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Tuesday, 25 November 2003
Page: 22779

Mr ABBOTT (Minister for Health and Ageing) (7:24 PM) —in reply—In summing up this debate on the Medical Indemnity Amendment Bill 2003, I wish to thank all members who have spoken. I particularly wish to thank the shadow minister, the member for Lalor, whose contribution to the debate I was unfortunately unable to hear in person. I apologise to her for that. If it is any consolation to her, it was her work earlier today which caused me to be absent from the House so that I was not able to hear her contribution to this debate. It was her political effectiveness which caused me to be absent from the House, dealing with the question of what has happened in the Senate today with the government's MedicarePlus package.

I want to thank everyone who has contributed, and I want to say that what has been in evidence today from all speakers is an appreciation of the importance of medical indemnity as an issue. Patients have to be confident that, if they are harmed through medical negligence, they have recourse. Doctors need to be confident that, if they are sued, they have cover—hence, the importance of the medical indemnity insurance arrangements and of the legislation currently before the House.

There have been very significant changes over the years in the way medical indemnity insurance has operated. A couple of decades ago, the medical defence organisations operated as little more than doctors' clubs. There were very few complaints of medical negligence and there were fewer settlements. The cost involved was modest. In fact, the main purpose of the medical defence organisations, it seems, was to represent doctors in matters before various professional tribunals to do with registration and so on rather than to pick up the tab for large negligence claims. In common with so many other areas of insurance and so many other areas of litigation, a great deal changed in the late eighties and through the nineties. The culture of litigation changed. There was more litigation, courts became more willing to make negligence awards, the risk of being sued for negligence increased and the quantum of damages increased. These organisations came under more and more pressure.

Competition in this area was not always as helpful as it might have been in other areas. What happened was that we moved from a situation where all doctors insured all doctors to a situation where, increasingly, each specialty insured its own members but no-one else. So, instead of seeing a situation where risk was shared, we had a situation where risk was increasingly concentrated. Eventually we had, in effect, obstetricians insuring obstetricians, orthopaedic surgeons insuring orthopaedic surgeons and neurosurgeons insuring neurosurgeons. We found ourselves with a system where GPs in New South Wales might, for argument's sake, face a medical indemnity insurance premium of perhaps $4,000 a year, whereas obstetricians might face a medical indemnity insurance premium of $150,000 a year without any government subsidy and orthopaedic surgeons might face a medical indemnity insurance premium of close to $100,000 a year. Plainly, it was a very difficult situation for medical practitioners to face. As this House would know only too well, it all came to a head early last year when United Medical Protection, by far the largest medical defence organisation in Australia, went into provisional liquidation, in part as a result of the general difficulties of medical indemnity insurance and in part because of the particular pressure it was under due to the $60 million loss it suffered in the collapse of its reinsurer, HIH.

Since then, the government has moved swiftly to try to stabilise the situation and ensure that doctors, patients and taxpayers receive a fair deal. Successively, the government has provided guarantees to UMP; picked up the so-called tail liability of UMP; introduced subsidy arrangements for specialties with high insurance costs; introduced the exceptional claims scheme to cover claims in excess of $20 million; and introduced the high cost claims scheme, which has been successively extended to now cover half the cost of claims against doctors of half a million dollars plus. In total, the federal government is committing some $100 million a year under present arrangements to try to support medical indemnity insurance in Australia.

In order to recoup some of the costs, the government established a scheme under the legislation which we are now proposing to amend—a scheme which has been called, for want of a better word, the IBNR scheme; a scheme covering incurred but not reported liabilities. This scheme was negotiated in full consultation with the medical profession and enshrined in the act which we are now seeking to amend. I have to say that when IBNR notices started to go out there was a very hostile reaction from the medical profession—a reaction which had not been anticipated by the government, which had not been anticipated by the AMA and which had not been anticipated by the medical representatives and leaders of the profession, in consultation with whom, every step of the way, the original legislation had been drafted.

The bill that we have before us tonight is designed to give effect to the arrangement which I negotiated with the medical profession at the beginning of October in company with Senator Coonan, the Assistant Treasurer, building on the good work that had earlier been done by my distinguished predecessor in this portfolio, Senator Patterson. The government agreed to put in place an 18-month moratorium on IBNR levies over $1,500 and to put in place a medical indemnity policy review panel to report to the government by 10 December. I am pleased to say that that panel is doing its work well and is proceeding extremely constructively. I am confident that the panel will present a range of feasible options to the government, any one of which will solve this problem for the long term.

I do have to say in passing to some of the members who have contributed to this debate that it is becoming increasingly apparent that medical indemnity insurance is sui generis. Medical indemnity insurance is not like general insurance. The particular stresses and strains of medical practice, the types of incidents which may arise from medical procedures that go wrong, the large number of small providers in the field, the reluctance of large insurers that can spread their risks and cross-subsidise, as it were, and the ferocious nature of competition between the large number of small medical indemnity insurers, suggests to me—and, I think, to the policy review panel—that we may well be witnessing a significant example of market failure.

This is a government which, as you know, believes very much in the market, but we also believe very much in solving problems when they arise. We do have a problem in medical indemnity insurance. This legislation is necessary to give effect to the moratorium arrangements which the government made with the medical profession at the beginning of October. I very much suspect that this is not the last time that we will be discussing medical indemnity insurance in this House, and I feel there is still some way to go before this matter is solved to the satisfaction of the medical profession, the protection of patients and the reasonable protection of the interests of taxpayers. Nevertheless, I commend the amendments to the House and I thank the opposition for agreeing to support them.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.