Medical indemnity - PM's statement (AMA State Media)
23 May, 2003
Media Release
Prime Minister John Howard
Medical Indemnity - Certainty for Doctors
Today I announce further details of measures to ensure that medical
practitioners have access to adequate and affordable retirement cover,
and a new measure to address concerns by doctors about exposure to so
called 'blue sky' claims. These extensions to the government's comprehensive
medical indemnity package will allow medical practitioners to continue
to practise with increased certainty about their medical indemnity insurance
cover.
The government has introduced an improved regulatory regime for medical
defence organisations (MDOs) and other medical indemnity providers. The
Medical Indemnity (Prudential Supervision and Product Standards) Act
2003 introduces a prudential regime that will take effect on 1 July 2003.
The Act will deliver increased certainty for doctors and their patients
that claims will ultimately be met. It provides this protection by prudentially
regulating the MDO's insurance operations under the same standards as
general insurers, and by requiring that medical indemnity cover is offered
as a legally binding contract for specified levels of cover rather than
as a vaguely defined promise.
'Blue Sky' Claims
The prudential regime will require MDOs to specify the level of cover
they offer because in practice no insurer has the unlimited capital needed
to underwrite 'unlimited' cover. The government recognises however that
doctors are concerned that the move to contracts of medical indemnity
insurance may potentially leave them financially exposed to large awards
and settlements in the future (the so-called 'blue sky' issue). In particular
doctors are concerned that the long tailed nature of medical negligence
claims - which in extreme cases can take over twenty years to be finalised
- and the high rate of claims 'inflation' may leave them personally liable
for that portion of future payouts that exceed their level of cover.
It is essential that the States and Territories continue as a high priority
with effective and substantial tort law and legal system reforms. Such
reforms will help reduce the number, size and duration of claims. They
will have significant flow-on benefits to the availability, adequacy
and affordability of medical indemnity cover, while at the same time
having due regard to ensuring fair and reasonable compensation for victims.
I am announcing today that the government will establish a Blue Sky
Scheme to assume liability for 100 per cent of any damages payable against
a doctor that exceeds a specified level of cover provided by that doctor's
MDO or other medical indemnity provider. These arrangements will apply
to payouts related to either a single large claim or to multiple claims
that in aggregate exceed the cover provided by the doctor's MDO, and
will apply to claims notified under contracts-based cover since 1 January
2003.
In terms of the threshold of contract cover above which the government
will assume liability for payouts, the government's objective is that
providers of medical indemnity cover be encouraged to offer the maximum
amount of cover that can feasibly be sourced from the commercial reinsurance
market and provisioned for under the Act.
The Blue Sky Scheme will be funded by an ex post charge imposed on the
MDO that insures the doctor against whom the damages are payable; this
is consistent with existing arrangements where the MDOs tend to make
ex post 'calls' on their members to meet any unfunded liabilities. Rapid
action by the States and Territories to progress tort law reform and
develop effective damages regimes will reduce the excessive claims 'inflation'
of the last decade, and will reduce the likelihood that doctors will
need the Blue Sky Scheme. Claims and payouts above contract limits should
be rare if they occur at all, and given the lags in finalisation of claims,
if any charge is payable it may not be until many years into the future.
The government will review the Blue Sky Scheme after three years, to
determine whether it remains necessary in the light of State and Territory
tort law reform and claims trends. The Commonwealth will be closely monitoring
State and Territory progress in delivering on tort law reform, and it
also encourages the medical profession and the broader community to engage
State and Territory governments on this issue.
Details of the new Blue Sky arrangements will be finalised in the near
future in consultation with the medical profession and medical defence
organisations.
Retirement Cover
The market move over recent years from "claims incurred" to "claims
made" cover has heightened concerns by doctors about the availability
and affordability of retirement cover, and the ability to continue to
'pre-fund' that cover during their working life.
The government has previously announced that it will regulate by 1 July
2003 to require that appropriate minimum "run-off" cover is offered to
medical practitioners ceasing practice in 2003-04. We also announced
the commissioning of a study of options to examine broader longer-term
arrangements for retirement cover, in consultation with the AMA and MDOs.
Today I am announcing details of the minimum interim retirement cover
requirements applying to medical indemnity providers. It is important
to note that these are minimum requirements. Importantly, the government
anticipates that MDOs that haven't already announced details of the retirement
cover they will offer members in 2003-04 will be doing so soon, and that
the cover they offer will extend beyond the stipulated minimum requirements.
The government will make a regulation under the Medical Indemnity (Prudential
Supervision and Product Standards) Act 2003 before 1 July 2003 that will
prescribe the following minimum standards of cover that must be offered
to medical practitioners ceasing practice in 2003-04:
- cover must be offered in the event of the death or permanent disablement
of the medical practitioner or the permanent retirement as a medical
practitioner at or after 60 years of age;
- an offer of cover must be made initially for the remainder of the
term of the medical indemnity contract held prior to the practitioners
death, disability or retirement and then the offer renewed annually
for at least 6 years; and
- the cover offered upon annual renewal must be offered on the same
terms and conditions (other than in relation to price) as medical indemnity
cover offered by the insurer to practising medical practitioners in
the year of renewal.
In relation to medium to longer-term retirement cover arrangements,
I wish to reassure medical practitioners that the government is committed
to and will facilitate doctors having access to arrangements that ensure
doctors do not have to pay material premiums after they retire. A longer
term approach to secure appropriate and affordable ongoing retirement
cover arrangements will be in place by 1 July 2004.
In consultation with MDOs and the medical profession the government
is examining several options as a high priority, ranging from continued
market provision underpinned by minimum retirement cover standards to
a government guaranteed statutory retirement cover scheme funded by doctors.
Background on the government's medical indemnity package is available
from the Medical Indemnity Information Phone Line on 1800 007 757 and
the Department of Health and Ageing's website at www.health.gov.au.
 Media
Contacts
|
