MEDICAL INDEMNITY – FINAL DETAILS OF THE INCURRED BUT NOT REPORTED
(IBNR) INDEMNITY CONTRIBUTION
The final details of the Government’s IBNR Indemnity Scheme were announced
today by the Minister for Revenue and Assistant Treasurer, Senator the Hon
Helen Coonan.
Today’s announcement details significant additional benefits for doctors
including exemptions for certain retirees from the IBNR indemnity contribution.
The Government is also providing further assistance to GP registrars undertaking
procedural training.
The exemption for retirees and the assistance for GP registrars provides
around a further $120 million in Government assistance to doctors over 10
years. This is on top of the previously announced package totalling $58 million
per annum.
Senator Coonan said, “Retiring doctors aged 65 years or more, and
earning less than $5,000 in medical income, will now be exempt from the IBNR
indemnity contribution.”
“While Doctor organisations have indicated that working doctors would
be willing to pay a higher IBNR indemnity contribution to fund the cost of
such an exemption, the Government has gone much further than this. The cost
of this exemption for retirees will be borne by the Commonwealth.”
Exemptions from the IBNR indemnity contribution will also be provided to
doctors who have purchased comprehensive retroactive cover prior to 1 July
2003, and to doctors who have had their entire liabilities covered by a State
or Territory Government.
“Doctors who have left private practice before 1 May 2002 and taken
up full time salaried public hospital positions will be exempt,” Senator
Coonan said. This exemption applies even if they continued to treat pre-booked
patients for a short time after 1 May 2002.”
It has also been decided that in 2003-04, the Government’s IBNR Indemnity
Scheme will only apply to United Medical Protection Limited (UMP) members.
“This means that no IBNR contribution will apply in 2003-04 to doctors
who were members of other MDOs as at 30 June 2000,” Senator Coonan said.
She also added that the Australian Medical Association’s push for
the taxpayer to pick-up all of the unfunded IBNR liabilities of UMP could
not be supported on equity grounds.
“The AMA’s proposal would be unfair to members of other MDOs
who are taking steps to fund their IBNRs without the need for Government assistance,”
Senator Coonan said.
The IBNR Indemnity Scheme was put in place after UMP entered provisional
liquidation with unfunded liabilities in the order of $460 million. Before
putting the IBNR Indemnity Scheme in place, the Government sought and received
assurances from the medical profession that if the Government provided support
to allow UMP to continue trading, doctors would be willing to make a financial
contribution to assist.
Without the IBNR Indemnity Scheme, it is very probable that UMP would have
been placed into full liquidation, with doctors required to meet future claims
out of their own pockets. This situation presented a very real possibility
that doctors would have faced bankruptcy and patients would not have received
the damages to which they were entitled.
“The Government also continues to work with the States and Territories
to examine the current and possible alternative arrangements for providing
long-term care to people who suffer catastrophic injury. The Ministerial meeting
in Adelaide next week, which I will chair, is expecting to receive a report
on the type of injuries and services that could be included in a scheme and
the associated costs.”
“The Federal Government has also been working with States and Territories
for nearly eighteen months now, to bring the laws of negligence back into
balance with public expectations and opinion,” Senator Coonan said.
This has led to agreement for significant and long-term changes to the rules
applying in cases involving negligence – including claims against doctors.
“There is now a blue-print for reform and the Commonwealth has called
on the State and Territory Governments to progress these changes to the law
as quickly and consistently as possible.”
“The Government has fully upheld its end of the bargain to help resolve
medical indemnity problems. It is now up to the doctors, as well as the States,
Territories and insurers, to play their part.”
Senator Coonan said doctors who were members of UMP as at 30 June 2000 will
be contacted directly by the Health Insurance Commission (HIC) in the next
few weeks.
The HIC will be sending invoices for the IBNR indemnity contribution payment
due by 1 November 2003. It will also send full details about all the exemptions
and how to pay.
Initial indications are that four out of five potentially liable members
will pay no more than $1,500 a year. This amount is also tax deductible.
Full details of the Government’s announcement are at Attachment A.
Details of the full suite of measures implemented by the Government to address
both the safety and affordability of medical indemnity are at Attachment B.
Further information on today’s announcement and other components of
the Government’s medical indemnity package are available at: www.health.gov.au/medicalindemnity
or freecall 1800 007 757.
ATTACHMENT A: DETAILS OF TODAY’S ANNOUNCEMENT
Under the Government's IBNR Indemnity Scheme - one of several measures taken
by the Government to address uncertainties surrounding the medical indemnity
industry - the unfunded IBNRs of Medical Defence Organisations (MDOs) have
been assumed by the Government to ensure that member doctors are not exposed
to the risk of unmet "historical" claims.
The cost of the IBNR Indemnity Scheme will be recouped from members of relevant
MDOs over time, via the IBNR indemnity contribution, after the relevant exemptions
are taken into account.
UMP will be the only MDO to participate fully in the IBNR Scheme in 2003-04.
Therefore, the indemnity contribution will only apply to doctors who were
members of United Medical Protection Limited (UMP) at 30 June 2000. This means
that no IBNR contribution will apply in 2003-04 to the doctors who were members
of other MDOs at 30 June 2000. The Government will assume responsibility for
meeting the unfunded IBNR liabilities of UMP as at 30 June 2002, estimated
at around $460 million in net present value terms.
The Government has announced today that doctors over 65 years old, and earning
less than $5,000 in medical income, will be exempt from the requirement to
pay the indemnity contribution. The exemption will apply to any qualifying
doctor who retired after 31 December 2001 or who retires during the life of
the IBNR Scheme. The cost of this exemption, which will be borne by the Commonwealth,
is estimated at nearly $120 million in nominal terms. The Government previously
announced that all doctors who retired before 31 December 2001 would be exempt
from the contribution.
Doctors who have purchased comprehensive retroactive cover prior to 1 July
2003 in the form of a discretionary arrangement, which replaces their UMP
cover, will be exempt from the contribution subject to the retroactive cover
being converted to a contract.
Doctors will also be exempt where their entire IBNR liabilities have been
picked up by a State or Territory government. An exemption will also exist
for doctors who have left private practice before 1 May 2002 and taken up
full time salaried public hospital positions. This exemption applies even
if they continued to treat pre-booked patients for a short time after 1 May
2002. These exemptions build on previously announced exemptions for doctors
who were students in 2000, and for deceased estates.
Under the IBNR Indemnity Contribution legislation, which was passed by the
Commonwealth Parliament in December 2002, doctors who belonged to UMP as at
30 June 2000 will be required to repay the Commonwealth’s IBNR Indemnity
Scheme assistance over a period currently estimated to be ten years, unless
they qualify for an exemption. Annual contributions are to be equal to 50
per cent of the subscriptions that UMP members paid to UMP in 2000-01.
The estimate of unfunded liabilities will be reviewed annually to take account
of the impact of tort law and other reforms. Importantly, UMP doctors will
never pay a higher contribution in any year than the amount they pay in 2003-04.
The Government is also extending the Medical Indemnity Subsidy Scheme to
cover 80 per cent of the marginal premium cost above non-procedural GPs' premiums
for GP registrars undertaking procedural training. This will help encourage
GP registrars to undertake further training, at a cost to the Commonwealth
Government of around $1 million per annum.
IBNR contributions will also be tax deductible and there is an option for
doctors to seek a once off deferral of the payment of the IBNR contribution
in any one year.
Subsidies provided by the Government to obstetricians, neurosurgeons, GP
proceduralists and GP registrars undertaking procedural training will also
apply to the IBNR indemnity contribution.
The Australian Government Actuary has advised the Government that two other
MDOs - the Medical Defence Association of Victoria and the Medical Defence
Association of South Australia – had reported unfunded IBNRs as at 30
June 2002.
A decision on these organisations has been delayed and as a result, members
of these two MDOs will not be required to pay a contribution in the 2003-04
financial year.
Preliminary estimates suggest that: