The Prime Minister's announcement on medical indemnity addresses the residual concerns of doctors on 'run-off' cover and 'blue sky claims', the Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, said today.
"Doctors will now have confidence to continue in practice after 1 July when the new arrangements for medical indemnity come into force.
"Doctors have been worried that the move to legally enforceable contracts of insurance will expose their personal assets to awards for damages in excess of the contract limit. Today's announcement means that doctors will no longer be at risk from such 'blue sky' claims.
"The Government will assume liability for amounts above the insured limit with any payments made under this arrangement funded by the doctor's insurer after the funds have been paid by the Commonwealth.
"The Australian taxpayer will not be meeting the costs of medical negligence and the scheme will be reviewed after three years", Senator Coonan said.
The risk that such an arrangement will be called upon is very low.
Medical indemnity cover of $20 million is currently available, and higher cover limits will be offered in the future. The highest ever award for damages in Australia was made in New South Wales for less than $15 million. Recent reforms to the law of negligence in that State will have the effect of placing downward pressure on compensation payouts.
Doctors have also been concerned about the cost of insurance cover in the event of retirement, disability or death. Today's announcement sets out a two-stage response to the issue of retirement or 'run-off' cover.
In the first stage, a regulation will be made before 1 July requiring retirement cover to be offered to practitioners ceasing practice in 2003-04. This cover will be required to be offered on an annually renewable basis for at least 6 years after a doctor ceases practice on the same terms and conditions (other than price) as that available to practising doctors in the year of renewal.
Medical Defence Organisations have previously provided this cover on a cross-subsidised basis at a nominal cost. Indications are that this will continue after 1 July with the cost of retirement cover for longer-term members as low as $300 per annum.
The second stage will be in place by 1 July 2004 and will ensure that doctors have access to appropriate and affordable coverage in retirement. The Government is committed to doctors not having to pay material premiums after retirement.
"These final components of the Government's package complement the significant reforms undertaken within the medical indemnity sector over the past year. Now, any doctor who wishes to continue in practice after 1 July has no reason to retire," Senator Coonan said.
Attachment
SNAPSHOT OF MEDICAL INDEMNITY PACKAGE
The Government's medical indemnity package is comprehensive and addresses both the affordability and safety of doctor's professional indemnity insurance. A summary of measures announced is set out below.
Safety
- A Government guarantee to United Medical Protection and its subsidiary Australasian Medical Insurance Limited until 31 December 2003. The UMP Group is the MDO for around 50 per cent of Australia's doctors and went into provisional liquidation on 3 May last year. Without the guarantee, the UMP Group would likely have been placed in full liquidation placing doctors and the community at risk of un-met claims. The Government's guarantee has not yet been called upon and there are indications that UMP may resume normal trading later this year.
- Through the IBNR scheme, the Commonwealth has assumed certain unfunded liabilities of MDOs and will recoup the cost over time through levies on members. This will shore up the financial position of MDOs and particularly, the UMP Group. Without this arrangement, doctors would likely have had to fund these liabilities through calls. The levy arrangements allow the costs to be spread over time.
- Providers of medical indemnity will have to be prudentially regulated in the same way that insurance companies are regulated. Doctors will have access to contracts of insurance which are legally enforceable, rather than the discretionary arrangements that exist now which provide no certainty to doctors that claims will be met.
- Retirement cover will be provided to doctors retiring in 2003-04 and subject to specified minimum requirements. A longer-term approach to retirement cover will be in place by 1 July 2004.
- The Government will assume liability for 100 per cent of a claim that exceeds a specified level of cover provided by a doctor's MDO, with the amount to be recovered by a post event impost on the MDO.
Affordability
- The Commonwealth will be providing subsidies to obstetricians, neurosurgeons and procedural GPs to make their premiums more affordable. These particular groups of doctors have low incomes relative to premium costs.
- The Government will be providing reinsurance to medical indemnity providers through the High Cost Claims Scheme. The Commonwealth will fund 50 per cent of all claims in excess of $2 million up to the level of the insured limit.
- The Federal Government will continue to work with States and Territories to ensure that the commitments made by the States to reform their laws of negligence are implemented.