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Wednesday, 9 March 2005
Page: 21

Senator BARNETT (10:59 AM) —I stand in support of the Medical Indemnity Legislation Amendment Bill 2005, which refines the legislation implementing the government’s medical indemnity support system. I acknowledge the comments from the other side, from Senator McLucas on behalf of Labor, indicating their support for the bill. That is appreciated. I want to make a few comments with regard to the bill specifically and a few comments with regard to medical indemnity issues more generally, and I will also give a little historical chronology as to why we are here today.

As a thrust and as a policy position, this bill underlines and provides a foundation of confidence for people in the medical industry, specifically GPs, medical specialists and other key stakeholder groups such as the insurance industry and medical indemnity insurers, and the patients—of course, they are a key stakeholder group that will be protected, supported and encouraged as a result of this bill. This bill is more technical than the previous legislation on this issue and has specific provisions relating to the substantive bills that were introduced and passed in 2002 and 2003, and in his speech Senator Ridgeway referred to that package of medical indemnity legislation.

At the start, I want to acknowledge the leadership shown and demonstrated by Senator the Hon. Helen Coonan, who was at the time the Assistant Treasurer and had carriage, in large part, for the medical indemnity legislation, together with Tony Abbott and, before Tony Abbott, Senator the Hon. Kay Patterson. They took a very good strategy of cooperation and worked together with the key stakeholder groups to get a solution. We were pretty much facing a crisis in this area. There were a lot of problems, and I know that perhaps people outside this place and some on the other side of this place were saying, ‘This is great!’ putting the government on the back foot. But I will tell you what the ministers did: they showed leadership and vision, and they showed that they wanted to have this problem fixed. Over a long period of time, through a lot of hard work, Ministers Coonan and Abbott in particular got their heads together and worked with those key stakeholder groups—the insurance industry, the doctors and those representing the patients—and provided solutions.

Just in the last 24 hours or so, I have spoken to the head of the Australian Divisions of General Practice, Dr Rob Walters, and he indicated that he has appreciated the cooperative approach of the Australian government and those two ministers in particular for the way in which they have addressed these issues. He indicated that of course there are issues still to be addressed, and that is why that ongoing working relationship is so important. Kate Carnell is now the executive director of the Australian Divisions of General Practice. I congratulate her on her appointment and look forward to working with her in the months and years ahead. Alan Mason from the Insurance Council of Australia has shown leadership on behalf of his industry. I met with Alan on a number of occasions last year and the year before, and again I acknowledge and thank the Insurance Council for their support.

Historically, we remember that we were facing a crisis in 2002 and 2003. The government passed legislation in response to the medical indemnity problems that emerged pretty much early in 2002, when I started in the Senate in February 2002. What happened was that UMP—United Medical Protection—which was the medical defence organisation and Australia’s biggest medical indemnity insurer, applied to be put into provisional liquidation in April 2002. That was obviously devastating for the industry, and it was not until 10 November 2003 that UMP came out of provisional liquidation. In my own home state of Tasmania, the Medical Protection Society of Tasmania certainly had cause for concern and, in particular, with regard to their meeting prudential requirements. The industry had not provisioned properly for future claims and was structured in such a way as to avoid prudential supervision, and this was particularly so for UMP, which had significant exposure and, sadly, was badly affected by the failure of HIH in particular.

Another reason for the crisis that we faced was the international increase in the costs of reinsurance. If we remember, this was not just medical indemnity; it covered professional indemnity insurance and public liability insurance. And, of course, we are aware of the remedial action that was taken by the Australian government; it played a great leadership role. Some of the states came on board—some of them came on board kicking and screaming—and we have now seen the fruit of that labour certainly in the form of public liability insurance premiums going down, which was announced by Minister Mal Brough just a week or so ago. Premiums trending down is good news. There was also a sustained increase that was backed up by evidence in the costs of claims against the doctors. You can see that, historically, we were facing very serious problems in the provision of health care to the average Australian mum and dad and child. So that legislation was passed in 2002 and 2003, but a lot of work was done and a lot of working groups were set up to make sure that we could address the problems.

I want to touch on some of the key elements of the government’s response in addressing those problems before I go to the specifics of the bill. The first is the incurred but not reported indemnity contribution scheme, where our government agreed to take over unfunded liabilities across the medical indemnity sector for claims that had not yet been lodged. That is what is known as the IBNR claims. The government has recouped the cost of the IBNR scheme from members of the medical defence organisations with unfunded liabilities. This approach was consistent with assistance packages in other industries outside the health sector. Following the recommendations—this was referred to in debate this morning—of the medical indemnity review panel, the UMP support payments have now been replaced by the IBNR contribution scheme. The actual payment is no more than the original IBNR contribution and in most cases will be less. It is now generally to be collected through medical indemnity insurance. The IBNR moratorium arrangements were implemented through legislation in 2003.

Another key element of the government’s response was the High Cost Claims Scheme. In this case the government was to meet half the cost of the settlements or judgments in excess of $300,000 up to the Exceptional Claims Scheme threshold, or ECS as it is known, which was the third key element. In this case the government meets the full cost of the settlements or judgments in excess of the ECS threshold.

Under the Run-off Cover Scheme, which is the fourth key element of the overall response by the government, the government will cover the costs of the medical indemnity claims for eligible doctors who have retired from private practice. Those doctors will not need to pay for that run-off cover. This was a particular issue in Tasmania and in Launceston—my hometown—for a number of the doctors who were practising and moving into retirement age. They were saying, ‘I have to keep working to make sure the premiums are covered. If I leave my practice how will I afford the run-off cover and the premiums to make sure I am covered into the future in my retirement?’ Those issues were addressed and I know some of the GPs concerned, and those concerns have been alleviated. That is good news.

The medical defence organisations in Tasmania and around the country are now under prudential supervision which is far more carefully regulated. They are reviewed and regulated by the Australian Prudential Regulation Authority, APRA. They are required to offer contracts of insurance through their insurer rather than discretionary cover to member doctors. That is how it works.

As part of the overall package of legislation and response from the Australian government there has also been tort law reform. I mentioned earlier public liability insurance and professional indemnity insurance. There has been a package of reforms to address the problems—and the crisis, in fact—we are facing. For example, community groups, small businesses and volunteer organisations who wanted to have a festival could not do so because they could not cover their volunteers involved in those activities in terms of public liability insurance. It was a very significant problem. I hosted and was involved in seven separate workshops and forums for small business and community groups in my home state of Tasmania to look at the public liability insurance issue and to see if we could come up with some suggestions and recommendations for reform. In March 2002 a working group of small business groups, the Small Business Council and community groups, including Volunteering Tasmania, did exactly that—we sat around the table and came up with 22 recommendations for reform. Some of them were relevant to the Australian government, most were relevant to the state government and some were relevant to local government.

Interestingly, in terms of the state and territory governments around this country, New South Wales essentially led the way, and I compliment the New South Wales government in that regard. Sadly, Tasmania came pretty well last in terms of the state government responding to the public liability insurance dilemma-crisis that was facing small businesses, community groups, volunteer organisations and the community in general. It is pleasing to have those recommendations implemented by the Tasmanian government but also sad to know that it took nearly two years to have those recommendations implemented. As I said, there were 22 recommendations for reform in March 2002. They are pretty much nearly all implemented now by the Australian government and the state and territory governments. These recommendations were made by a working group of small business groups and community organisations. That is on the record. They know the history. The state government in Tasmania simply did not pull their weight. They did not adequately follow the lead of the Australian government or indeed of the New South Wales government. The Tasmanian public sadly paid the price. They are now coming on board and have taken up the important role they need to fulfil. There is still more to do but we are pleased that some of those strategies and reform actions have now been implemented.

I want to touch on some of the specifics of the bill. Firstly, I have a matter to draw to the attention of the Senate. We had a Senate Scrutiny of Bills Committee meeting this morning. I have drawn this matter to the attention of the department: in the commencement provisions of the bill there is a typo—

Senator George Campbell —Madam Acting Deputy President, on a point of order: I am not so sure that what Senator Barnett is about to do is consistent with the standing orders. The Scrutiny of Bills Committee, having met this morning, has not yet presented its report to the chamber. I do not think it is appropriate to discuss what is in that report until it has been presented here.

The ACTING DEPUTY PRESIDENT (Senator Kirk)—Senator Barnett, unreported proceedings of committees should not be disclosed in the chamber prior to their being tabled.

Senator BARNETT —Thank you, Madam Acting Deputy President. That is noted. It is an administrative matter and one which will no doubt be discussed later on. It is a technical, administrative matter which does not impede the progress of the bill or this process in any way.

I will proceed with the specifics of the legislation. I note that the system that has been set up, which refines the previous legislation from 2002 and 2003, ensures that doctors are provided with increased access to affordable and secure insurance that can be maintained through retirement. I have mentioned the benefits for those Tasmanian doctors and indeed for GPs throughout the country. The ongoing funding for the scheme is achieved through a payment by insurers called the run-off cover support payment. I have mentioned that earlier in my comments. To address concerns, the definition of insurers’ premium income will be changed so that it is considered net rather than inclusive of the run-off cover payment.

We are adding three measures to the original measures of this bill. Firstly, the government are continuing to enhance this package of measures by extending financial protection to doctors for the cost of claims beyond the level of their indemnity insurance. That is the Exceptional Claims Scheme, which I have mentioned. Secondly, there is an increase in the number of categories of doctors who are eligible to be exempt from the contribution for incurred but not reported liabilities. Thirdly, there is a measure to put a moratorium on the amount payable on the IBNR contribution for 18 months.

The other thing that I think is worth noting is that, for the IBNR scheme, this amendment is a very good one because it makes the package of legislation more consistent. It relates to the IBNR and the high-cost claims schemes, which use the term ‘awareness’ to define when an insurer knows of an incident or claim, while the run-off cover and the exceptional circumstances schemes use the more narrow concept of ‘claims being made’ or incidents ‘notified’. So this makes the legislation more consistent. The key stakeholder groups—the GPs and the insurers—know exactly where they stand.

That inconsistency can lead to difficulty in administering the respective schemes, so the government is proposing a more defined concept of claims made and incidents notified that can be consistently applied across all of those schemes. I think that is a good move and I think it is good legislation. It builds on a foundation of confidence that the government has created as a result of, and flowing from, the difficult times that we had in 2002 and 2003 with the crisis and problems facing the health sector. I support the bill.