIIs are likely to rise significantly as cover is renewed in mid-2004, with a national average increase of 14 per cent in 2004-05.  This shows that the affordability problem continues for doctors.

 

The IBNR levy

 

Although the IBNR levy was a key part of the IBNR Scheme, it nonetheless contributes to doctors’ overall medical indemnity costs.  The IBNR contribution is:

·          paid by those who were members of UMP at 30 June 2000; and

·          set at the rate of 50 per cent of the premium the member paid in 2000-01.

 

This means that under the current arrangements the levy is limited to past risk, not present capacity to pay (which may have reduced since 2000-01).  It is important to note that the levy arrangements were developed in consultation with representatives of the medical profession.

 

The levy arrangements apply to all doctors who were still practising at 31 December 2000.  After the levy was introduced, it became apparent that the levy might present a financial obstacle for doctors wishing to take a period out of the workforce for further study or for child rearing.

 

Security

In the current medical indemnity insurance market only claims made cover is available. Doctors continue to prefer claims incurred over claims made cover in terms of the security it offers doctors and patients.  Under claims incurred cover doctors pay a premium for a year and know that they will be covered forever for any incident in that year (providing that their insurer remains solvent).

 

Under claims made arrangements doctors have to maintain cover by continuing to pay annual premiums to the same indemnity provider.  If they wish to change provider, or leave practice they have to purchase run-off cover.  Retiring doctors need to have access to run-off cover.

 

The current arrangements are providing run-off cover at a nominal cost for retiring doctors with long periods of membership, and the Government has regulated to require MDOs/MIIs to offer run-off cover for up to six years for retiring doctors.  This does not mean that every doctor can easily afford run-off cover.  Nor does it give certainty for doctors or their patients beyond the six-year period.

 

Impact of medical indemnity problems on the community

A lack of security for doctors is equally a lack of security for patients.  If a doctor is not sure whether he or she will be covered for claims settled many years down the track, the patient cannot be sure either.  The current lack of certainty and affordability of cover for doctors has led some to leave the profession and others to threaten to do so if these problems are not resolved.

 

OBJECTIVES

 

The Government’s objectives are to ensure that the medical indemnity insurance industry is financially viable and sustainable whilst ensuring that indemnity insurance is affordable and provides appropriate security to enable doctors to remain in practice.  An important objective is that the Australian community continues to have ready access to medical services.

 

Proposed action

The Australian Government is considering implementing a package of measures which will support further the medical indemnity market.  These measures are based on recommendations presented by the Panel.

 

1.         To provide more broadly based premium subsidy assistance to doctors, paid directly to their insurer;

2.         Introduce a Run-off Reinsurance Vehicle (RRV) and require MDOs to offer run-off cover to other doctors either free or at cost;

3.         Reduce the High Cost Claims Scheme threshold further from $500,000 to $300,000;

4.         Address IBNR levy concerns.

 

 

Premium Support Scheme

 

A Government-run premium support scheme (PSS) would assist doctors who pay more in total medical indemnity costs than a determined affordability threshold or thresholds and would replace the current subsidy arrangements for doctors.  No doctor currently receiving a subsidy will receive less support under the new arrangements.  The Scheme would provide support to doctors automatically without any application process, with the Government support shown separately on premium notices.  This Scheme would come into operation on 1 July 2004, with transitional arrangements to offer an equivalent level of assistance to insurers for the six months beginning 1 January 2004.

 

Run-off Reinsurance Vehicle

 

Under a guaranteed Run-off Reinsurance Vehicle (RRV) the Government would assume the liability for and pay for the claims against doctors aged 65 or over who have permanently retired from private medical practice, and doctors (irrespective of age) who die, are permanently disabled, leave the workforce for more than 3 years or who go on maternity leave.  In addition, the Government would also consider:

·          requiring MIIs to offer free cover to doctors in other circumstances where they meet qualifying periods (funded by insurers through premiums); and

·          requiring (at a cost to doctors) insurers to offer run-off cover in all circumstances (not covered by options above).

 

The RRV would be funded by a charge on MIIs and passed on through premiums.  The cost of run-off cover would be incorporated into normal annual premiums to ensure that run-off was available free of charge at the time a doctor needed it.

 

High Cost Claims Scheme

 

Under the High Cost Claims Scheme (HCCS), the Government currently meets 50% of all medical indemnity claims that exceed $500,000 up to the doctor’s level of insurance.  The Government now proposes to reduce that threshold further to $300,000.

 

Incurred But Not Reported liabilities (IBNR) levy

 

The Government now proposes that it will not recoup from those liable to pay an IBNR levy the full cost of the IBNR Scheme.  This is currently estimated at $480 million (net present value). Rather those liable to pay will contribute to this cost. The Government now proposes to rename the levy the UMP support payment.  The new payment rates for the UMP support payment will be the lesser of 50% of their 2000-01 premium, 2% of their gross medicare billable income or $5000.  This means that those liable to pay will meet about a quarter of the estimated costs.

 

Alternative options considered

 

There are a range of alternative options the Government has considered including:

 

·          eliminating the IBNR levy;

·          transferring a larger quantum of liabilities and costs from medical indemnity insurance to the Government (the Australian Medical Association has put the proposal to the Government that it assume responsibility for medical indemnity claims 3 years after their occurrence [for adults] and after 6 years [for children]);

·          introducing a long-term care scheme for the catastrophically injured;

·          moving to a sole provider model for providing medical indemnity cover.

 

These options, whilst they may offer opportunities for various forms of financial relief for doctors, would require significant structural changes (eg. a long-term care scheme, sole provider model) to effect.

 

The industry is still adapting to the regulatory arrangements introduced on 1 July 2003, and the effects of tort law reform are yet to flow through the system.  On balance, the Government concluded that it would be better to modify the current system to address its problems during this transitional period rather than imposing another major upheaval on doctors and insurers at this time.  It noted that building on the current system would allow urgent problems to be addressed more promptly and would provide stability and certainty in the short-term in a cost-effective way to the Australian community.

 

In respect to the recommendation of the Panel relating to the implementation of Medical Indemnity Review Panels to decide on the merits of clinical issues in a case, this is a matter for the State Governments and will not be considered further in this Regulation Impact Statement.

 

IMPACT ANALYSIS

 

The directly affected parties are:

·          medical practitioners;

·          MDOs and their captive insurers;

·          patients; and

·          plaintiffs (persons who make personal injury claims against medical practitioners).

 

Preferred option package

 

Impact on medical practitioners

 

The PSS will provide increased assistance to doctors, irrespective of specialty, based upon premium cost relative to income.  Doctors would not need to apply personally to receive assistance through the PSS as the subsidy is payable to MIIs and passed on by them to their policyholders by way of a reduced premium.

 

The cost of run-off cover will continue to be incorporated into normal annual premiums, which may result in some adjustment to ongoing premiums to cover these costs, rather than as a separate cost upon leaving practice.  This ensures that doctors have access to run-off cover at the time when they need it.  For doctors who die, are disabled, retire at age 65 or over, permanently leave the workforce (for more than 3 years) or go on maternity leave, no further premium payments will be required after they leave the profession (or are temporarily absent from it).  Doctors under the age of 65 who retire will be required to pay run-off cover to their MII for a period of three years before the scheme would apply.

 

As a result of a portion of the previous IBNR liabilities being transferred to the RRV, all doctors paying premiums will contribute to this cost.

The current Medical Indemnity Subsidy Scheme (MISS) will continue to operate in its present form until 30 June 2004.  The PSS will have effect from 1 January 2004 and will entirely replace the MISS from 1 July 2004.

 



Impact on MIIs

 

MIIs will be required to ensure that subsidies paid to them by the Government result in members paying a reduced premium where their costs are more  than an agreed affordability threshold.  There will therefore be increased administrative requirements placed on MDOs and insurers.

 

Administrative requirements may be increased for insurers through the RRV as it will require insurers to make a separate payment to the Government for run-off cover as well as making reinsurance payments to other reinsurers.  Under the new Scheme they will also have to offer and directly provide run-off cover for a period of three years for doctors who retire before the age of 65.

 

MIIs will receive significant financial advantages by transferring some of their liabilities to the Government, including:

·          reducing their overall liabilities;

·          meeting capital adequacy standards (set by APRA) more quickly (due to reduced liabilities); and

·          tax advantages accruing from requiring lower profits to meet capital adequacy standards.

 

Impact on patients

 

The increased certainty and affordability for doctors provided by these measurers will assist doctors to remain in practice and will therefore ensure the ongoing provision of vital medical services to the Australian community particularly in high-risk specialties and for rural and remote regions.  Costs to patients may also be contained due to reduced medical indemnity costs for doctors.

 

Costs

 

The Government will provide additional taxpayer funding in the ranges shown below:

 

 

2003-04

2004-05

2005-06

2006-07

Fiscal balance ($m)

 168.2 to 157.2

 108.0 to 139.4

  79.8 to 132.1

  81.9 to 135.8

 

The RRV will be funded by doctors through their normal annual premiums it should be budget neutral in its impact over time.  Under previous medical indemnity arrangements doctors purchased claims incurred cover. The premiums for these policies included cover for claims arising after leaving the profession.

 

There will be increased cost to taxpayers through the funding of the IBNR liabilities that are not taken up by the RRV.  The above table indicates the net increase in Government expenditure, including the impact of revenue forgone by not maintaining the IBNR levy.

 

The above costs are additional to the cost of the previous package of measures, which was predicted would cost the taxpayer $55.8m over the 2005-06 financial year.

 

CONSULTATIONS

 

The Panel members included representatives of the medical profession, a lawyer and a financial expert.  The Panel undertook wide-ranging consultations with professional groups, insurers and actuaries.  It also received a range of factual reports from consultants about the current medical indemnity market and the impact of recent Government actions (by the Commonwealth and the States and Territories).

 

CONCLUSION

 

The proposed measures address the three key concerns of doctors as expressed to the Panel of affordability, security and the IBNR levy.

 

The preferred option package is in addition to the Government’s original package of measures introduced following the collapse of UMP, as outlined in the background on page 1.

 

It replaces:

·          Current subsidy arrangements under the Medical Indemnity Subsidy Scheme;

·          Current arangements in relation to the IBNR levy; and

·          The old High Cost Claims Scheme threshold of $500,000 with a new threshold of $300,000.

 

Although there will be a large cost to taxpayers, the benefits for the community through the ongoing provision of medical services are assessed to outweigh the costs.

 

IMPLEMENTATION AND REVIEW

 

The Health Insurance Commission (HIC) will administer the PSS and RRV.  The Department of Health and Ageing will continue to take policy responsibility for these measures.  Liabilities and benefits of the schemes will accrue from 1 January 2004.  Contracts will be entered into during the early part of 2004.  The RRV will commence operation in the 2004-05 financial year.

 

The Government will also consider establishing a working party in mid 2005 to:

(a)       evaluate the effectiveness of the new arrangements put in place in 2004;

(b)      if the current market arrangements have failed to deliver sustainable and affordable cover give detailed consideration to the feasibility, costs and benefits of alternative arrangements, including the option of a single doctor-owned monopoly insurer; and

(c)       consider developments in relation to a long term care scheme, the handling of clinical disputes, and improvements in claims handling.

 

 



MEDICAL INDEMNITY AMENDMENT BILL 2004

 

NOTES ON CLAUSES

 

Clause 1   This item sets out the short title for the Bill.

 

Clause 2   This clause provides that the Bill commences on Royal Assent.

 

Clause 3   This clause provides that each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

 

 

Schedule 1 Exemptions

 

Items 1 - 2   Provide notes which refine the application of a definition for medical indemnity insurer in the Act.

 

Item 3   This item limits the exemption in relation to a person’s medical income in paragraph 52(2)(c) to the contribution year starting on 1 July 2003. This is done because this exemption is generally less generous than that inserted by item 2, which only requires income to be under the $5,000 limit in one year, rather than the two required by paragraph 52(2)(c).

 

Item 4   This item inserts new paragraphs (ca) and (cb) to create new exemptions.  Paragraph (ca) exempts a person who is a medical practitioner and had a gross Medicare billable income during the income period for the contribution year of less than $5,000.  Paragraph (cb) exempts a person who is a  health professional but not a medical practitioner during the income period for the contribution year and has a gross medical income for the income period of less than $5,000.

 

Item 5  This item inserts two new paragraphs after paragraph 52(2)(d) to create a new exemption to cap the number of contribution years for which a person is liable to the number of years that the person was a member of the MDO, up to a maximum of 6 years.

 

Item 6  This item inserts four new subsections after subsection 52(3). 

 

Subsection (3A) provides that the references to gross medical income, gross Medicare billable income and income period have the same meanings as in the Medical Indemnity (UMP Support Payment) Act 2002. 

 

Subsection (3B) provides for the number of years for which a person is determined to be a member of an MDO to include the number of years that a person was a member of an MDO that was taken over by the participating MDO, and provides for the rounding up of the number of years.

 

Subsection (3C) provides a definition of an MDO taking over another MDO. Examples of where former coverage by an indemnity provider taken over by an MDO will be covered by subsection (3C) include the take over by United Medical Protection Limited of members of:

·          the Medical Defence Union of the United Kingdom; and

·          the New South Wales and Queensland members of the Medical Protection Society of the United Kingdom.

 

Subsection (3D) provides for a definition of indemnity provider for the purpose of new subsections (3B), (3C) and (3D).

 

Subsection (3E) clarifies that a reference in paragraph (2)(da) or (db) to a liability to pay a UMP support payment includes a reference to a liability, before the commencement of that paragraph, to pay an IBNR indemnity contribution. 

 

Item 7  This item adds a new paragraph at the end of subsection 53(2) to provide that for the retroactive cover exemption, there is a new requirement that the person must give to the HIC a certificate by the insurer, or (if there is more than one insurer) by each of the insurers, that paragraphs (a), (b), (c) and (d) apply in relation to the person.  This requirement is to streamline administration.

 

 

Schedule 2—Payment and collection

 

Item 1  Provides a definition for the term invoice which will include any document issued by a medical indemnity insurer or MDO which quotes an amount payable for a contract of insurance or subscription.

 

Item 2  This item excludes a lump sum payable under section 64 from the definition in subsection 4(1) of late payment penalty as section 64 is to be repealed.

 

Item 3  This item adds to the definition of late payment penalty in subsection 4(1) a penalty payable under section 66B in relation to an amount that a medical indemnity insurer or an MDO is required to remit to the HIC under paragraph 66A(4)(b).

 

Item 4  This item inserts a new definition in subsection 4(1) of medical indemnity insurer as a body corporate that: is authorised under section 12 of the Insurance Act 1973 to carry on insurance business in Australia and in carrying on that business, enters into contracts of insurance providing medical indemnity cover for other persons.

 

Item 5   This item removes section 63 from the table as this section dealing with payment by instalments is to be repealed.

 

Item 6 This item removes section 64 from the table as this section dealing with lump sum payments is to be repealed.

(Note: the existing sections 57-59 in the Medical Indemnity Act 2002 are not amended by these bills, as the enhanced UMP contribution has not been invoked.)

 

Item 7  This item adds to the table section 66B which relates to late payment penalties for medical indemnity insurers and MDOs. 

 

Item 8  This item adds to the table section 66A which relates to the collection of the UMP support payment by medical indemnity insurers and MDOs. 

 

Item 9 This item repeals paragraph 52(2)(e), as it is a reference to lump sum payment under section 64 which is to be repealed.  

 

Items 10 and 11 - these items remove section 63 and 64 from the table as these sections are to be repealed. 

 

Items 12 and 13   - these items add new sections 66B and 66A to the table.

 

Item 14 This item removes references to section 63 and 64 as these sections are to be repealed. 

 

Item 15 This items repeals sections 63 and 64.

 

Item 16   This item replaces the term medical indemnity contribution with a medical indemnity payment.

 

Items 17 - 19 remove references to lump sum payments as section 64 is to be repealed. 

 

Item 20   This item provides the mechanism of payment through either an MII/MDO - if the payment is all or part of an amount specified in an invoice issued under section 66A by a medical indemnity insurer or MDO, as an amount of UMP support payment - or through the HIC.

 

Item 21   This item removes a reference to lump sum payments as section 64 is to be repealed.

 

Item 22 This item adds new section 66B in the reference to late payment penalties.

 

Item 23 This item removes the reference to subsection 66(2) as the subsection is to be repealed consequential on the removal of lump sum payments.  

 

Item 24   This item provides that new paragraph 66(1)(a) in relation to payments to an MII/MDO does not apply to an amount recovered under section 68.

 

Item 25   This item inserts two new sections. 

New section 66A provides the conditions under which medical indemnity insurers and MDOs are collection bodies for the UMP support payment, the conditions under which the HIC may give a notice of UMP support payment payable to the medical indemnity insurer or MDO and what the collection body must do.

 

It also provides that a payment by a person to a collection body discharges their liability to the extent of the payment, and that any interest earned is attributed to the collection body.  It provides a limitation on where a collection body can invest any money collected until payment day.

 

New section 66B imposes a late payment penalty if medical indemnity insurers and MDOs do not pay the amounts collected, as paid by persons in discharge of their liability, by the specified days.

 

Item 26  This item inserts a reference to a late payment penalty in relation to medical indemnity insurers and MDOs in the section dealing with refund of overpaid amounts.

 

Item 27 removes a reference to the capacity of a person to offset an overpayment in subsection 67(1).

 

Item 28 repeals subsection 67(2) - the capacity for a person to make an offset an overpayment in subsection 67(2) and subsection 67(3) - the capacity for a person to have an overpayment of a lump sum refunded.

 

Item 29  This item repeals subsection 68(2) in relation to lump sum payments and substitutes a provision that an amount that a medical indemnity insurer or an MDO is required to remit to the HIC under paragraph 66A(4)(c) is a debt due to the Commonwealth.

 

Item 30  This item inserts a reference to new section 66B in subsection 68(3) so that a late payment penalty payable by a medical indemnity insurer or MDO is a debt due to the Commonwealth.

 

Item 31  This item repeals subparagraph 70(1)(a)(ii) in relation to lump sum payments as section 64 is to be repealed.

 

Items 32 - 33  These items add a new subparagraph 70(1)(a)(iv) adding a late payment penalty in relation to an amount that a medical indemnity insurer or an MDO is required to remit to the HIC under paragraph 66A(4)(c) to the list of matters in respect of which the HIC may issue an evidentiary certificate.

 

Item 34 This item adds to the list of matters in section 71 in respect of which the HIC may request information whether a person has medical indemnity cover provided by a contract of insurance with a particular medical indemnity insurer and whether a person is a member of a particular MDO;

 

Item 35 This item inserts a new section 74A after section 74 to provide an offence for medical indemnity insurers or MDOs failing to comply with requirements for collecting UMP support payments under the new section 66A.

 

 

Schedule 3—Renaming the IBNR indemnity contribution

 

This schedule renames ‘IBNR indemnity contribution’ to ‘UMP support payment’.  It renames medical indemnity contribution to ‘medical indemnity payment’.  It renames ‘contribution’ to ‘payment’.

 

It also makes other amendments consequential on the renaming. Most of the renaming is in the Medical Indemnity Act 2002, but the following Acts are also amended: the Health Insurance Act 1973; the Health Insurance Commission Act 1973; and the National Health Act 1953.

 



The effect of the renaming is that there will no longer be an IBNR contribution. Instead, there will be a UMP support payment. This renaming of itself will not affect liability to pay. The other effects of limiting the amount of each person’s liability are dealt with in other schedules.

 

 

Schedule 4—Other matters

 

Item 1 This item extends the definition in subsection 4(1) of health care related vocation to include a health care related vocation in relation to which there is at least one State or Territory under the law of which a person must be registered in order to practise. This broadens the meaning of ‘health care related vocation’ as used throughout the Medical Indemnity Act 2002 .

 

Item 2  This item makes provision for the new Premium Support Scheme to be a medical indemnity scheme by providing for the Minister to formulate one or more schemes under subsection 43(1) which may make payments to medical practitioners or medical indemnity insurers and MDOs on behalf of medical practitioners, and providing that the scheme may help meet the costs to medical practitioners of purchasing medical indemnity, and the costs to medical indemnity insurers and MDOs of administering schemes under the section and complying with their obligations under section 66A relating to UMP support payments.

 

Item 3   replaces the term the scheme with a scheme in subsection 43(2).

 

Item 4   This item extends paragraph 43(2)(c) to allow a scheme to impose conditions on persons to whom a subsidy is paid. This will allow conditions to be imposed on medical indemnity insurers and MDOs taking part in a scheme.

 

Item 5   This item extends the scope of a scheme set out in subsection 43(2) to make provision for payments to medical indemnity insurers or MDOs to reduce the costs of medical indemnity for medical practitioners and the entering into of contracts setting out conditions for such payments to medical indemnity insurers or MDOs.

 

Item 6   This item clarifies that subsection 43(3) may apply to more than one scheme under subsection 43(1).

 

Item 7   This item that a scheme formulated under section 43 of the Medical Indemnity Act 2002 before the commencement of this Schedule continues in effect after that commencement as if it had been formulated under that section as amended by this Schedule, thus allowing the current Medical Indemnity Subsidy Scheme to continue.

 

Item 8   This item inserts a new section 44A to provide for the HIC to be able to notify medical indemnity insurers or MDOs of whether or not a doctor is liable to make or has made a UMP support payment and the amount of that liability.

 

Item 9   This item clarifies that subsection 48(c), which provides an appropriation for payments made under a scheme, may apply to more than one scheme under section 43.



 

 

MEDICAL INDEMNITY (IBNR CONTRIBUTION) AMENDMENT BILL 2004

 

NOTES ON CLAUSES

 

Clause 1    This item sets out the short title for the Bill.

 

Clause 2   This item provides that the formal provisions of the Bill commence on Royal Assent.  The amendments made by Schedule 1 of the Bill commence at the same time as Schedule 1 to the Medical Indemnity Amendment Act 2004.

 

Clause 3   This clause provides that each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

 

Schedule 1 - Amendments

 

Item 1   This item amends the short title of the Act in section 1 to substitute (IBNR Indemnity) Contribution with (UMP Support Payment).

 

Item 2  This item inserts a definition into section 3 of gross medical income for a health professional for a period as meaning the sum of the amounts payable in respect of health care related services rendered by, or on behalf of, the health professional during the period.

 

Item 3 This item inserts a definition into section 3 of gross Medicare billable income for a medical practitioner for a period as meaning the sum of the medical expenses payable in respect of professional services that were rendered by, or on behalf of, the medical practitioner during the period and for which Medicare benefits were or are payable under Part II of the Health Insurance Act 1973 .

 

Item 4   This item amends section 3 to provide that health professional has the same meaning as in the Medical Indemnity Act 2002 .

 

Item 5   This item repeals the definition of IBNR indemnity contribution in section 3.

 

Item 6 This item inserts a definition into section 3 of income period for a contribution year as meaning the period, of the length specified in the regulations, ending on the day in that year specified in the regulations.  If regulations do not specify a period, the income period is a period of 12 months ending on 30 September in that contribution year.

 

Item 7 This item amends section 3 to provide that medical expenses has the same meaning as in the Health Insurance Act 1973.

 

Item 8   This item amends section 3 to provide that medical practitioner has the same meaning as in the  Medical Indemnity Act 2002.

 

Item 9   This item amends section 3 to provide that professional service has the same meaning as in the Health Insurance Act 1973.

 

Item 10 This item inserts a definition into section 3 to provide that UMP support payment means the payment that is payable under Division 1 of Part 3 of the Medical Indemnity Act 2002.

 

Item 11   This item further clarifies the definitions at the end of section 3 of gross medical income and gross Medicare billable income in subsection (1) by stating that:

(a)         the amount payable in respect of a health care related service; or

(b)        the medical expenses payable in respect of a professional service;

is taken to be the amount paid for the service, or (if no amount has been paid) the highest amount stated in the account for the service as the amount payable for the service.

 

Item 12 This item replaces an IBNR indemnity contribution and substitutes a UMP support payment in section 4.

 

The note alters the heading to section 4 by omitting IBNR indemnity contribution and substituting UMP support payment.

 

Item 13 This item provides that there may be different imposition days for different classes of participating members of a participating MDO.

 

Item 14   This item provides that for a later contribution year (after the 2003-04 contribution year) the default imposition day in subparagraph 5(3)(b)(i) is 1 May, (instead of 1 August). This day can be changed by regulation.

 

Item 15   This item provides in section 5 that regulations made for the purposes of subparagraphs 5(3)(a)(ii) or 5(3)(b)(ii) may specify different imposition days, for a contribution year for a participating MDO, for different classes of participating members of the MDO. It is envisaged that this provision will be used to prescribe different payment days for people covered by different medical indemnity insurers or MDOs. This is so that collection of the payment can be integrated in the annual or financial year billing of the insurer or MDO.

 

Item 16   This item replaces IBNR indemnity contribution in subsection 6(1A) with UMP support payment. The note replaces IBNR indemnity contribution with UMP support payment in the heading.

 

Items 17 and 18 introduce new limits on the liability of each person for the contribution year that starts on 1 July 2003 in subsection 6(1A) for the UMP support payment by limiting the liability to the least of: 

(a)     the applicable percentage of the member’s annual subscription for the base year; and

(b)     $1,000; and

(c)     if the member is a medical practitioner during the income period for that contribution year—2% of the member’s gross Medicare billable income for the income period for that contribution year; and

(d)     if the member is a health professional during, but is not a medical practitioner at any time during, the income period for that contribution year—2% of the member’s gross medical income for the income period for that contribution year.

 

Item 19 This item replaces IBNR indemnity contribution, with UMP support payment in subsection 6(1B).

 

Items 20 - 22 These items introduce new limits on the liability of each person for the contribution year that starts on 1 July 2004 in subsection 6(1B) for the UMP support payment by limiting the liability to the addition of:

Paragraph (a) the least of:

(i)                  $2,500; and

(ii)                half of the applicable percentage of the member’s annual subscription for the base year; and

(iii)              if the member is a medical practitioner during the income period for that contribution year—1% of the member’s gross Medicare billable income for the income period for that contribution year; and

(iv)              if the member is a health professional during, but is not a medical practitioner at any time during, the income period for that contribution year—1% of the member’s gross medical income for the income period for that contribution year; and

Paragraph (b) the least of:

(i)                  $500; and

(ii)                half of the applicable percentage of the member’s annual subscription for the base year and

(iii)              if the member is a medical practitioner during the income period for that contribution year—1% of the member’s gross Medicare billable income for the income period for that contribution year; and

(iv)              if the member is a health professional during, but is not a medical practitioner at any time during, the income period for that contribution year—1% of the member’s gross medical income for the income period for that contribution year.

 

Item 23 This item introduces new limits on the liability of each person for the contribution year that starts on or after 1 July 2005 in subsection 6(1) for the UMP support payment.  The amount of the UMP support payment imposed on a participating member of a participating MDO for a contribution year for the MDO that starts on or after 1 July 2005 is the least of:

(a)     $5,000; and

(b)     the applicable percentage of the member’s annual subscription for the base year; and

(c)     if the member is a medical practitioner during the income period for that contribution year—2% of the member’s gross Medicare billable income for the income period for that contribution year; and

(d)     if the member is a health professional during, but is not a medical practitioner at any time during, the income period for that contribution year—2% of the member’s gross medical income for the income period for that contribution year.

 

Item 24  This provision makes it clear that amendments made to change the name of the IBNR contribution to the UMP support payment does not affect a person’s liability to pay an IBNR contribution.

 

Item 25  A reference in a regulation or other instrument made under the Medical Indemnity Act 2002 or the Medical Indemnity (IBNR Indemnity) Contribution Act 2002 to the IBNR indemnity contribution is to be taken, after the commencement of this Schedule, to be a reference to the UMP support payment.