Dr Kerryn Phelps, AMA President, with Cathy Van Extel, Radio National

VAN EXTEL: Yes, and they're under fire on another medical issue. Some doom-like utterances are coming from the medical industry about the impact of rising indemnity insurance costs. This has been an on-going issue, but it's come to a head by news that the biggest insurer of doctors is warning now that it might in fact collapse.

The industry and the opposition are both accusing the government of dithering on the issue of indemnity. And yesterday the Australian Medical Association President, Kerryn Phelps, held emergency talks with the government to discuss this issue. And Dr Phelps joins us this morning. Thanks for your time.

PHELPS: Good morning.

VAN EXTEL: How serious is the situation for United Medical Protection, which I believe covers about 60 per cent of Australian doctors?

PHELPS: Yes, even more than that, and in fact about 90 per cent of New South Wales doctors. I think it's not understating it to say that it's a looming disaster. We've been seeing that the problem with medical indemnity has been building over quite some years. And it's reached a head last year with the withdrawal of services from New South Wales hospitals, and the New South Wales Government did introduce tort law reform and stepped in to cover public patients in public hospitals. However, it hasn't solved the problem. It won't solve the problem until we see a national approach with fundamental law reform.

VAN EXTEL: Now, you met with the Health Minister yesterday. What did those talks achieve?

PHELPS: I met with Senator Coonan, and I also spoke with the Health Minister yesterday, because this is an issue that crosses portfolios and which, in itself, makes things a little more complicated than otherwise might be. But I think that we now have a whole of government approach to solving this problem.

We are going to see threats to services, especially obstetrics and gynaecology, unless we see a solution to this problem. We do need to see, I think, an urgent lifeline thrown to the industry. What form that takes I think we have to give the government a little bit of time to speak with the industry and decide what needs to happen there. But …

VAN EXTEL: Well, what is the AMA's position?

PHELPS: Well, we've been working on this issue for more than a decade. And we've had a medical indemnity task force up and running now for a couple of years, and so we're very well placed to be able to give advice to government about what will benefit the health systems. That's certainly our concern.

The sorts of advice that we'll be looking at is in the area of fundamental law reform. Now, in order to do this we have to have unprecedented federal and state co-operation. I believe we can achieve that with goodwill. This must transcend political barriers.

We need to see a statutory scheme for the care needs of people who've had an adverse medical outcome. And I think that we need to - we need to look at how the law currently deals with these cases.

I mean, if you look at the premiums that doctors pay, for every dollar that goes to a patient, a dollar goes to a lawyer. And that makes the system expensive, cumbersome. Of course it's time consuming. It's unsustainable.

VAN EXTEL: There are reports that the industry itself is massively undercapitalised. Is it too late?

PHELPS: Well, it's become undercapitalised because of the escalating size of premiums and the number of cases. It may well be too late for the industry in its current form, which is why I think we need to see changes not only to the prudential requirements of the medical indemnity organisations, but we also need changes to the way the law actually deals with these cases.

The other problem, too, is that the insurance industry generally has been hammered over the last year with the HIH collapse, and they of course were a major reinsurer for the medical indemnity industry. September 11, once again, insurance globally was affected by that. And we also had the Calandre Simpson case last year, which amounted to a final figure of about $17 million for a single case that was paid out after 21 years.

Now, we need to also have a look, I think, at some sort of Statute of Limitations on these cases, because it's impossible for these organisations to be able to predict firstly what judges are going to be awarding cases. But, secondly, 21 years down the track, how can you decide what level of negligence or otherwise was in a case after that length of time has elapsed?

And then you have interest costs, legal costs, and all sorts of other add-on costs, and then the imponderable long-term care costs, without knowing how long a person is going to survive or what care they're likely to need.

So we have got a complex situation and one that I believe with goodwill and with great focus and energy can be solved, but it has to be done within the next few months.

VAN EXTEL: Dr Phelps, just on another matter. The Royal College of Psychiatrists is reconsidering its association with the Governor-General. Can you confirm that the AMA has withdrawn its invitation to Dr Hollingworth to open your national conference?

PHELPS: I'm not able to confirm or deny that at this stage.

VAN EXTEL: Do you understand the concerns that are being expressed by the Royal College of Psychiatrists?

PHELPS: I do understand those concerns. The medical profession is charged with protection of the vulnerable in our community, and I can understand the concerns of the College of Psychiatry in putting questions to the Governor-General for the College to discuss. But that's a matter for that organisation.

VAN EXTEL: Dr Phelps, thank you for joining us.

PHELPS: Thank you.

COMPERE: National President of the Australian Medical Association, Dr Kerryn Phelps, with Cathy Van Extel in Canberra.

Ends