New medical indemnity package removes doctors' reason to retire

Retirement cover and a new measure to address liability above insured limits means that doctors threatening to retire on 1 July now have no reason to retire. These two measures, announced recently by the Prime Minister, are the residual components of the government's medical indemnity package.

The government has put in place an interim measure that will secure retirement cover for doctors in 2003-04. The proposed regulation sets minimum standards for retirement or "run-off" cover to be offered to medical practitioners who cease to practise in 2003-04. Indications are that the cost of retirement cover for long-term members of MDOs will be as low as $300 per annum.

The government is keen to provide longer-term certainty for retirement cover for doctors but wants to make sure that the option chosen is the best available for doctors, patients, insurers and the Australian public. A study was commissioned in March this year and identified a range of possibilities ranging from market provision to the creation of a statutory scheme funded by a levy on doctors; plus variations in between.

A longer-term approach will be in place by 1 July 2004 and will ensure that doctors will not have to pay material premiums after they retire.

In my discussions with doctors over the past months they have indicated that they considered the risk of exposure of their personal assets beyond the level of cover offered by a medical indemnity provider to be unacceptable.

I do not believe this is the case, particularly as the indemnity limits forecast by insurers have been in the vicinity of $20 million and the highest ever award damage in Australia was less than $15 million. In addition reforms to the law of negligence by State and Territory governments will have the effect of placing downward pressure on compensation payouts.

However, in order to secure continuing medical services throughout Australia, the government will establish a Blue Sky Scheme to meet 100 per cent of any damages payable above the insured limit. Under the scheme, 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.

Claims and payouts above the insured limit will be rare, if they occur at all.

The government will review the Blue Sky Scheme after three years to determine whether it is still necessary in the light of State and Territory law reform, which will limit the incidence and cost of claims.

The past few weeks have been characterised by reports of doctors threatening retirement; pregnant women that have been told their babies won't be delivered; and alarmist reporting, that has stretched the nerves of doctors, patients, insurers and the Australian public alike.

When the provider of 50 per cent of Australia's medical indemnity insurance, UMP, went into provision liquidation in May last year placing doctors and the community at risk of un-met claims the government intervened to prevent a crisis in the medical indemnity market and this decision was not taken lightly.

Additionally, under existing arrangements some MDOs did not have sufficient capital reserves to meet claims and this could result in additional calls on doctors to meet capital shortfalls. Through their strong objections to calls, doctors sent a clear message to MDOs and the government that these funding arrangements were not desirable.

The government's package is designed to address two fundamental problems in the provision of medical indemnity insurance - the financial viability of the providers of medical indemnity insurance and the ongoing affordability of medical indemnity cover for doctors.

The government's package was carefully thought through, the subject of extensive consultation and, in our view, in the best long term interest of doctors and the community.

Understandably there has been some confusion in the move to the new system but the government believes that this package of reforms will fundamentally improve the safety and affordability of medical indemnity coverage in Australia.