Doctors Fight Back on Soaring Indemnity Costs

3 12 2000

In an unprecedented move Australia's peak medical colleges and representative bodies have issued a joint call for wideranging reforms to stop spiralling medical insurance costs.

Presidents and delegates from key medical specialties - including surgery, anaesthetics, obstetrics and gynaecology, emergency medicine, ophthalmology and dermatology - held a crisis meeting in Melbourne today to put forward a series of policy initiatives.

Australian Medical Association Federal President, Dr Kerryn Phelps, said growing numbers of doctors were quitting or scaling back their private practise as a result of soaring medical indemnity premiums.

"This is not about 'underwriting doctors' as the Health Minister has claimed. It is about ensuring patients of private medical specialists are not forking out hundreds of extra dollars because of wildly escalating damages awards," Dr Phelps said.

She said a single payout of $9 million (awarded in a recent case involving brain damage to a 15 month old child) would effectively add $250* onto the cost of delivering every new baby by a private obstetrician.

"Private obstetrics will be dead under this system. It is already an uninsurable risk for many practitioners.

"We have been told by rural doctors that GP-obstetricians in Orange have dropped from nine to zero, in Bathurst from 17 to 10 and in Tamworth from three to zero, in the past three to four years."

She said the situation had taken a turn for the worse with Australia's largest medical defence organisation, United Medical Protection, calling on members for an additional payment equivalent to a full year's subscription.

Dr Phelps said the move by United MP followed calls from other medical defence organisations late last year.

"The system is out of control. Medical insurance costs have been soaring by 15% to 25% a year because courts are continuing to award larger and larger payouts," Dr Phelps said.

She said obstetricians and neurosurgeons were facing an indemnity fee increase from $45,000 to more than $60,000 a year. Anaesthetists' premiums would rise to about $27,000 and GP indemnity costs would rise by about $1,000.

*Based on recent AMA estimates of 600 privately practising obstetricians in Australia performing an average 60 deliveries a year

"This will have a devastating impact on many doctors and their patients," she said.



In many cases, doctors will be forced to pass on the fee increase to patients. This flies in the face of the Federal Government's policy of reducing medical gaps for patients. An Access Economics consultant has estimated that a 25% increase in defence premiums was the equivalent to an increase of 8% in total patient gap payments.


In other cases doctors may be forced to stop practising altogether. In rural areas, GPs often also practise obstetrics, anaesthesia or surgery. Major increases in indemnity costs will force many GPs to stop providing these services, services that will be hard - if not impossible - to replace.


Because of the threat of litigation, it is already hard to find enough trainees willing to become neurosurgeons. The increase in indemnity costs will deter even more young doctors from seeking training in areas such as neurosurgery and obstetrics.


1. ALTERNATIVE MODELS TO ADVERSARIAL SYSTEM: Should be led by the Federal Government with input from the States - with the aim of speeding up the rate at which matters are dealt with to reduce the high costs of the process of litigation.

2. STRUCTURED SETTLEMENTS: Tax laws need to be changed to allow the introduction of structured settlements in Australia, where compensation payments for personal injuries are made periodically for life, rather than paid as a lump sum. The system works well in the USA, the UK and Canada and would save the Federal Government an estimated $220m a year in welfare and community services provided to people with disabilities after their lump sum awards have been spent.


needs to fully implement and adequately fund the Relative Value Study. If it doesn't do this, it will have to consider subsidising the insurance costs of those areas of health care where the provision of services is being threatened.

"We are calling for urgent action on these recommendations from State, Territory and Federal governments," Dr Phelps said.

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