E&OE……………………………………………………………………………………
PRIME MINISTER:
Well ladies and gentlemen, my colleagues and I are here today to announce the key elements of a longer term strategy to address problems in the medical indemnity insurance market. I had indicated previously that it was the Government’s firm intention that a new framework be in place before the 31st of December this year. And today following extensive consultations we’re announcing a comprehensive new framework for medical indemnity insurance and a range of measures that will take effect from the 1st of January next year.
This series of measures is designed to ensure that key private medical services are maintained including in rural and regional areas. It addresses the problem of rising medical indemnity premiums and helps to ensure a viable and ongoing medical indemnity insurance market. Firstly I announce that the Government will offer to extend the existing guarantee, the UMP/AMIL by 12 months, that is until the 31st of December 2003. This will allow adequate time, indeed more than adequate time for the other measures being announced today to take effect. That of course is subject to the approval by the New South Wales Supreme Court and if that approval is granted then members of UMP/AMIL will continue to be able to practice during that period on having claims met. It will also allow additional time for the provisional liquidator to explore a broader range of options for restructuring the businesses and maximising the value of UMP/AMIL’s assets.
The package contains a number of other very important proposals and commitments. Firstly a subsidy to obstetricians, neurosurgeons and GP proceduralists to help them meet their relatively high premium costs. That is a very important proposal and addresses those sections of the profession that have been most severely affected by the challenges that have emerged.
Secondly a scheme to be known as the High Cost Claim Scheme whereby the Commonwealth will meet 50% of the cost of claims payments greater than $2 million up to the insured amount made by medical indemnity insurers. This will lower reinsurance costs for insurers and take a great deal of pressure off premiums.
Thirdly the funding of incurred but not reported liability, the IBNRs, for those medical defence organisations that have not set aside money to cover these liabilities and recouping the cost of that funding through a levy on their members and that levy will be over an extended period making it a lot more affordable to doctors.
Fourthly measures to place providers of medical indemnity insurance on an appropriate prudential and commercial footing and that will involve and expanded role for APRA. Transitional arrangements will be put in place to help insurers meet increased capital adequacy requirements.
Fifthly enhanced policy holder and product safeguards to ensure continuity of cover and better product understanding.
And finally enhancing approaches to reducing injury to adverse events and to handling incidents which do occur thereby improving patient safety and alleviating pressures for insurance payouts.
Could I say in the context of all of these proposals they will not constitute and effective package unless they are underpinned in great detail by tort law reform. I want to thank the States that have so far moved. More must be done. As far as possible we want to have a uniform national approach. I want to thank the Ipp Report for the work that it’s done in this area but a lot more has to be done by the various State governments.
I’m also asking the State and Territory governments to removes stamp duties on medical indemnity insurance premiums. Input tax credits are of course available in relation to the GST and it would be a matching gesture if I could put it that way on the part of the States to remove stamp duty. We’ll continue to work with the States and Territories to examine the current and possible alternative arrangements for providing long term care to those people who’ve suffered catastrophic injury. It’s very important that the benefits of reform are passed on to doctors, patients and the community, and I ask all governments, medical practitioners, insurers in the legal profession to move quickly to play their part in implementing this new framework. We expect medical indemnity insurers to factor these new arrangements into their future premiums and the ACCC will have a role to monitor medical indemnity premiums to determine whether they’re actuarially and commercially justified.
We have consulted very widely and we think this is a very comprehensive and fair package. It is the subject of a very detailed press release which is or will shortly be available. But it does address the major issues. It should be sort of immediately sort of made available, if that request can be picked up, and deposited in the boxes. It is designed to address the particular problem of the high risk specialties and that is why we are providing I think a very significant subsidy, when you’re going to meet 50% of the cost of the high claims and we’re also going to provide a very significant subsidy in relation to the premiums of the high cost specialties. The subsidy will be provided to obstetricians, neurosurgeons and GP proceduralists who undertake Medicare billable procedures. It will be equivalent to 50% of the difference between the cost of their premiums plus the IBNR levy if applicable and the corresponding cost for gynaecologists, general surgeons and non procedural GPs respectively in the relevant State and Territory. What we’ve basically done is take as a benchmark the less high risk discipline and we’re going to pay 50% of the cost of the additional cost of premiums and the levy and that is a major and I think appropriately generous subsidy.
For neurosurgeons in light of particularly high premium costs faced by some neurosurgeons combined with their relatively limited scope to derive income from private practice, the subsidy rate will increase to 80 per cent on that portion of their premium, plus levy if applicable, that exceeds $50,000. Now these aren’t necessarily detailed and complicated proposals but they have a very consistent theme and that is underpinned by tort law reform, underpinned by the significant extension of the guarantee for a year after the end of this year, and also recognising that there is a particular problem for the high risk specialties, and also recognising that there is a particular problem for very big claims. We have endeavoured, after extensive consultation with everybody, to address all of those areas.
Now, I want to thank Senator Coonan and Senator Patterson because they have done most of the very difficult negotiating work in this area and I want to record my thanks to both of them. It is I think a very comprehensive response to a difficult issue. Inevitably some will want more, some will disagree with aspects of it, but after a lot of time we think it is a very effective response to a particularly difficult issue and we commend it to the medical profession.
I mean we are providing a very big subsidy, but a very necessary subsidy, to the profession. We do recognise how important their skill is to the community and we do recognise the particular burden that has arisen in these high risk specialties. And can I stress again, and I’ll conclude on this note, this will not work unless we have comprehensive tort law reform. Comprehensive tort law reform is absolutely essential because it is comprehensive tort law reform that in the future will prevent many of these difficulties arising. We have to deal with what has already arisen, and that is why we have the levy, that is why we have the guarantee, but looking into the future comprehensive tort law reform is essential.
JOURNALIST:
Prime Minister, how much will this package cost and how long will the subsidies last? Are they ongoing or are they for a certain period?
PRIME MINISTER:
Well Senator, you might like to say something about that in relation to long term costing.
SENATOR COONAN:
Yes. The long term cost will be reviewed but there is two parts of it. One is the subsidy arrangement and obviously we’ll need to see how the various reforms that have been proposed by the States and Territories bite, so that in the long term hopefully these subsidies can be phased out. It’s obviously something that needs to be monitored and kept under review. Can I say that the reason why the tort law reforms are so important is because what has been proposed is a different standard of care for doctors so that that will in the end limit some of the claims, and also that the timing for the bringing of claims will also be limited. They’re very important reforms and they can extend of course to other professional groups. But the Ipp reforms look particularly at doctors because that was the most pressing problem.
PRIME MINISTER:
Can I just say one of the reasons why you can’t put a precise figure on the cost is that you don’t know the precise extent of the IBNRs.
JOURNALIST:
But are you budgeting for…
PRIME MINISTER:
We’ll obviously be budgeting for a certain appropriate amount. We’ll be indicating that a little later on.
JOURNALIST:
Prime Minister, you’ve previously expressed the opinion that this crisis is due to an increasing litigiousness in the Australian community and you’ve blamed that partially on lawyers. Don’t you think that subsidising half of the big payouts is just going to encourage that mentality?
PRIME MINISTER:
Not if you change the law and you alter the standard of proof. I mean the key is that. But you have to mix that concern with a need to maintain a base of professional excellence in the community in these high risk specialties, and you have to strike a compromise.
JOURNALIST:
When do you expect to know the cost of the IBNRs and don’t you have at least a first year estimate of what this is going to cost the taxpayer?
SENATOR COONAN:
Yes the highest estimate on the IBNRs is between $360 million and about $500 million. It’s very difficult because of the nature of the IBNRs because by their very definition they have been incurred but not reported. So whether or not they come to fruition of course is a matter of speculation and that is something that the provisional liquidator obviously has under consideration. And we also have to look as we move the other medical indemnity providers into the prudential framework whether they also have Incurred But Not Reported problems as well. So that’s an ongoing assessment.
PRIME MINISTER:
The best figure mark we can give you is about $45 to $50 million a year. That is an approximation and how long that will last will depend upon the length of the tail.
JOURNALIST:
Prime Minister, can you please name the indemnity funds whose members, the doctors who belong to those funds, will have to pay a levy, and when the levy will commence?
PRIME MINISTER:
Well I can’t list them all, no. One of my colleagues may be able to but I can indicate that if you belong… if you’re a doctor who is in an MDO that doesn’t have an unfunded claims problem, you won’t have to pay the levy. I can certainly give that assurance, that this will not capture doctors who belong to MDOs that don’t have an unfunded liability problem.
JOURNALIST:
When will you strike the levy?
PRIME MINISTER:
When we know the full extent of the obligation.
JOURNALIST:
Will that be before July or December next year?
PRIME MINISTER:
I can’t tell you that because… and a lot will depend on what we’re told by the liquidators.
JOURNALIST:
But it’s all a bit open-ended, isn’t it? We’ve waited six months for the final figure on the IBNR. How long do you wait?
PRIME MINISTER:
Well because of the nature of the beast. Of course. I mean it’s not open-ended. I mean the suggestion is that the IBNRs in relation to UMP/AMIL is somewhere in the order of $350 to $500 million. Now I’m not going to nail myself to a specific figure because it mightn’t be right and I don’t have control over its assessment. I’m relying on information that other people are giving us. But I don’t think it’s open-ended in this sense, that we’ve laid down criteria and a benchmark and we’ve made those decisions based on generalised estimates of what the likely tail is. But unless you provide this degree of specificity, you’re not going to bring any sense of stability and reassurance to the profession. And we’ve tried to… I mean some people will say it’s too generous and some people will say it’s not generous enough. I think it’s right. I think it strikes a very good balance, because it addresses all the major elements.
JOURNALIST:
Prime Minister, up until now the Government has maintained that it was not exposed to any costs from this indemnity crisis. Has that situation now changed?
PRIME MINISTER:
We maintain we’re not exposed to any direct cost in the sense that we’re an insurer. We may have said that. But I don’t know that we’ve asserted that the measures that we’re going to put forward to help solve the problem won’t involve some liability, but we’ve tried to minimise that and we quite rightly have looked to the profession over a manageable period of time to fund the levy. But it’s through the levy to fund any call that may be made on the Government.
JOURNALIST:
But the profession will pay the cost of all of the IBNRs?
PRIME MINISTER:
That’s the proposal – over a manageable period of time and to a precise financial extent that I can’t say at this stage and neither can they.
JOURNALIST:
Is this the last time that the guarantee to UMP will be extended? It’s been extended twice already.
PRIME MINISTER:
Yes. And I think that has been justified. Is it the last time? I would expect so, but I’m not going to guarantee that.
JOURNALIST:
How many large claims do you expect to get above $2 million given the reforms that you want to put in place?
SENATOR COONAN:
Probably not very many because the large claims scheme will kick in for claims notified as from the 1st of January 2003 and of course it’s really a reinsurance scheme and it only relates to claims over $2 million and for 50 per cent of the amount that the doctor has insurance for. So the Government will be picking up only 50 per cent of the claim over $2 million. The estimates for that are very, very difficult to put a good figure on, or a clear figure on, simply because we’re also expecting that tort law reform will do a lot towards reducing large claims. But the large claims component is a very important part of making premiums affordable for doctors. So there is two tranches to the thing – one is to make the medical indemnity provider industry stable, and then the second part of it is to do something to assist doctors with affordability, and the large claims scheme comes into the second category.
JOURNALIST:
Prime Minister, is it fair that some doctors will be paying - who happen to be members of MDOs that have unfunded liabilities will now be paying part of a levy, and their counterparts who just happen to be in MDOs that have budgeted effectively for unfunded claims are…
PRIME MINISTER:
Well I don’t think that’s unfair. I mean it’s part of the operation of the market that if you belong to an organisation that has made proper provisions and partly through perhaps charging a higher premium, that you should reap the benefit. I mean you’ve got to think back – why are some MDOs not faced with an unfunded liability problem? Perhaps because they have charged higher premiums, and therefore it would be doubly unfair if the members of those MDOs, having paid higher premiums in the past, are then asked to share in part the cost of unfunded liabilities for MDOs that have got by on low premiums. No, I don’t think that’s unfair at all. I think the reverse would be unfair.
JOURNALIST:
Private hospitals are also facing soaring public liability. Is there anything in the package for private hospitals?
PRIME MINISTER:
Private hospitals?
JOURNALIST:
Yes.
PRIME MINISTER:
This would be of very significant benefit to private hospitals in an indirect sense because it will stabilise private medical practice and specialties.
JOURNALIST:
Prime Minister do you expect the rate of medical indemnity premiums growth to slide, or for premiums in fact to drop because of…
PRIME MINISTER:
I’m not going to make any precise predictions about how premiums are going to move. But we believe this will ease the pressure on premiums. We believe that. It should. And we’ll make darn sure as best we can through the ACCC, etc. that the benefits are captured.
JOURNALIST:
Prime Minister, Steve Bracks doesn’t seem very keen on your gun reform plans. Have you spoken to him or are you planning to speak to him?
PRIME MINISTER:
I will speak to him tomorrow.
JOURNALIST:
What is your message?
PRIME MINISTER:
My message is that this is a community problem. I think the Australian community is worried about violence arising from the proliferation of hand guns. I’m not blaming anybody. I want to talk constructively to the Premiers about how together we might address this problem.
JOURNALIST:
Are you interested in the Commonwealth taking over increased responsibility for regulation? Licensing?
PRIME MINISTER:
At this stage Annabel what I’m interested in is engaging the States tomorrow in the constructive way and saying to them that this something that the public is quite concerned about. The public is concerned about this and they have a reason to be concerned about this and I think collectively, and I don’t, I haven’t settled all the details in my own mind but I’ve got some ideas and I want to talk to them tomorrow, I mean we won’t have a lot of time, we’re going to sign the inter-governmental agreement on counter-terrorism and I hope that the Premiers can receive a general security briefing from the relevant federal agencies and then I will raise the issue of handguns. But not in the atmosphere of blaming the states. I mean this is not something where the public wants various levels of government to start finger pointing, I mean surely it’s something, relevant to community safety, where people should work together.
JOURNALIST:
Prime Minister, have you declined to rule out a specific defence tax?
PRIME MINISTER:
Have I declined to rule out? I noticed that there was some commentary in an interview I did with a very intelligent engaging journalist at the weekend and the interview was printed in full and quite faithfully and I thank the publication for that, but then there was some commentary, well that is commentary and I’m not going to comment on the commentary.
JOURNALIST:
What about on the question of, is there any ideas for a defence tax of any nature?
PRIME MINISTER:
There are no proposals for a defence tax in front of the Government. What I said and I repeat here is that when something like the 12th of October happens to a country like Australia you have to look quite across the gamut and I felt in my bones that we would have to commit more resources to defence and security. Now just how much and on what basis and what way at the expense of what else it is too early to say. But we have no discussed or given any consideration to what you choose to describe a defence tax.
JOURNALIST:
Mr Howard, what is your take out on the Cunningham result?
PRIME MINISTER:
Look I have avoided making any comment on it and other people have commented and I can’t really improve on that.
JOURNALIST:
… medical indemnity proposals a few times, what has to happen to those proposals to become reality?
PRIME MINISTER:
Well they’re solid commitments of the government, I mean for example we need the New South Wales Supreme Court to approve the extension of the guarantee. We need the cooperation of state governments to make things work. But the commitments, in so far as the Commonwealth has a role to play, the commitments in this package are absolute.
JOURNALIST:
Mr Howard, swing it back to guns for a second, I know you’re talking to the Premiers tomorrow but do you personally tend to support an extended buy-back scheme this time for automatic hand guns?
PRIME MINISTER:
I haven’t specifically speculated about a buy-back scheme and I’m not going to, beyond saying what I’ve said earlier, start saying yes or no to particular things. I think it is an issue, it’s been heightened by the tragedy at Monash University, the public is worried about the proliferation of guns, the average person can’t understand why an ordinary individual should have access to a multiplicity of lethal handguns, I can’t. It seems an odd situation to me but I’m sure there is an strengthening of the law and other measures that can be taken that accommodate legitimate interests of sporting shooters, I think you can do it, you can do it and accommodate that. But I’ll talk to the Premiers about it, I’m not going to speculate in advance.
JOURNALIST:
There seems to be substantial disagreement about the number of automatic handguns that are actually in Australia. Would a national register help do you think?
PRIME MINISTER:
Look I’m not going to, I mean there are a whole lot of things, when something likes this gets put on the agenda I think it’s important that people approach it constructively. I don’t think it’s a good way to approach something like this by saying that the status quo in my state is perfect, or the status quo of the Commonwealth level is perfect. If we’re to improve the climate of community safety and give people greater reassurance I think governments have to recognise the need to work together. And work together very closely.
JOURNALIST:
Prime Minister, a newspoll in a Sydney newspaper today found that a large majority of voters supported the Government’s handling of the fight against terrorism, a large proportion of voters also felt more concerned about terrorism strikes here, and again a large proportion said they wouldn’t allow terrorism to change their travel plans. Do you have any comments on those findings?
PRIME MINISTER:
Well I really don’t want to get into any part of my reaction to this issue in the context of opinion polls. What I have done and said and what I will do and say will be conditioned by what I think is in the national interest. I believe that Australians will remain determined to live their lives as Australians have always lived their lives and I am encouraged and hearted by that belief and it’s based on the reaction I have received from Australians over the last 10 or 12 days. And I’m also aware that if people do have a slightly heightened sense of concern as a result of what has occurred and I think we have to strike a balance between being more prudent and cautious and getting on with life. The terrorists win if they fight you out of living your life as you would want to live it. If it’s possible to do that, and as the same time as a community and as individuals be as prudent and as careful as possible. We are all at greater risk, we have been saying, I have been saying since the 11th of September last year that we’re all more vulnerable to terrorism either here or in other parts of the world. Within Australia, although the risk is heightened, and it’s been further heightened as a result of the Bali atrocity, it is not as great as in other countries, but it’s still high and we, as a nation, have to come to terms with that. But one thing that does encourage me is I haven’t found anybody say to me well we’ve just to completely change our life and give in and I think that spirit of Australian resolve and defiance is encouraging.
JOURNALIST:
What is your knowledge, Prime Minister, of the latest American report, or report out of America, that there was some prior intelligence?
PRIME MINISTER:
Well I naturally sought advice on that and I’ve been advised that the relevant agency in Australia, and its US counterpart, have searched their databases this morning and have not found a report matching that mentioned in the media out of Washington. I can repeat of course that Australian intelligence agencies generally have searched their records and they identified no material that specifically warned of the Bali attack. As you know I’ve asked the Inspector General of Intelligence Security to review all intelligence that might be relevant to the Bali atrocity and report to me on it. Can I say and that it’s inevitable in the wake of what occurred in Bali that there’ll be further commentary and allegations of intelligence failures, that’s inevitable, it always happens when something of this magnitude occurs. Those reports will be, any relevant report will be thoroughly examined in the Inspector General’s review. And of course the Government has been warning for some time of the heightened threat to Australians in the region and that has been reflected in DFAT travel advice and in various statements made by Ministers, including myself.
Thank you.
[ends]