Dr Kerryn Phelps, AMA President, with Jon Faine, Radio 3LO

PHELPS: Good morning, Jon.

FAINE: We've spoken often on the program about the insurance crisis but yesterday it took a turn for the worst. We learned that the biggest insurer of doctors in the nation based in NSW and covering mostly doctors in NSW and Queensland - but all the same the biggest in the country - is looking a little wobbly.

I understand you had crisis talks with the Federal Government last night. What happened?

PHELPS: Well I spoke yesterday with Senator Coonan and Senator Patterson because this issue crosses portfolios and we need a whole of government approach but we don't only need a whole of Federal Government approach. We also need Federal/State co-operation of virtually unprecedented nature to sort out this whole medical indemnity mess. We are facing a looming disaster and I'm pleased to say that the Government recognises the urgency of the situation and they're taking urgent measures to try and deal with it.

FAINE: Urgent measures? What does that mean?

PHELPS: Well there is a fast tracking of the preparations for the Prime Minister's medical indemnity summit that he announced late last year and that will be happening on 23rd April. Obviously there's a great deal of groundwork that needs to go in before that happens. The AMA will be consulting with government at all stages to ensure that whatever solutions come out are in the interests of the health system and patients.

And, but I think also, there needs to be consideration of a lifeline to the industry in the meantime to make sure that there is some stability brought to the industry before we achieve the reforms that are needed to get the industry on to a sensible footing.

FAINE: Dr Phelps, you're talking in what I'm sure is political jargon but doesn't have much meaning to the consumers and the customers - having a summit, talking about things. All of that's well and good. But what's going to happen? What's going to be done?

PHELPS: Well I think you have to talk about things and you have to make sure that the planning is appropriate in the lead up to something like this. What can be done? What needs to be done is for the entire legal system surrounding medical indemnity to be reformed. And that's why it's such a big task but not one that is impossible.

That is one that will need Federal Government intervention. It's going to need changes to the way that we deal with people who are injured in medical accidents. And for example, at the moment, if you have a doctor's premium that they're paying for medical indemnity insurance, for every dollar that goes to the care of patients, a dollar goes to the lawyers. It's an expensive system. It's cumbersome. It's time-consuming. You can still in the case of obstetric problems, you can still be suing a doctor 21 years after the initial event.

And so it's virtually impossible for the insurers to be able to anticipate what judges are going to decide, what sort of size of judgments there are going to be. I mean we had, just last year, one case which was worth about $17 million and, you know, enormous legal costs and it took about many, many years in the courts for that to come through.

Now it would only take a few more of those cases for the whole system to crumble. So…

FAINE: Are you saying that, if people are caused permanent and serious injury by negligent doctors, they shouldn't be able to sue?

PHELPS: No, what we're saying is, if people are caused permanent and serious injury as a result of medical treatment, it's not necessarily have to be for negligence. But if there has been an adverse outcome from a medical treatment, that what we need to do is to make sure that the long-term care of that person is taken care of.

And at the moment, it's only people who go through the adversarial legal system with all of its expense and its trauma and stress, who have any likelihood of getting a payout. And the question really is, is that the best way to manage the long-term care costs of people who have adverse outcomes, to have to go through the adversarial legal system where the lawyers are getting dollar for dollar what the patients are getting.

FAINE: Dr Phelps, you've been sued and you have sued other people in the course of your medical/political career.

PHELPS: I have not been sued in the course of my medical or political career.

FAINE: You've been taken through the courts in various capacities.

PHELPS: I have not.

FAINE: You've taken others on as well. You pursue your rights and defend them when you're affected.

PHELPS: Well the proposals before the Government would certainly protect a citizen's rights, common law right to sue a doctor. But if that was - if there was a case of negligence. And in fact the whole reason that medical indemnity organisations were set up as mutual organisations was because the medical profession was determined to make sure that patients were protected in the event of these sorts of outcomes.

However, nobody is winning under the current system. At the moment we have cases where people who need to have long-term care are not getting it; where we have lawyers who are getting as much as the patients are getting out the system; where we have services that are being withdrawn from entire communities because the doctors can't afford to maintain their premiums. And, if premiums keep on going up, then medical fees will go up and that will mean that patients are unable to afford the care that they need for basic medical treatment.

So the situation at the moment is unsustainable. Nobody denies that a patient has the right, to common law rights to sue a doctor in the case of negligence. But the bottom line is that the current system lacks elements of social justice. It's cumbersome. It's expensive and it's unsustainable.

FAINE: The lawyers of course say that it's the insurance companies that are unreasonable and needlessly draw out litigation where they know they're going to win because they try to minimise what it will cost them. And if they just offered a decent settlement at the start, there wouldn't be the need for litigation.

PHELPS: Unfortunately there are frivolous claims. There are claims of negligence that are not cases of negligence which need to be stridently defended because it is unfair on the doctors involved if they have not been negligent but there has been an adverse outcome. It is very difficult in the courts to tease out what is truth and what is not truth. And I think the system as it currently stands does not really address the fundamental issues.

It is unsustainable financially. It is unsustainable for patients and, if it continues the way it is going, we will lose vital services particularly in areas like obstetrics, particularly in rural communities, and in also other specialties such as neurosurgery where they're having difficulty filling training places because people don't want to go into a profession where they're likely to be sued. As part of looking after the patients that they've done all their education and training over many, many years to look after patients, and they don't want to have to end up in courts over it.

FAINE: We need to reform the way medicine is practised. We need to reform the way the courts operate and the way litigation is conducted and insurance companies go about assessing their claims. None of those seem likely to deliver a quick outcome. Each of those are enormous tasks. Together they're almost insurmountable.

PHELPS: If we do get fundamental reform of the nature that I'm discussing, then the actuarial assessments, the way the accountants look at the status of the medical indemnity companies, will be reviewed and I think we'll find that the industry is on a more stable footing.

FAINE: Well my point though is that that's not going to be a quick process.

PHELPS: Well I think that the reassessment will be a quick process. I think at the moment the reason that the industry has been rocked is that APRA has stepped in, the prudential regulator, and said that there are not reserves there for them to be happy about the stability of this particular organisation.

So the Government is working at the moment to find out how they can best shore up the industry so that we can put in place these reforms which will lead to more longer term stability and certainty for patients. Because we don't want to see communities left without obstetricians.

FAINE: No.

PHELPS: We don't want to see essential services being withdrawn. We don't want situations where people who have high risk problems… Now let's just take a situation for example where you have high risk procedures like spinal surgery, brain surgery, difficult labours, to have a doctor saying I can't treat you because you have a high risk of something going wrong. I mean we don't want to be in that situation.

But if things keep going the way they are, and people are saying, well we're not going to give you that treatment because of the risk of something going wrong and therefore being sued…

FAINE: Yes.

PHELPS: …then nobody wins. Nobody is winning under the current system. And we need to have a win-win situation where patients have the services that they require; whether there is adequate risk management so that there is safety and quality in our health services. And it's not just about doctors either. It's about the way the system operates as well.

FAINE: All right. Briefly before we move on, 16 minutes to 9: Dr Phelps, the health insurance companies. This is not now the doctor insurance companies, this is the people who provide health insurance to families, have this week won a price rise and had approved a price rise that in some cases is more than double the inflation rate that we have in this country at the moment. Surely that is part of the same problem which is that the costs of the health system are just out of control.

PHELPS: Well I think that we have I think suppression of private health insurance premiums over the last few years and costs have gone up. What the AMA is concerned about is that there is transparency and justification for the increases. And I think that we've really reached a stage where the taxpayer is contributing to such an extent with private health insurance premiums through the taxation rebate, that I think we are owed quite detailed explanations of why the increases are, if any in a given year, are necessary.

We do know that the cost of providing medical treatment do increase substantially with time and generally outstrip rises in CPI. But I think that the factors that are involved need to be explained not only to health fund members but to general taxpayers.

FAINE: Thank you for your time this morning.

PHELPS: My pleasure.

FAINE: Very complex matters. It's been most interesting. Dr Kerryn Phelps, the Federal President of the AMA.

Ends