Dr Kerryn Phelps, AMA President, with Brett De Hoedt, Radio 3AK

PHELPS: Morning, Brett.

DE HOEDT: I know you're busy, meetings to go to. You'd have a very busy filofax. I want to have a talk about possible increases in medical bills as a result of that issue that doesn't go away for doctors - insurance premiums.

PHELPS: Yes. Medical indemnity insurance premiums faced by doctors are set to escalate dramatically for the coming year. We've been facing this looming crisis for quite some time and the governments at federal and state level have been looking at the issue trying to work out how is the best way of going about finding a solution. But really the crisis is upon us and the costs will be increased by, we think, between 40 and 100 per cent.

DE HOEDT: I mean, just imagine everyone else and every other bill that we receive increasing by 40 to 100 per cent. And over the last 10 years or so, those premiums have been increasing anyway, it's not as if they've been plateauing up till now.

PHELPS: No, they haven't. I mean, they've gone up about tenfold in the last decade. So there are a number of specialities which have really felt the brunt of this particularly and that's obstetrics and neurosurgery, but it's now going to be flowing on to not just the procedural specialities but the GPs are going to be expected to subsidise the higher risk specialties, just to keep the system running. And I think most people would find that a fairly unfair kind of impost on general practitioners who would be the lowest earning of the specialists.

DE HOEDT: Dr Phelps, give us an idea of the sort of annual premium someone like a neurosurgeon would have to pay.

PHELPS: Well, if we didn't have the cross-subsidisation of GPs paying more than they ought to be paying to subsidise the high risk specialities, the neurosurgeons, we are told, would be looking at premiums of around a quarter of a million dollars.

DE HOEDT: Ooh! That's an absurd amount of money and that's before you even walk into surgery in the morning.

PHELPS: It is. Now that … it won't be that high for this coming year because of the cross-subsidies, but that can't go on because- -

DE HOEDT: Well, how long can GPs bear the brunt of that?

PHELPS: Well, they can't. They are going to have to pass the costs on to patients, as every other specialist is going to have to pass the cost of increased medical indemnity insurance on to their patients. And this is a situation that really is going to require I think a fairly fundamental systematic change to the way medical indemnity is handled in the adversarial court system.

DE HOEDT: We've seen that court system develop payouts of something like, you know, $13 million for one woman who developed cerebral palsy as a result of what … medical issues. Can we put caps on those sort of payouts?

PHELPS: The New South Wales Government has introduced law reform which will cap some of the payouts for people who have been injured. But I think one of the … there are a number of really unjust elements of the whole system as it stands at the moment and that is that you have to have a fair bit of money behind you in order to be able to afford the legal process and that means that there are many, many others who have probably a right to some form of care and support who are not getting it because they either can't afford, or don't have the will to go through that long involved and expensive process. The second major problem is that most of the cost, most of the costs awarded will go not to the patient but to administration and legal fees. So with that $13 million payout, about $5 million is going in legal costs.

DE HOEDT: So that doesn't really work for anyone in that case, does it?

PHELPS: Well, it doesn't work and it means that there are a lot of people who have long term care needs that are not being met. And so we really do need to find a system where these people who have had catastrophic injuries and let's face it, everybody knows that obstetrics is a high risk business and things can go wrong and looking for someone to blame as being the only way you can get compensation is not fair on the patient, it's not fair on the doctor and it's not fair on the system.

DE HOEDT: It's almost cultural now, isn't it, that culture of blame? If something goes wrong, someone must pay.

PHELPS: Yeah. The blame and shame culture is something that also I think stands in the way of good communication about when things do go wrong and in being able to improve quality and reduce risk, because if doctors are encouraged by their lawyers not to say, 'look, this is what went wrong and this is why and this is how we can stop anything in the future', if they're not encouraged to be able to do that, then I think it's less likely that we will be able to manage the risk in the future. So there are a lot of reasons for changing what's happening. What it does require is a lot of cooperation between the states and the Commonwealth. And we did have, I think, some very significant progress on this issue last year, in this last year. The Federal Government, just before the election, announced a change to the tax laws, so that structured settlements, or settlements that you get over the period of your lifetime can be tax free in the same way as lump sums are and that's been a tremendous help, I think. The New South Wales Government has introduced a change to the law that governs medical negligence. The other states are looking at it, but the wheels are moving a little slowly to overcome this current crisis in time.

DE HOEDT: If you've just joined me, I'm talking to Dr Kerryn Phelps, President of the AMA. Finally, you talk about reducing risk. I think there's reduced competition in the insurance market, isn't there, after the collapse of HIH?

PHELPS: Well, there's certainly a problem with the reinsurance issues. I mean, reinsurance is very much more expensive than what it was before and this is one of the reasons why indemnity premiums are going to be going up and this is going to be a problem not just for one insurer but for all of the insurers and there aren't that many of them. It, I think, also makes medical indemnity insurance a fairly unattractive option commercially too, because it's such an unpredictable area. So there is, I think, the risk of a lessening of competition in the future. We've really got to get to the crux of this whole issue in a very concerted way and quickly. But in the meantime, medical fees are going to go up. I mean, I was talking to an obstetrician yesterday and he said that his costs for medical indemnity amount to about a thousand dollars per delivery…

DE HOEDT: Oh, goodness me!

PHELPS: …for his private patients, so, you know, there's a problem there.

DE HOEDT: And you've obviously opened up negotiations with Senator Patterson, the new Health Minister.

PHELPS: We've already discussed this matter with the Government. I've written to Senator Patterson about it and sent a briefing about the nature of the problem. We're in discussions with various state governments at the moment and I'll be meeting with Senator Patterson in a couple of weeks to discuss this and other issues.

DE HOEDT: All right. Dr Kerryn Phelps, thanks for your time today.

PHELPS: Thank you.

DE HOEDT: Good to talk to you.

PHELPS: Bye.

DE HOEDT: Dr Phelps there, President of the Australian Medical Association, of course.

Ends