Ladies and Gentlemen.
1. Firstly, let me say thank you to the Association for the invitation to be here with you today.
2. As health care professionals, many of you will understand the great challenge of managing risk and delivering quality outcomes while still taking care of the bottom line.
3. Governments face the same challenges on a daily basis, only on a much larger scale. As the elected representatives of the people Governments must balance the interests of all parts of the community.
4. Health policy is an area in which it is difficult to find the right balance. Nothing is of more value to people than their own health and that of their family.
5. The community expects to have access to the highest quality health care on offer. However, health care, like most things in life, is not free.
6. In the time I have with you today, I would like to outline steps taken by the Federal Government to ensure that high quality health care services can be provided to all Australians on a sustainable basis into the future.
7. In this regard, I intend to consider the question of affordable health care from two aspects directly relevant to my own Treasury portfolio:
- appropriate health expenditure as part of the Government's fiscal strategy, and
- ensuring medical practitioners, private hospitals and other participants in the health care industry have access to affordable medical negligence and public liability insurance.
Government Spending on Health
8. The Howard Government is proud of its sound record of economic management. Economic growth provides the most effective basis for improving the lifestyle of all Australians.
9. To ensure that the good work of the past six years is not lost, the Government must continue to exercise sound policy management to ensure fiscal sustainability.
10. The Government has taken a long term approach to economic management. To ensure strong government finances over the next 40 years we need to plan for the future now. While Albert Einstein was quoted as saying that he "never thought of the future, because it would come soon enough", Government's cannot be that relaxed and must plan for future generations.
11. With this year's Budget, the Government released Australia's first Intergenerational Report. This report provides an assessment of the Commonwealth's fiscal challenges up until 2042.
12. Australia's population, like most industrialised countries, is ageing. This is already beginning to place some pressure on government funding for aged care services and income support for older people.
13. Over the next 40 years, without adjustment, Commonwealth Government spending is likely to rise significantly.
14. Assuming that revenue remains around the current share of GDP, rising levels of spending would eventually push the budget into deficit. This deficit could grow to 5 per cent of GDP or $87 billion in today's dollars by 2042.
15. A significant source of likely future budget pressure is continuing rapid growth in health spending.
16. Over the past three decades, Commonwealth health spending has more than doubled as a percentage of GDP.
17. In 2001-02, health spending represented 4.0 per cent of GDP.
18. In 40 years time, the proportion of Commonwealth health spending is forecast to be 8.1 per cent of GDP.
19. Although population growth and ageing affect health spending, these factors account for only around one-third of the recent growth. Much of the growth in health spending has come from the demand for new technology and treatments.
20. Australians now expect to access more expensive diagnostic procedures and new (and more expensive) medications listed on the Pharmaceutical Benefits Scheme. Unless addressed, these trends are likely to continue to drive up health spending over the next four decades.
PBS
21. For over 50 years, the Commonwealth has subsidised pharmaceutical products through the PBS.
22. The Intergenerational Report shows spending on the PBS is the fastest growing component of Commonwealth health expenditure.
23. Over the last decade, spending on the PBS grew by 250 per cent, from $1.2 billion in 1990-91 to $4.2 billion in 2000-01.
24. Over the next 40 years, PBS expenditure, as a proportion of GDP, is projected on past trends to grow by more than four times its current level.
25. The Commonwealth pays for the majority of the cost of prescription medicines listed on the PBS. People who have a health concession card currently pay no more than $3.60 for a prescription - others currently pay no more than $22.40 per prescription.
26. Patient co-payments represent only a small part of the cost of many PBS medicines. For example:
- Humulin NPH, widely used in the treatment of insulin dependent diabetes costs $229.17 per prescription.
- Avonex, a drug used for the treatment of multiple sclerosis costs $1,090.85 per prescription. A patient on this drug would normally take 13 prescriptions per year.
- Zyban, used for the treatment of nicotine addiction, costs $238.89 per prescription.
27. New drugs with high costs are coming on to the Pharmaceutical Benefits Scheme all the time.
28. It is essential that action is taken now to ensure that the PBS can continue to provide timely, reliable and affordable access for Australians to necessary and cost-effective medicines.
29. To do otherwise would represent a serious abuse of intergenerational equity. The Government is committed to ensuring that measures are implemented to manage the growth of the PBS.
30. All of us, Government, consumers, industry, doctors, pharmacists and health care professionals, have a shared responsibility to contribute to reducing the cost of the PBS.
31. As part of the 2002-03 Budget, the Government proposed to introduce a small increase in patient co-payments.
32. The Budget measure proposed an increase of just $1 per prescription for concession card holders and $6.20 per prescription for general patients. This increase in co-payments would, if the Senate passed the legislation, help to secure the long-term future of the PBS.
33. The Government also introduced a range of other Budget measures to ensure suitable conditions are placed on new and existing PBS medicines and that these medicines are prescribed appropriately.
34. The Government is seeking price reductions for generic products listed on the PBS in return for facilitating greater use of generic medicines. The Government is introducing further initiatives to identify and target pharmacy fraud and strengthening and broadening the existing doctor shopping surveillance conducted by the Health Insurance Commission.
35. Without these changes, we will be burdening future generations with a PBS system that may not be financially sustainable.
Medical Negligence and Public Liability Insurance
36. Returning to my earlier comments on the value that individuals place on their own health and that of their families, it is not surprising that when things go wrong in a medical context, patients look to be compensated.
37. There is nothing wrong with compensation per se. There is a legitimate community need and expectation that those injured though the negligence of another should be able to look to the wrongdoer for compensation.
38. However, the existing system of compensation for negligence through the courts relies on the proposition that generous court awards are ultimately paid by insurance companies with deep pockets.
39. This proposition comes unstuck when we realise that the deep pockets of insurers are in fact funded through our insurance premiums. Large payouts flow through to all policyholders in the form of higher premiums.
40. There is a widely held view in the Australian community that insurance has become unaffordable and unobtainable and that this is due in large part to the operation of the legal system.
41. In the medical context, this has manifested in providers of medical services questioning their ongoing willingness or ability to undertake medical practice.
42. This phenomenon is not occurring only in Australia. It is often said that we follow the US in terms of medical litigation and unfortunately, this appears to be the case.
43. Let me quote from an article last week in the New York Times:
"Increasing malpractice costs over the last two years have led doctors to order batteries of costly exams and limit risky procedures; many doctors decided to retire early. Now the costs are directly affecting medical institutions and the care they deliver to patients ... in all, more than 1,300 health care institutions have been affected, ..."
44. The article goes on:
"Many obstetricians and surgeons are restricting themselves to low-risk procedures. Still other specialists have become consultants, providing advice but leaving actual treatment to others to avoid medical malpractice insurance altogether."
45. It is probably true to say that in Australia the perception is that the law of negligence, as applied by the courts, is unclear and unpredictable. It has become too easy for plaintiffs in personal injury cases to establish liability for negligence on the part of defendants and damages awards in personal injuries cases are frequently too high.
46. In this context, it is the appropriate role of Government to intervene to ensure that the balance between competing interests has not strayed too far in favour of one group in the community. The fact that ordinary activity and essential services are threatened provides a clear indication that the present arrangements are out of whack.
47. In recognition of this role for Government, the Howard Government, in close cooperation with State and Territory Governments, has worked to develop a nationally consistent solution to the current crisis in Public Liability Insurance.
48. So far, I have convened two meetings with my State and Territory counterparts to thrash out some practical solutions to the current problems.
49. Research commissioned for these meetings has shown that Australia wide, the average size of bodily injury claims has increased by 10 per cent every year since 1993. This continual increase in the cost of claims has contributed to a rapid increase in insurance premiums and has meant that some insurers have left the market all together.
50. Referring again to the article from the New York Times, there are clearly similarities between what is happening here and overseas. In the US:
"From 1995 to 2000, the average jury award jumped more than 70 percent, to $3.5 million, and a few claims since then have run to more than $40 million, ..."
51. Reforms to the common law (or tort law) to reduce the uncertainty surrounding court awards and settlements and reforms to streamline the legal system are essential to stabilise the insurance market.
52. The States have responsibility for the common law and State courts. They have agreed to take action to reform the laws and court procedures in their jurisdictions, however, the pace of and commitment to reform varies significantly between State and Territory Governments.
53. To assist State and Territory Governments to move forward in the difficult area of law reform, an expert Panel, chaired by Justice David Ipp, was established to review the law of negligence and make recommendations to Government for reform. The Panel's advice to Government will be delivered over two reports.
54. In its first report to Government released on Monday of this week, the Panel reported, among other things, on matters relating to professional negligence and in particular, medical negligence.
55. The panel noted that evidence suggests that the costs of delivering compensation, for example, legal fees and insurers' administrative costs, make up as much as 40% of the total costs of the personal injury liability system.
56. The panel also noted that only a small proportion of the sick, injured and disabled recover compensation through the legal liability system, and only a very small proportion of deaths result in the payment of compensation.
57. In making recommendations to Government, the Panel has sought to strike a balance between the interests of injured people and the interests of injurers that seems to be fair and likely to be widely accepted in the community at large.
58. The Panel's view is that in order for law reform to be effective, reforms to personal injury law must provide a uniform scheme regardless of the legal category (tort, contract, equity, under statute or otherwise) under which a claim is brought.
59. The Panel strongly supports measures that would bring the law in all Australian jurisdictions as far as possible into conformity.
60. In the area of medical negligence, the primary issue identified by the Panel is what standard of care should be applied when assessing whether or not a medical practitioner has been negligent.
61. The Panel has recommended a test for the standard of care that would be applied in the provision of, or failure to provide, treatment, and a separate test for determining whether the provision of information to patients prior to treatment was adequate to enable informed consent.
62. The Panel has recommended the reinstatement of a modified version of the Bolam test for determining the standard of care in cases in which a medical practitioner is alleged to have been negligent in providing treatment to a patient.
63. This test would mean that a medical practitioner would not be negligent if treatment were provided in accordance with an opinion widely held by a significant number of respected practitioners in the field, unless a court considers that the opinion was irrational.
64. This requires a court to defer to widely held medical opinion unless in an exceptional case, the expert opinion were both widely held and irrational.
65. This formulation will give doctors as much protection as is desirable in the public interest. It will protect medical practitioners in cases of medical misadventure, but will leave open cases where a medical practitioner has acted negligently and those actions are not supported by a wide body of medical opinion.
66. The Panel has recommended that a medical practitioner's duties to inform should be expressed as duties to take reasonable care and that these duties should be divided into proactive and reactive duties to inform.
67. The proactive duty to inform is a duty to take reasonable care to provide the information that a person in the patient's position would reasonably require to give informed consent to a procedure taking place.
68. The reactive duty to inform requires the medical practitioner to take reasonable care to give the patient such information as the medical practitioner knows or ought to know the patient wants to be given before making the decision whether or not to undergo the treatment.
69. A medical practitioner would not be required to provide information about obvious risks.
70. The Panel has also made recommendations on some procedural issues.
71. The Panel noted that there is a widespread perception that, in many instances, expert witnesses consciously or sub-consciously slant their testimony in favour of that party which retains them.
72. The Panel recommended that Governments give further consideration to the use of Court appointed experts (along the lines now operative in the United Kingdom) on a three year trial period.
73. In addition, the Panel recommended that Governments consider the introduction of a rule requiring the giving of notice of claims before proceedings are commenced.
74. This would be based on the '90 day rule', applying in South Australia. This rule requires a plaintiff to give at least 90 days notice to a defendant of a proposed action. The notice must provide sufficient detail of the claim to enable the defendant an opportunity to settle the claim before proceedings commence.
75. Another area in which the Panel has made recommendations, which, although not confined to medical practice, will have a significant impact on medical litigation, is the statute of limitations.
76. The Panel has recommended that the limitation period should be three years from the date of discoverability and that claims would become statute barred on the expiry date of the limitation period or 12 years after the event on which the claim is based (`the long stop period'). However, to ensure fairness in circumstances of latent damage, the court would have discretion to extend the long-stop period up to three years after the date of discoverability.
77. The Panel makes recommendations with respect to the treatment of minors, persons under a disability and the deceased. Except in very limited cases, the standard limitation period would apply.
78. The Panel will make a range of further recommendations in its second report to Government due at the end of this month. The recommendations, if implemented, would provide a platform to bring claims for negligence more into line with community expectations.
79. Ultimately, it will be a matter for State and Territory Governments to decide whether they intend to implement the proposals.
80. On 27 September, I will again meet with my State and Territory colleagues to discuss how the measures contained in the Panel's report might be implemented.
81. You can be assured that I am keen to maintain the momentum for reform and I would encourage those of you with an interest in this issue to make your views known to State and Territory Governments.
Conclusion
82. In conclusion, life is all about balance. If, as a society, we want a rolls royce system of health care and compensation for injured parties, we must be prepared to pay for it.
83. In the words of the 18th century writer, Thomas Paine, "What we obtain too cheap, we esteem too lightly".
84. In the case of Government spending on health, the Government is taking a long term approach to planning for the needs of our community.
85. All of us have a roll to play. All of us want and expect access to the best available treatment. To do this, we must ensure that health services remain affordable for today's and future generations.
86. In the case of insurance, it would seem that the levels of compensation currently being awarded are out of step with what the community sees as being reasonable and appropriate and that we are not prepared to pay the insurance premiums necessary to support the current system. The proposals put forward by the Ipp report provide a reasonable basis for taking this issue forward to a common sense outcome.
87. The medical industry is more than an important part of the Australian economy - it is a vital part of the Australian community. We are all responsible for making sure it continues to provide the services we all expect. Thank you for your time today, I hope that you enjoy the rest of the conference.
Thank you.