Dr Kerryn Phelps, AMA President, with Leigh Hatcher, Channel Seven, 'Sunrise'

Australian Medical Association President Dr Kerryn Phelps has welcomed the announcement, and she joins us now. Doctor, good morning to you.

PHELPS: Good morning, Leigh.

HATCHER: Thanks for your time. Doctors are faced with quite staggering premium increases. Can you give us a couple of practical examples?

PHELPS: Well, paediatricians - the specialists who look after children who are sick - are facing 123 per cent increases. The average increase in medical indemnity premiums in New South Wales is 52 per cent, and some of the surgeons are going up by 75 to over 100 per cent. Now what this will mean is premiums in excess of $100,000 a year just to insure yourself against being sued.

HATCHER: How have those premiums moved over the past, say, five years, and why have these increases happened?

PHELPS: Well, they've skyrocketed and there are a number of reasons for this. One of them is that we have seen a massive increase in the amount of litigation, but also in the quantum of the payouts. And, of course, the most obvious example of recent times is the Calandre Simpson case, which was $13 million for the one case, plus costs, plus interest. So you can imagine that having to reassess every one of those similar cases as they come up has added a great deal of cost to the whole system.

Similarly, we've seen with the collapse of HIH and the global insurance and reinsurance crisis that we're facing, that has had an impact, too, on the reinsurance for medical insuring companies.

HATCHER: What will you be looking at in this summit? What are you hoping for, is it just about money?

PHELPS: It's about a lot of things but money is probably the symptom of the disease, I suppose. What we really need to see is a fundamental restructuring of the whole way that our society deals with medical accidents.

Rather than having it always go through the adversarial legal system, we should look at some other way of settling differences, of having people being able to understand what went wrong, whether there was negligence or otherwise involved. And we need to find some way of caring for the people who are catastrophically injured, whether by negligence or by accident, so that these people's care is taken care of for the rest of their lives. At the moment, the minority of people who have catastrophic injuries receive a substantial payout and are able to live independently and look after their costs. The rest of the people with these types of injuries are really reliant on the social security system.

So we want to see a system that's just, and at the moment lawyers and administration take up two-thirds of the awards given to patients, so nobody's winning at the moment.

HATCHER: No. Is there is a need to cap payouts for medical negligence claims as a way of trying to limit the premiums?

PHELPS: Well, I think we need to look at some sort of system that has a capping of, at least part of the award, and the New South Wales law reforms which were recently put through the New South Wales Parliament have addressed this issue. What we need to see is a coordinated national response and this is why we welcome the Prime Minister's announcement yesterday to ensure that all of the State Governments, the Federal Government, the medical profession, patient groups, the legal profession, can get together and work out a system that's going to be fairer to patients and that will enable doctors to continue to provide services to the public health system.

HATCHER: Now, the New South Wales Government has announced it will cover doctors in the public health system. Will that ensure doctors stay in public hospitals?

PHELPS: I think that that will make an enormous difference. Now, clearly this is not going to solve every problem in the public hospital system, but it will certainly solve the problem that we've seen with doctors not being able to afford to stay on in the public hospitals.

It had reached a stage where the money that doctors were receiving in terms of salary for working the public hospitals, was not enough to cover their medical indemnity premiums. So they were working at a loss just to cover their insurance. And, of course that's an unsustainable system and the doctors quite rightly were saying 'look the only way that I can continue to work and afford to work is to work only in the private sector'. So I think it's been a fantastic announcement by the New South Wales State Government. A very welcome announcement by the Prime Minister yesterday, and I think that we really now have the foundations set for a truly national response to this crisis.

HATCHER: Can I put this to you? Lots of businesses and business people are facing hugely increased insurances costs at this very moment for some of the reasons you alluded to before, and yet they can't be helped by the Government. Doctors are seeking to set themselves aside from the rest of the community.

PHELPS: I think it really comes down to being able to provide services to the community, and the point is at the moment, if we leave things go as they are, people who are not able to afford very high fees which will include the medical indemnity costs are the ones who are going to have to look at the biggest payments for their medical costs.

Now, we have to make a choice here as to whether the sickest Australians pay the most for this medical indemnity crisis, or whether it is shared more fairly across all of the taxpayers. And I think most people would say that this a burden that our public health system generally should bear, rather than just the people who are the most sick - that is, the people who are most likely to be using the health services.

HATCHER: Now, if the Government foots the bill for medical indemnity costs, will the Medicare levy have to be increased?

PHELPS: We're really looking at a coordinated effort between State and Federal Governments. At the moment the State Governments are picking up the tab for the public hospitals in every State. New South Wales was the only State which wasn't specifically doing that, and so that has really created some uniformity around the States.

In terms of the Medicare levy, that, of course, is a Federal issue, and I think that we need to look at what our health system is paying for - this is a genuine cost to the health system. We need to look at ways of perhaps reining in that cost, making sure it's more just. If the Medicare levy is one of the ways of going about that then fair enough. If there are other ways of going about it, then I think that we need to lay all the cards on the table and 'say here are the options, what is most acceptable to the Australian people?'

HATCHER: Dr Kerryn Phelps, thanks for joining Sunrise today.

Ends