Medical Indemnity Country: Australia Partner Institute: Centre for Health, Economics Research and Evaluation (CHERE), University of Technology, Sydney Survey no: (1)2003 Author(s): Marion Haas Health Policy Issues: HR Training/Capacities Current Process Stages Idea Pilot Policy Paper Legislation Implementation Evaluation Change 1. Abstract The Australian government introduced a subsidized scheme of indemnity insurance to prevent doctors ceasing to practice and to reform the medical indemnity insurance market. The scheme is a package of activities that aims at enhancing quality of health services, and at protecting medical practitioners. 2. Purpose of health policy or idea Objective: to ensure that doctors remain insured against legal action as such insurance is compulsory for registered medical practitioners who wish to work in Australia Characteristics: the major characteristic of the policy was the introduction of a subsidised scheme of indemnity insurance. The Medical Indemnity Package included: Direct subsidies for doctors with high insurance premiums Funding for 50% of the cost of indemnity insurance payouts greater than $2million up to the limit of the practitioner's indemnity cover Funding unfunded but not incurred liabilities of Medical defence Organisations (MDOs) where the organisation does not have adequate reserves to cover these liabilities Introducing a levy on doctors to pay for this scheme (to be in place for 5 years) Introducing reforms to the medical indemnity insurance market Providing better consumer protection for doctors who purchase medical indemnity insurance Supporting enhanced quality and safety programs to reduce the likelihood of adverse events. The expected outcomes of the policy are the prevention of doctors leaving the private health system due to lack of indemnity insurance and the reform of the medical indemnity insurance market. - 1 -
The State governments are also involved in this issue to the extent that they have some control over civil and criminal law and dealing with complaints against doctors. Thus, more general reform of tort law and the legal system is also one of the expected longer-term outcomes. Incentives: Doctors, State governments and public hospitals all have incentives to support this policy: doctors if they wish to continue practising (and thus maintain income); State governments if they wish to maintain viable public hospital systems. Main objectives to prevent doctors ceasing to practice due to lack of medical indemnity insurance to reform the medical indemnity insurance market Type of incentives financial incentives for doctors who have high premiums and/or high payouts Groups affected Doctors, Patients (in Terms of access medical care), Medical defence Organisations (MDOs), State Governments 3. Characteristics of this policy Degree of Innovation traditional innovative Degree of Controversy consensual highly controversial Structural or Systemic Impact marginal fundamental Public Visibility very low very high Transferability strongly system-dependent system-neutral 4. Political and economic background Not applicable 5. Purpose and process analysis Idea Pilot Policy Paper Legislation Implementation Evaluation Change - 2 -
Origins of health policy idea The major driving forces behind the policy were the rising cost of indemnity insurance and insurance payouts. This was connected to global issues which had been placing pressure on insurance costs more generally. Thus, doctors, particularly those who specialised in high-litigation areas such as obstetrics and neurology threatened to stop practising as they could no longer afford to pay their medical indemnity insurance premium Secondary driving forces were: The financial collapse of one of Australia's largest MDOs which led to its being placed in provisional liquidation The potential for many doctors to cease practice due to their lack of indemnity insurance The knowledge that the pressure on the system was likely to increase due to additional claims which had been foreshadowed but were not yet registered. The main actors were doctors, MDOs, State and National governments Initially, a short term guarantee was provided to doctors that any claims on their indemnity insurance would be honoured. The final package of measures came into force in December 2002. Longer term reforms are still under discussion: Structured settlements (proposed by the Commonwealth government) Proposals by doctors to reform the way complaints and legal actions are handled etc. Stakeholder positions There was the potential for doctors and patients to be affected profoundly although there is little evidence that much actually changed. The policy changes have been accepted by doctors and MDOs although the work regarding long term reforms to the legal system is likely to generate considerable debate and may be opposed by the legal profession. The policy papers were formulated by government bureaucrats from the departments of Health and Ageing, Treasury and the Attorney General's Department. The relevant ministers (K. Paterson and H Coonan), advised by their departments, were actively involved in the formulation of the policy A Senate inquiry was held into the issue. Influences in policy making and legislation Legislation came into effect in December 2002. It consisted of: The IBNR (incurred but not reported liabilities) scheme and levy The High Cost Claims scheme Premium subsidies The regulation of MDOs by the Australian Prudential Regulation Authority (APRA) Legislative outcome - 3 -
Adoption and implementation The government, MDOs and doctors have been involved in the implementation of the policy. In particular, the provisional liquidator of the large MDO whose financial difficulties precipitated the crisis which led to the policy (United Medical Protection, UMP) has been active in ensuring that doctors maintain their indemnity insurance, that financial claims on the company (ie payments to doctors and litigants) are honoured and that doctors are supported in litigation, tribunal and coronial hearings and practice management services normally offered to members. The initial policy has been successful in that doctors have remained insured and practising. However, evidence is not available regarding other potential changes such as delays in payments to doctors and litigants. While the policy appears to have appeased doctors fears over the initial lack of or high cost of insurance, there is no guarantee that the same problems will not emerge in the future. Hence, the long term solutions such as changes to the legal system and tort law have not been enacted, although discussions between the Commonwealth and State governments continue and potential solutions such as "structured settlements" have been proposed. In addition, some doctors groups believe that the policy as detailed above is a short term or "band-aid" solution and are proposing changes to how complaints and legal action over injuries etc are dealt with. One such strategy proposed by the Central Coast Division of General Practice (NSW) includes: Avoiding court action by setting up a medical accident and compensation scheme National accident scheme to cover all patients Standard procedure for settling claims (not case-by-case) to speed up claims procedure and reduce legal costs Nationally managed scheme for long term care and rehabilitation of severely injured patients Ban on legal advertising of "no-win no-fee" arrangements which encouraged patients to sue doctors and tied up legal resources Set a period of 3 years for claims to be made to prevent claims for events that happened when standards of practice and medical technologies were different. UMP appears to be trading its way out of financial difficulties and may be out of provisional liquidation in 2003. Monitoring and evaluation It is unclear what will happen to the Medical Indemnity legislation if UMP is restored to full financial viability. The proposed levy (the amount payable by doctors has not yet been announced) is to be in place for 5 years and will only be payable until sufficient funds have been raised to cover the unfunded IBNRs. If these are revised down, the rate will be reduced and if they are revised up the period for payment of the levy will be extended. However, the actual amount of the levy will not increase. 6. Expected outcome - 4 -
The policy has partially achieved its objectives as there has been no serious breakdown in the health system or in patients being able to access medical care. The estimated cost to Government has been estimated as approximately A$45 million per annum. In addition, the cost of the compulsory levy payable by doctors, whilst not yet fixed, has been estimated as adding an additional 20 cents to each consultation. Unless work continues on reforming the underlying problems, the subsidisation may mask the continuing issues and reduce the incentives to reform the legal system. The legal profession is likely to oppose any such changes and make their introduction more difficult to enact. Author/s and/or contributors to this survey Marion Haas Suggested citation for this online article Marion Haas. "Medical Indemnity". Health Policy Monitor, May 2003. Available at http://www.hpm.org/survey/au/a1/3-5 -