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FOCUS: MEDICAL INDEMNITY
After years of stability, the Federal Government is threatening to unwind several medical indemnity schemes. What will it cost doctors? And how will it affect patient care?
Had the Federal Government not stepped in to fix the medical indemnity crisis in 2003, Former Federal AMA President, Dr William Glasson, says the whole health system would have collapsed.
“Doctors would have retired, stopped seeing patients, stopped delivering babies, and so the whole system would have fallen apart.”
Since 2003, the Commonwealth has subsidised the indemnity insurance premiums of medical practitioners and provided financial assistance to medical indemnity insurers and eligible doctors in high cost claims.
The Federal Government has since introduced a number of schemes that have had a stabilising effect on the system, which have enabled doctors to provide care with confidence, and safeguard the interests of patients and the community.
In 2011, these schemes were consolidated into one fund: The Indemnity Insurance Fund.
In February 2014, the National Commission of Audit recommended the Commonwealth scale back its subsidies for medical indemnity insurance and reported that there is evidence the market is normalising; citing that average premiums have declined since 2003 to become more affordable and net assets/reported profits in the industry have increased. The Government responded by announcing reforms to medical indemnity would be considered in the 2014-15 Budget.
In 2016, the Department of Health announced it would conduct two reviews: a thematic review of the legislative framework for the schemes and a first principles review. In the 2016 Mid Year Economic Outlook (MYEFO), the Commonwealth Government announced it would change the threshold for claims made under the High Cost Claims Scheme from $300,000 to $500,000 from 1 July 2018. Medical indemnity providers have already flagged that this will result in a 5% increase in doctors’ premiums.
The changes were announced just before Christmas last year, with no consultation with insurers or the AMA.
The AMA’s Federal pre-budget submission warns that affordable medical indemnity insurance is necessary and recommends changes be put on hold until doctors are consulted.
“The [government’s] changes start to unpick parts of the Indemnity Insurance Fund … As a result of this surprise announcement, some insurers have already announced they intend to recoup these lost funds by increasing premiums levied on doctors.”
Avant, which was created in 2007 after UMP merged with MDAV, argues any removal of the schemes could be perilous for the medical system.
“Introducing uncertainty into this sector is counterproductive and shifting funding responsibility from the government to the medical community and patients is unwise,” it stated in a position paper on medical indemnity.
Other financial support schemes from the Indemnity Insurance Fund that could also be under the microscope include: Run Off Cover, the Exceptional Claims Scheme and Premium Support.
Under the Run Off Cover Scheme (ROCS), the Federal Government guarantees funding for claims against eligible medical practitioners who have retired, or no longer practice for other circumstances. These doctors are given free run-off cover, which is funded via a levy on all medical indemnity insurance premiums each year.
The Government’s Exceptional Claims Scheme funds 100% of the costs of medical indemnity payouts that are greater than an applicable threshold amount – currently $20m. To date this scheme has not had to be utilised, however it provides certainty to doctors and patients that for exceptionally large claims they will not face the possibility that the policy limits have been exhausted.
The Premium Support Scheme subsidises insurance premium costs.
The mechanics of this scheme varies, but generally MDOs are re-imbursed 60% of the medical practitioner’s premiums for medical indemnity cover that exceeds 7.5% of their income.
Medical indemnity organisations warn undoing these schemes would be detrimental to Australia’s medical indemnity system, but suggest they could be tweaked for improvement.
Some commentators suggest that the Government’s schemes were always meant to be temporary measures, and now that MDOs operate in a regulated environment and tort law reform has been so successfully implemented it is highly unlikely we will see a repeat of the earlier crisis.
However, Dr Glasson suggests our politicians have short memories.
“History repeats itself … So we’ve got to make sure we’re at the table, reinforcing the message that this has got to remain affordable to the patient, because ultimately the tax payer pays for it one way or another… Doctors don’t pay premiums, patients do.”