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The current climate of litigation: the medico-legal year in review: speech to National Medico-Legal Congress.

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Australian Medical Association Limited ABN 37 008 426 793

42 Macquarie Street, Barton ACT 2600: PO Box 6090, Kingston ACT 2604 Telephone: (02) 6270 5400 Facsimile (02) 6270 5499 Website :


**Check Against Delivery


Good morning.

I have been asked to talk today about the last twelve months of medico-legal activity. To be honest, it has been a quiet year compared to the previous few.

The medical indemnity crisis is in hiatus. It has not gone away. Like Monty Python’s parrot, it is not dead, it is resting. The heat has gone out of it…for now.

For doctors and patients, that has been a good thing. The lawyers, however, may have a different view.

We have had a year of settling in of the significant reforms that came down at Christmas in 2003. There has been a general calmness in the profession and in the community, but there have been some rumblings, too.

We are yet to see plummeting premiums. We may never see them. Time will tell.

There are still inconsistencies in tort law reform across the country. Some jurisdictions are keener than others in this regard.

There has been internal squabbling in the medical indemnity industry, but, as is the nature of that industry, they seem to have it covered.

And there is major unfinished business. For the AMA, a long-term care scheme for the severely injured is at the top of this list.

Also on our shopping list are risk management, quality and safety in health care, and open disclosure of medical errors and near misses.

Many of you here today have similar agendas, but will no doubt come at them from different angles, with different conclusions in mind.

Where we go - and at what pace - will be dictated by the results of the Government’s mid-year review of its medical indemnity reform package.

This review will evaluate the effectiveness of the new arrangements. It will determine whether these arrangements have delivered sustainable and affordable indemnity cover.

It will consider the feasibility, costs and benefits of alternative arrangements, including the option of a single doctor-owned monopoly insurer.


More importantly, the review will also consider developments in relation to a long-term care scheme. The handling of clinical disputes and improvements in claims handling will also be looked at. The review offers something for everyone.

It is yet to be seen whether the ‘something’ is good or bad - and for whom the outcomes will be good or bad. At the very least, it will fuel the debate for a long-term care scheme.

But before looking ahead, let’s look at what has been achieved.

We now have prudential regulation of the Medical Defence industry so that they operate as prudentially regulated insurers.

There has been a massive injection of Federal Government funds into the medical indemnity industry - some $600 million over three years.

We have seen tort law reform in all States and Territories with varying degrees of intent, extent and effect.

The medical profession is committed to better risk management and clinical quality and safety health programs.

And the flood of departures from the medical workforce by experienced and skilled specialists has slowed.

The patients and the community have benefited significantly.

This whole exercise has delivered tangible and palpable good to many Australians. It has shown that the Commonwealth and State and Territory Governments can work together towards a common goal.

Well, just what are the gains from all this medical indemnity pain?

We have stability in what was a rapidly shrinking medical workforce, for one.

The reinstatement of secure and affordable medical indemnity premiums for doctors is another.

We still have a competitive medical indemnity insurance industry. This was looking decidedly dodgy 18 months ago.

But as yet no commercial insurer has seen fit to enter this profitless market. All existing medical indemnity providers are doctor run, not-for-profit organisations, established to provide doctor and patient security.

Although they may argue otherwise, it has been a good result for lawyers. They still have a fault-based adversarial litigation system. In which case it has also been good for some persevering litigants.

And it has been a huge team effort, with every player doing their bit.


The Federal Government’s indemnity package guaranteed the necessary funds and confidence to keep doctors working in their communities.

The community has done its bit by paying the taxes that pay for the Government subsidies to the indemnity industry.

The State and Territory tort law reforms took the heat out of the system - but, as plaintiff lawyers point out, at the expense of some rights of injured people.

Injured patients have contributed through their lost or restricted civil rights to damages.

And the medical profession is now subjecting itself to more rigorous risk management programs to enhance quality and safety in the delivery of health care.

While indemnity costs have been contained, doctors in private practice still face huge premiums. Patients, including those patients with non-compensatable and severe disabilities, ultimately pay for these costs.

So, it’s not an ideal solution.

We have effectively seen a compromise that has temporarily fixed a problem that threatened the equitable delivery of health care to the whole community.

It is not an easy compromise. It has been challenging.

It means getting it right for healthy patients. It means getting it right for injured patients. It means getting it right for the community as a whole.

Not an easy call for public policy

Suing doctors has an adverse impact on the public’s access to their health care.

The small amount of funds that support the medical indemnity industry can never be enough to provide those severely injured from medical mishaps with the care they need.

Doctors are accountable for their mistakes, and will always be accountable.

Patients’ litigation activity is an ineffective, expensive and heartless way - to both patients and doctors - to achieve medical accountability and improvements in the safety and quality of health care.

It is sad that the system pits two groups of professionals against each other - two groups with the interests of their patients or clients at heart.

One tries for the best health outcomes, and the other for the best financial results for the same people. So why can’t we work together?

I suggest that the source of our differences arises from two major factors.

There is inadequate funding and irrational distribution of the limited pool of funds available to support the health needs of both healthy and injured patients.


And the legal and administrative costs inevitably incurred by our adversarial litigation system are a burden on us all - directly or indirectly.

Federal and State government squabbling and the consequential squandering of resources contribute to the first problem.

Their inability to cooperate to establish a better and nationally coordinated compensatory system for severely injured people perpetuates the second.

An important question when seeking to resolve these problems is: has tort law reform delivered the desired results?

If we continue to operate under a fault-based compensation regime, a secure and affordable system of indemnity cover is needed.

Patients pay for this.

While the civil litigation system continues to determine fault by adversarial means, much of the insurance dollar will go to lawyers and medico-legal expert witnesses - rather than to the injured patient.

All Australians pay for this.

While the States and Territories have made substantial inroads into tort reform, it has not been enough. More work needs to be done to build on the existing changes to produce interstate equity and legislative consistency.

The AMA has been monitoring the reform process closely, and this is how we see things at the moment, state by state.


The A.C.T.’s Civil Law (Wrongs)(Thresholds) Amendment Bill 2003 was discharged when the ACT election was held in late 2004.

This left a gaping hole in the ACT tort reform platform with the disappearance of a general damages threshold.

What is needed are stronger amendments than those previously planned to ensure consistency with other States and the Northern Territory.

There are other deficiencies in the ACT reforms, including:

• the failure to adopt a modified Bolam principle as recommended by the Ipp Review • an absence of capping on gratuitous care • no limits on lawyers’ advertising • and the legislation lacks anti-Cattanach legislation (to limit damages to parents for

wrongful birth).


New South Wales

New South Wales was the hardest hit by UMP’s near collapse, but hit back equally hard.

The NSW Government responded rapidly to implement tort law reform, and claims are reported to have slowed.

Their commitment to fix things was amplified by Premier Carr’s recent pronouncements on the need to provide long term care for people severely injured in accidents.

Northern Territory

Like the ACT, the Northern Territory has failed to incorporate a modified Bolam principle into its tort law reform package.

Nor has it moved to restrict a parent’s right to seek damages for wrongful birth.


Queensland has not redefined the duty of care, nor established a general damages threshold.

They have not removed liability for wrongful acts in the course of Good Samaritan acts.

South Australia

The approach in South Australia has been to consolidate its legislation by replacing the Wrongs Act with its Civil Liabilities Act.

It has not adequately capped general damages and gratuitous care costs.

It fails to remove exemplary or punitive damages and does not restrict legal costs and advertising.

Nor does it properly define limitation periods for those legally incompetent.


Tasmania’s most recent changes have been to its Limitation periods.

Although the changes have resulted in legislative consistency between the States, the changes represent a partial weakening of its previous laws.


Deficiencies remain in Victoria in the areas of: • exemplary or punitive damages • the containment of legal costs • legal advertising • and anti-Cattanach legislation.


Western Australia

While slow out of the blocks, Western Australia is quickly closing the gap.

Unfortunately, a Bill to amend the Limitations Act, which would have brought the West more in line with the rest of Australia, lapsed a month ago today.

A modified Bolam principle is now active. However, there is no true general damages cap.

More work needs to be done on exemplary or punitive damages, the containment of legal costs, and anti-Cattanach legislation needs to be addressed.


Where the reforms have been welcome, one consequence has to be mentioned.

In New South Wales, there was a ‘spike’ in claims as lawyers initiated actions to beat the tort law reforms.

That spike has now settled, with many of those claims not proceeding.

In Victoria, while there has been a substantial reduction in all personal injury writs issues, a ‘spike’ occurred late.

It hit over the past 12 months as claims were issued ahead of the newly amended Wrongs Act. The spike effect seems to have settled somewhat now.

The need for taut tort reform

There are some people calling for a ‘winding back’ of tort law reform to give back injured litigants their previous compensation rights.

These people must be taught we need to keep the tort reform taut.

It is far better to ensure that severely injured patients have fair and equal access to the ongoing treatment and attendant care they need, as they need it.

Risk management

An important part of minimising the number of severely injured patients is risk management.

No group is more dedicated to risk management than the medical profession.

Risk management is a unique area of endeavour, quite separate to the programs geared to improve quality and safety in health care.

The more cynical would say that risk management is all about reducing the risk of being sued.

Risk management is all about taking the risk out of medicine. This is a noble aim in a place like Australia where risk is already very low.


There are sad but true side-effects to risk management.

It can lead to over-servicing, more conservative approaches to medicine, and less incentive to push the boundaries of science and medicine with revolutionary techniques.

Defensive medicine is not necessarily the best medicine - for the patient or the doctor.

Quality and safety

Quality and safety programs are equally important to good medicine. Improving quality and safety in healthcare requires root cause analysis of errors and system failures.

I must mention the impact of our litigation system on open disclosure initiatives.

The Australian Council of Quality and Safety in Health Care’s Open Disclosure Standard provides a template for hospitals and other health care organisations.

The more open a doctor or health organisation is, the less likely they will be sued. However, no one doctor or organisation or insurer takes heart from statistics when they are the one being sued, or the one who is responsible for the financial consequences.

So long as there is a ‘fault based’ adversarial framework in which complaints are to be resolved, the open disclosure practices are modified to protect individual service providers.

The AMA and the medical colleges and insurers are doing their best to improve on risk management and quality and safety in health care.

Together we have formed a Risk Management Working Party to develop a coordinated, integrated, national Risk Management framework that is acceptable to all Australian doctors and other interested parties.

So, another big question is: has all this work on risk management and quality and safety had any effect in the current climate of litigation?

First, I must put the question in context.

In Australia, we have an inequitable ‘hit and miss’ fault-based adversarial system. It is a system that provides lump sum amounts by way of compensation to those who suffer injury from medical negligence.

This climate dictated the need for all of the Government and industry reforms. We still operate in this climate.

But do we have to be locked into this system forever?

As the medical indemnity crisis showed, the fault-based system requires safeguards.

The fault-based system may deliver lump sum amounts to the small number of litigants who make it through the long legal maze, but the truth is that many severely injured patients don’t make it to court.


Safeguards like the Government’s package are therefore vital for several reasons:

• to keep the premiums down • by keeping the premiums down, doctors can afford to keep practising • communities can be confident they will have access to affordable health care • and risk management and quality and safety mechanisms will minimise adverse events.

Take away the safeguards, and the fault-based system will bring on another medical indemnity crisis.

We can all do without that uncertainty.

Australia has a high quality safe health system by world standards. But there is a limit to what risk management activities can achieve in an environment where hospitals are under funded.

As I said earlier, the fear of being sued places a limit on open disclosure of near misses and root cause analysis of system errors.

The act of being sued is a stigma for doctors and health professionals. It is a stain that won’t wash away…even when the accused is vindicated.

Being sued undermines integrity and professionalism. It ruins careers. It places enormous stress on families.

It is accepted that being open about errors and near misses and saying sorry will go a long way to reducing the incidents of litigation. That, however, is no comfort to those who, despite all their best efforts find themselves at the other end of a writ.

The system does not allow them to offer comforting words to a patient because might be taken as an ‘admission’.

Meanwhile, the doctors who are clearly, truly negligent in failing to meet the standard of work expected of them don’t get ‘dragged’ through the courts’ litigation system. Their cases are generally swiftly dealt with and settled before nearing a court door.

The ones who suffer are often the family doctors who have delivered hundreds of healthy babies over generations who fall victim to the inherent risks of their profession.

Delivering babies is no fun when there is a team of lawyers in the waiting room. Delivering babies is a risky business that requires great skill and dedication.

But many obstetricians go through their working life with a writ hanging over their head, sometimes for 20 years or more.

Even if the doctors win these cases, they have lost.

The only true winners from this system are the lawyers.

The plaintiff may get a lump-sum, but evidence shows that a lump-sum is not a ‘win’, especially where lifetime care at home is the issue.


The majority of the injured and severely disabled are totally reliant on government welfare.

The Federal, State and Territory governments can fix this…which brings me back to the long-term care scheme.

A National Scheme to provide for the long-term care needs of the severely disabled is needed. It is commonsense.

Governments at all levels are considering it, but I notice the early interest being shown by the Federal Government is on the wane. The only two reasons could be budgetary or ideological.

Budgetary fears are bunkum. A national system would save the community money.

Ideological concerns are imaginary. If the Government can push for a national industrial relations system, then a national long-term care scheme is a walk in the park.

All Australians would benefit.

And in another shock to the public, the legal and medical profession could work together for the common good.

But we need leadership from the very top - the Federal Government.

State Governments will not legislate to remove future care costs as a head of damages from a civil damages award until a statutory compensation scheme is in place to provide those care needs.

The State and Territory governments would not agree to a statutory scheme that admits people injured from medical accidents without Federal government support.

Long-term care scheme

Despite the recent signs that the Federal Government is dragging its feet on the issue, the time for a national long-term care scheme is upon us.

The reform process is underway and the goodwill is there.

It has been estimated that to admit medical mishaps to the Scheme would cost the Federal Government around $120 million a year. That would be $120 million a year well spent.

A properly structured long-term care scheme would reduce litigation costs and provide better care for the disabled.

It would make all the pain of the indemnity crisis worthwhile.

It would convince the doubters of the need for tort law reform.

It would be the crowning glory of the Government’s reform package.

The hard work has been done and we’ll receive further compelling evidence soon.


The Heads of Australian Treasuries, working to the Federal Government, are currently exploring a national or nationally coordinated long-term care scheme for the severely disabled.

An actuarial report on the viability the scheme is expected to be released shortly. This may well provide the Government with the catalyst to get behind the scheme actively and include medical mishaps.

The mechanism

I have talked about the budget and the ideology, but what about the actual mechanism to manage the scheme.

The AMA believes the Government would need to create a national entity to manage the long term care ‘head of damages’.

This would replace the current system whereby costs are awarded through the civil tort system by Australian courts by way of compensation to those injured by medical accidents.

The AMA is seeking the support of the legal profession for this mechanism.

The National Scheme would pool future care funds from all accident compensation schemes into a managed trust or trusts.

Compensation and rehabilitation schemes for those injured in motor vehicle accidents and in the workplace have already been established in some Australian States and Territories.

Patients born with severe disabilities - or severely injured in the course of medical treatment - could similarly benefit from statutory schemes that fairly and rationally deliver the care and services they need throughout life.

This could be done by extending existing State and Territory based schemes.

It would need Federal Government management and funding if the scheme is to include those severely injured by medical accident.

The current support systems fail the people who are severely injured from medical mishaps. It is inequitable and unfair.

A National Scheme would provide the care through statutory benefits and access to services rather than ‘hit and miss’ lump sums.

Once the Scheme is in place, the Federal Government can shift some of its current costs across.

These would include high cost claims, exceptional claims and premium support schemes currently in the medical indemnity reform package.

The States and Territories would need to legislate to remove the courts’ power to award lump sums for future medical, care and rehabilitation costs for people who have entered the National Scheme.

The same would apply for past medical and care costs already met by the Scheme.


The services required by patients and their carers will be met in a timely manner on a needs basis.

More people would be able to have life-long care in the home, which is where they want to be.

Doctors and hospitals would still be accountable for medical mishaps.

Fairer and more effective mechanisms would be put in place to ensure medical accountability.

Impact on State and Territory civil processes

As for the State and Territory civil processes, the Scheme would mean that cases would come before a court and be finalised at an earlier stage.

Why? Because there will be no need for cases to be delayed pending full assessments of a claimant’s long-term care needs.

For example, there would be no long delays waiting for injuries to stabilise.

There would be no long delays waiting for a child to become an adult before an accurate assessment can be made.

This in turn means that awards for past care and medical costs would be substantially reduced.

There would be greater incentive for out of court settlements and a substantial reduction in legal costs.

Impact on the medical indemnity industry

The Scheme does not mean an end to the current medical indemnity industry.

It would continue to provide the products it does today.

Premiums would be lower because of:

• the removal of the long-term care heads of damages • the reduced awards for past medical and care services because of immediate patient access to the national scheme • savings from shorter, speedier and fewer court hearings • and from reductions in legal and administrative costs.


And the cost to the taxpayer is low for such benefits.

The initial estimated cost to Government of $120 million per year could come down to around $80 million per year as a result of efficiency gains from pooling all funds into a single scheme.

The funding should extend to admit cerebral palsy children whose condition is not caused or contributed to by medical negligence.


These kids would otherwise rely on government welfare schemes. The Scheme would allow all cerebral palsy children to be treated equally.

The AMA envisages multi-source community funding of the national scheme by way of:

• direct contribution of Federal, State and Territory governments • the opening up of existing statutory schemes supported by Federal Government funding to provide for entry of injured patients • and by the pooling of existing funding for services currently accessed by the severely


This last point would include existing social security and welfare payments, community services, indemnity premiums, and Government subsidies to high cost claims and exceptional claims contributions.

The National Scheme offers a simple affordable solution. Currently, through its reforms, the government helps doctors pay their indemnity bills.

The doctors who have been helped by the government then pay the insurers.

The insurers who have been paid by the doctors who have been helped by the government then pay the few litigants who succeed with their cases.

And the same insurers who have been paid by the doctors who have been helped by the government pay the many lawyers involved.

The Scheme would put an end to this King Caracticus complexity.

We can deliver the same care to the injured patients by a long-term care scheme. Ideally the compensation for the catastrophically injured would be delivered to patients without patients having to prove fault.

And isn’t that what we all want?

The AMA has been pushing for a national long-term care scheme for many years.

We have been gaining support for this idea. Not just from doctors. From patients. From lawyers. The public. And from Governments.

The Scheme has not been simply dreamed up. We have looked at international experience.

Yes, we even looked at the New Zealand model. While not perfect, it gave us ideas.

I’m sure that if we got our national scheme up and running, the New Zealanders would learn from ours.

And I’m sure Helen Clark would not object if we invited John Farnham to sing at the launch.

Thank you.