The final details of the Government’s IBNR Indemnity Scheme were announced today by the Minister for Revenue and Assistant Treasurer, Senator the Hon Helen Coonan.
Today’s announcement details significant additional benefits for doctors including exemptions for certain retirees from the IBNR indemnity contribution. The Government is also providing further assistance to GP registrars undertaking procedural training.
The exemption for retirees and the assistance for GP registrars provides around a further $120 million in Government assistance to doctors over 10 years. This is on top of the previously announced package totalling $58 million per annum.
Senator Coonan said, “Retiring doctors aged 65 years or more, and earning less than $5,000 in medical income, will now be exempt from the IBNR indemnity contribution.”
“While Doctor organisations have indicated that working doctors would be willing to pay a higher IBNR indemnity contribution to fund the cost of such an exemption, the Government has gone much further than this. The cost of this exemption for retirees will be borne by the Commonwealth.”
Exemptions from the IBNR indemnity contribution will also be provided to doctors who have purchased comprehensive retroactive cover prior to 1 July 2003, and to doctors who have had their entire liabilities covered by a State or Territory Government.
“Doctors who have left private practice before 1 May 2002 and taken up full time salaried public hospital positions will be exempt,” Senator Coonan said. This exemption applies even if they continued to treat pre-booked patients for a short time after 1 May 2002.”
It has also been decided that in 2003-04, the Government’s IBNR Indemnity Scheme will only apply to United Medical Protection Limited (UMP) members.
“This means that no IBNR contribution will apply in 2003-04 to doctors who were members of other MDOs as at 30 June 2000,” Senator Coonan said.
She also added that the Australian Medical Association’s push for the taxpayer to pick-up all of the unfunded IBNR liabilities of UMP could not be supported on equity grounds.
“The AMA’s proposal would be unfair to members of other MDOs who are taking steps to fund their IBNRs without the need for Government assistance,” Senator Coonan said.
The IBNR Indemnity Scheme was put in place after UMP entered provisional liquidation with unfunded liabilities in the order of $460 million. Before putting the IBNR Indemnity Scheme in place, the Government sought and received assurances from the medical profession that if the Government provided support to allow UMP to continue trading, doctors would be willing to make a financial contribution to assist.
Without the IBNR Indemnity Scheme, it is very probable that UMP would have been placed into full liquidation, with doctors required to meet future claims out of their own pockets. This situation presented a very real possibility that doctors would have faced bankruptcy and patients would not have received the damages to which they were entitled.
“The Government also continues to work with the States and Territories to examine the current and possible alternative arrangements for providing long-term care to people who suffer catastrophic injury. The Ministerial meeting in Adelaide next week, which I will chair, is expecting to receive a report on the type of injuries and services that could be included in a scheme and the associated costs.”
“The Federal Government has also been working with States and Territories for nearly eighteen months now, to bring the laws of negligence back into balance with public expectations and opinion,” Senator Coonan said. This has led to agreement for significant and long-term changes to the rules applying in cases involving negligence – including claims against doctors.
“There is now a blue-print for reform and the Commonwealth has called on the State and Territory Governments to progress these changes to the law as quickly and consistently as possible.”
“The Government has fully upheld its end of the bargain to help resolve medical indemnity problems. It is now up to the doctors, as well as the States, Territories and insurers, to play their part.”
Senator Coonan said doctors who were members of UMP as at 30 June 2000 will be contacted directly by the Health Insurance Commission (HIC) in the next few weeks.
The HIC will be sending invoices for the IBNR indemnity contribution payment due by 1 November 2003. It will also send full details about all the exemptions and how to pay.
Initial indications are that four out of five potentially liable members will pay no more than $1,500 a year. This amount is also tax deductible.
Full details of the Government’s announcement are at Attachment A. Details of the full suite of measures implemented by the Government to address both the safety and affordability of medical indemnity are at Attachment B.
Further information on today’s announcement and other components of the Government’s medical indemnity package are available at: www.health.gov.au/medicalindemnity or freecall 1800 007 757.
ATTACHMENT A: DETAILS OF TODAY’S ANNOUNCEMENT
Under the Government's IBNR Indemnity Scheme - one of several measures taken by the Government to address uncertainties surrounding the medical indemnity industry - the unfunded IBNRs of Medical Defence Organisations (MDOs) have been assumed by the Government to ensure that member doctors are not exposed to the risk of unmet "historical" claims.
The cost of the IBNR Indemnity Scheme will be recouped from members of relevant MDOs over time, via the IBNR indemnity contribution, after the relevant exemptions are taken into account.
UMP will be the only MDO to participate fully in the IBNR Scheme in 2003-04. Therefore, the indemnity contribution will only apply to doctors who were members of United Medical Protection Limited (UMP) at 30 June 2000. This means that no IBNR contribution will apply in 2003-04 to the doctors who were members of other MDOs at 30 June 2000. The Government will assume responsibility for meeting the unfunded IBNR liabilities of UMP as at 30 June 2002, estimated at around $460 million in net present value terms.
The Government has announced today that doctors over 65 years old, and earning less than $5,000 in medical income, will be exempt from the requirement to pay the indemnity contribution. The exemption will apply to any qualifying doctor who retired after 31 December 2001 or who retires during the life of the IBNR Scheme. The cost of this exemption, which will be borne by the Commonwealth, is estimated at nearly $120 million in nominal terms. The Government previously announced that all doctors who retired before 31 December 2001 would be exempt from the contribution.
Doctors who have purchased comprehensive retroactive cover prior to 1 July 2003 in the form of a discretionary arrangement, which replaces their UMP cover, will be exempt from the contribution subject to the retroactive cover being converted to a contract.
Doctors will also be exempt where their entire IBNR liabilities have been
picked up by a State or Territory government. An exemption will also exist
for doctors who have left private practice before 1 May 2002 and taken up
full time salaried public hospital positions. This exemption applies even
if they continued to treat pre-booked patients for a short time after 1 May
2002. These exemptions build on previously announced exemptions for doctors
who were students in 2000, and for deceased estates.
Under the IBNR Indemnity Contribution legislation, which was passed by the
Commonwealth Parliament in December 2002, doctors who belonged to UMP as at
30 June 2000 will be required to repay the Commonwealth’s IBNR Indemnity
Scheme assistance over a period currently estimated to be ten years, unless
they qualify for an exemption. Annual contributions are to be equal to 50
per cent of the subscriptions that UMP members paid to UMP in 2000-01.
The estimate of unfunded liabilities will be reviewed annually to take account of the impact of tort law and other reforms. Importantly, UMP doctors will never pay a higher contribution in any year than the amount they pay in 2003-04.
The Government is also extending the Medical Indemnity Subsidy Scheme to cover 80 per cent of the marginal premium cost above non-procedural GPs' premiums for GP registrars undertaking procedural training. This will help encourage GP registrars to undertake further training, at a cost to the Commonwealth Government of around $1 million per annum.
IBNR contributions will also be tax deductible and there is an option for doctors to seek a once off deferral of the payment of the IBNR contribution in any one year.
Subsidies provided by the Government to obstetricians, neurosurgeons, GP proceduralists and GP registrars undertaking procedural training will also apply to the IBNR indemnity contribution.
The Australian Government Actuary has advised the Government that two other MDOs - the Medical Defence Association of Victoria and the Medical Defence Association of South Australia – had reported unfunded IBNRs as at 30 June 2002.
A decision on these organisations has been delayed and as a result, members of these two MDOs will not be required to pay a contribution in the 2003-04 financial year.
Preliminary estimates suggest that:
- Non-procedural GPs subject to the IBNR indemnity contribution will pay an average of around $970 per year;
- Procedural GPs subject to the IBNR indemnity contribution would have been paying an average of around $3,700 per year in the absence of the Premium Subsidy Scheme. However, after premium subsidies are accounted for, the cost of the contribution will fall to an average of $2,300 per year;
- Obstetricians subject to the IBNR contribution would have been paying an average of around $11,800 per year in the absence of the Premium Subsidy Scheme. However, after premium subsidies are accounted for, the cost of the contribution will fall to an average of $8,100 per year for obstetricians in metropolitan areas and $5,900 for those in rural areas.
- Neurosurgeons subject to the IBNR indemnity contribution would have been paying an average of around $15,700 per year in the absence of the Premium Subsidy Scheme. However, after premium subsidies are accounted for, the cost of the contribution will fall to an average of $9,700 per year.
The Government has also decided to change the imposition date for the IBNR contribution from 1 August to 15 August, to ensure that regulations giving effect to today's announcement are in place before the contribution is imposed.
ATTACHMENT B: PACKAGE PREVIOUSLY ANNOUNCED
The measures announced today build on the Commonwealth Government's comprehensive and generous package of initiatives to improve the safety and affordability of medical indemnity insurance for doctors.
These include:
- through the High Cost Claims Scheme the Government will, at a cost of around $19 million per year, fund 50 per cent of the insurance payout by medical indemnity providers over and above $2 million for claims notified on or after 1 January 2003. This reduces costs to medical insurers, and reduces upward pressure on premiums;
- the Government will establish a Scheme, to be reviewed after three years, to meet 100 per cent of any damages payable over a threshold of $20 million for claims notified from 1 July 2003 (or a threshold of $15 million for claims notified in the period 1 January 2003 to 30 June 2003), with the amount to be recovered by a post-event charge. This will protect doctors from being personally liable for amounts above their level of insurance cover, should they be subject to an exceptionally large claim;
- the Government will provide approximately $38 million per year in subsidies to obstetricians, neurosurgeons and GP-proceduralists who undertake Medicare billable procedures. This removes pressure on those doctors facing the highest medical indemnity premiums;
- the Government's assumption of UMP's unfunded IBNRs of around $460 million, providing doctors with certainty of coverage, and patients with insurance payouts;
- the Government's guarantee to UMP to 31 December 2003, which has allowed UMP to continue to process claims and to renew policies, allowing members of UMP to continue to practise in the knowledge that claims can be met;
- since 1 July 2003, providers of medical indemnity have been prudentially regulated along with other insurance providers. Doctors now have access to contracts of insurance that are legally enforceable, rather than cover based on a discretionary arrangement from their medical indemnity provider;
- the Government has made regulations to put in place minimum standards of cover that must be offered to medical practitioners ceasing practice in 2003-04. A longer-term doctor-funded approach to retirement cover will be in place by 1 July 2004, providing reassurance to doctors that suitable medical cover will be available for them in the future, for which they will not pay material premiums after they retire;
- the Government has also taken steps to monitor the affordability of medical indemnity premiums by providing the Australian Competition and Consumer Commission with an additional $1.5 million to help monitor medical indemnity premiums and determine whether they are actuarially and commercially justified; and
- the Government is continuing to work with States and Territories to ensure that the commitments made by the States to reform their laws of negligence are implemented. Legal reform is a key part of reducing premiums. The Commonwealth calls on the States and Territories to continue their reform efforts.