The future of medical indemnity

The medical indemnity crisis of the early 2000s was a culmination of factors – outrageous claims, unrestricted lawsuits, volatility in the insurance sector, the collapse of HIH Insurance and instability of United Medical Protection (UMP) – all of which put mounting pressure on doctors who increasingly felt agitated by sky-rocketing medical indemnity costs.

And at the height of the crisis, many doctors faced the prospect of an additional year of premiums that would cripple them financially. As a result, some doctors increased their fees, and others reduced or stopped bulk billing patients. Many left the public hospital system, and some left the medical profession all together. Everyone felt vulnerable.

In late 2003, the Federal Government announced a package of medical indemnity reforms. The Commonwealth agreed to subsidise the indemnity insurance premiums of medical professionals and provided financial assistance to medical indemnity insurers and eligible doctors in high costs claims. It also backed away from the Incurred But Not Reported (IBNR) levy and announced a much more palatable fee. At a state level, NSW led the way in tort law reform, which helped limit frivolous or outrageous lawsuits. These solutions made indemnity more affordable and secure in the longer term. They brought stability to a system that was in crisis. Since then, Australia has had a strong, steady and equitable medical indemnity environment.

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.

With this in mind, we need to ask … if the Federal Government starts unwinding the medical indemnity schemes that have so successfully created stability – will we risk a second medical indemnity crisis?

To understand the future sometimes we need to look at the past. In the following pages we’ll explore the medical indemnity crisis of the 2000s, its causes, the impact on doctors, how the AMA fought for Government protections, and what changes to the current system could mean for the future.