Good morning ladies and gentlemen.
I will try to keep it "S and S".
Today's forum was announced by the Prime Minister in December last year in response to rising medical indemnity premiums.
And the objective of today's forum is to try to identify some of the drivers of long term health care and legal costs which impact on the price of medical indemnity and to discuss I hope innovative ways to handle medical claims designed to reduce the cost of claims. We should also explore better channels of communication between doctor and patient in circumstances where things go wrong and better methods of clinical risk management.
Now these are not simple tasks. The drivers of medical indemnity costs are complex and require some very serious examination.
Of course, the problem of increased premiums for doctors is not dissimilar to problems being experienced across the whole community. The availability of insurance at a reasonable cost is something which, until now, we have all pretty much taken for granted.
Senator Patterson has already mentioned the Ministerial Meeting on Public Liability insurance which I hosted last month. And I do believe that there are some initiatives coming out of that meeting which will be of relevance here.
We are not alone in an international context. According to a report by England's Comptroller and Auditor General in May 2001, provisions to meet the costs of clinical negligence claims doubled from £1.3 billion in 1996-97 to £2.6 billion in 1999-2000. Medical negligence poses particular problems when compared with other types of litigation. Distinguishing negligent harm from unavoidable outcomes or acknowledged risks when treating a patient is neither simple nor quick.
A fundamental question is whether the medical profession or the taxpayers, or what combination of medical profession and taxpayer, should be responsible for picking up the pieces from proven negligence.
But my role here today is to canvass ideas about financial viability for the medical indemnity market.
Medical indemnity is different from other types of insurance, because as it is currently structured it is not in fact insurance and it is not provided by insurance companies.
Unlike insurance products which impose a contractual obligation upon insurance companies to honour a policy when an insured event takes place, doctors are covered by a discretionary indemnity. That is, medical defence organisations have an absolute discretion to deny cover in any circumstance.
While I am advised that MDOs very rarely deny claims, the existence of discretionary cover has two important legal implications for doctors and the community.
Firstly, MDO `policyholders' - for want of a better word - are not currently protected by the body of consumer protection law which relates specifically to insurance - such as the Insurance Contracts Act and the Financial Sector Reform Act.
Secondly, MDOs avoid prudential regulation, as they are not insurance companies in the technical sense of the word. This topic of course is very close to my heart as the Minister responsible for prudential regulation and the general stability and viability of the insurance industry.
Prudential regulation is fundamentally concerned with the financial viability of financial institutions.
A fundamental issue is whether medical indemnity providers should work in a regulated environment, as do general insurers, and if so what framework would best underpin the delivery of medical indemnity cover.
While MDOs are not regulated by APRA, each of the major MDOs operating in Australia are associated with regulated insurance companies. As a result, APRA has some limited information on the financial viability of the MDO sector as a whole through its supervision of the subsidiary insurers of MDOs.
So APRA, which comes directly under my portfolio responsibility, is currently engaged in a process of consultation with the MDOs. The consultation is examining ways to bring these entities under APRA supervision and to subject them to prudential requirements, including the requirements for capital adequacy and liability valuation. The purpose of these requirements is to ensure to the extent possible, that insurance companies have sufficient funds to pay all claims by providing a buffer against unexpected events including adverse claims experience.
APRA will be speaking on this topic a little later in the morning.
From my perspective however, prudential regulation is essential to ensuring ongoing financial viability for medical defence organisations and it will determine in the long run whether or not insurance is ultimately available at any cost for this sector.
Similarly, the capacity to curtail the rising costs of medical indemnity claims will be one of the factors that will determine whether commercial insurers enter the medical indemnity arena and perhaps most importantly whether reinsurance will be available.
Reform of the law and better claims handling which may stabilise the spiralling costs and ultimately impact on premiums are primarily a matter for State and Territory governments.
For the Commonwealth's part, I have already announced amendments to the tax legislation which will make structured settlements more attractive and available. Legislation will be introduced in the winter sittings of this year to provide a tax exemption for certain annuities provided as part of a personal injury compensation payment. It will provide much more flexibility.
Structured settlements mean that the money paid as compensation will last for as long as the claimant lives. It means there will be greater capacity for injured people and their families and less wastage of compensation funds paid. I recently gave a speech in which I described this process as no windfall, no shortfall.
It is pleasing to see that all of us here today with a stake in this issue have come together. I suspect there will be a great deal we can agree upon as we consider the systematic and systemic changes necessary to fix a system that has the wobbles.
We are all charged with finding a way forward so that the community can continue to receive medical services, patients can receive compensation for their injuries and we find a framework that can deliver these things at an affordable cost.
I am confident that we are all equal to the task and I wish you all well in the discussions that will follow.
Thank you.