Dr Kerryn Phelps, AMA President to Medical Indemnity Satellite Broadcast, Sydney

Our focus has always been on 'curing the disease', rather than applying a band-aid to this spreading problem. The disease is the mix of disparate factors that forced indemnity premiums to skyrocket out of control.

UMP was a victim of that disease but, at least in the eyes of the AMA, not a terminal victim. By successfully treating UMP, the AMA saw a way to stop the disease spreading across the whole industry.

We have acted swiftly and carefully to help resolve a crisis that threatens to wreak havoc with the provision of medical services to all Australians - a crisis that would see the worst medical workforce shortage in Australia's history.

The first step was to treat the patient - UMP. Last year, on behalf of our members and the profession, we asked Ernst & Young to report on UMP and its most recent 'call' on doctors. UMP cooperated on that report. We circulated the relevant advice from that report to our members.

Following the advice of Ernst & Young, we insisted that UMP should start publishing estimates of the unfunded tail or IBNR. By and large, this information has been forthcoming and has provided the AMA, UMP members and the Government with a much clearer picture than ever before.

As a result of the AMA's endeavours, the workings of the medical indemnity industry became historically transparent.

UMP and the industry have since been hit by a string of unexpected events.

An increase in the number and size of claims, including the $14 million Calandre Simpson case.

The full impact of the HIH collapse, a major UMP re-insurer.

And the September 11 catastrophe in the United States and its international shockwaves affecting the global re-insurance market.

UMP's resultant woes have driven home the stark reality that the medical indemnity "tail" must be covered if equity of access to medical services in Australia is to be maintained.

A social problem of the first order had emerged. A community response was needed.

The entry of the Federal Government to the medical indemnity debate has been most welcome. Despite the Federal Government 'guarantee' until the end of the year, many doctors have let us know they remain uncertain about the present, let alone the future.

That is why we are here tonight - to ease that uncertainty.

The response from doctors to this broadcast has been amazing. We will attempt to answer as many of your questions as possible tonight but we won't get to all of them. We will do our best.

The pieces are falling into place to solve or at least ease this crisis for doctors, patients and communities.

Governments and medical defence organisations have begun to respond.

The NSW state government has introduced tort law reform, extended public coverage to all doctors working in the public system, and endeavoured to make some reforms around medical indemnity premiums.

The Federal Government has just introduced legislation to enable large lump sum payments to patients to be replaced by periodic payments.

After initially extending a capital guarantee of $35 million to UMP to 30 June 2001, the Federal Government is now guaranteeing the payment of settlements and claims made by doctors over the period 29 April to 30 June this year.

The Prime Minister has indicated that his Government will guarantee UMP settlements and claims made to 31 December this year on a claims-made basis and has come up with a scheme to deal with the unfunded "tail" of claims.

However, this proposal includes a yet-to-be-determined form of levy on doctors.

This is being challenged by the AMA and it will need to be examined very closely. I am sure that Senator Patterson will provide specific information about the Government guarantees.

Medical defence organisations have taken a range of steps to be more transparent and to ensure that their finances are in order.

Where possible, they are offering coverage to doctors who want to switch MDOs.

While every doctor will need to make their own individual decision as to how and if they keep practising, the measures taken so far appear to offer a reasonable degree of comfort in terms of doctors having coverage in the short to medium term.

But these measures are not comprehensive and they do not address the unsustainably high level of premiums facing many proceduralists.

Nor do they satisfy the fundamental long-term reform requirements that will be needed to make the medical indemnity system viable again.

As the AMA has been saying all along, the key to a viable medical indemnity industry for the longer term in Australia is a viable UMP.

As I understand the Government guarantee, if UMP goes into liquidation, UMP-insured doctors would not be covered for their tail for the period from 1 January 2001 to 28 April 2002, and from 1 July 2002 through to 31 December 2002 - unless they can shift to another MDO and buy tail cover for these periods.

The Government is aware of this issue but is, as I understand it, not prepared to make an additional commitment until they see if the need arises.

Of course, if UMP is able to keep trading into the future this issue will not arise. Members will be covered by their claims made policy on an ongoing basis.

Clearly the next milestone in this issue will be when we get a decision from UMP's Provisional Liquidator, Mr David Lombe, about the commercial viability of UMP. Maybe he will be able to give us some indication tonight. In the meantime, I am very aware that there is an established legal process that Mr Lombe must follow in all of this.

Long term viability of the medical indemnity system will require reform of the courts and their processes, including expert witnesses, judges experienced in medical cases and shorter statutes of limitations in the States.

Some of the State Governments are actively working on these issues, but we need a much quicker and more positive response.

On top of this, the Federal Government will need to develop a national scheme to bring the costs of the very high settlements under control. There are not many of these but when a single claim can run to an overall cost of around $17m or $18m, they have the capacity to completely destabilise an otherwise viable insurance market.

The AMA has proposed that a national scheme for the long term care of severely injured patients, which is a very major cost item in these big awards, must be developed on a community funded basis.

I know that the Government is also looking at the possibility of a scheme covering the excess over a fixed amount, say $5m, in the big cases.

The costs of these big cases have to be brought under control or some of our key specialities such as obstetrics and neurosurgery will become totally uninsurable. Without cross subsidies from other parts of the profession, these specialities are already uninsurable.

It is not just a matter of holding the line. Some premiums have already reached the totally unsustainable levels that are driving doctors out of procedural work. Many of the doctors who have faxed questions into this program are in this position.

They cannot afford the premiums and the pressure and the risk that goes with, for example, delivering babies in a country town.

Rural obstetrics is rapidly becoming a thing of the past.

Similarly, neurosurgeons are paying $10,000 a month to keep practising. They can't keep this up. Something has to give.

Rather than going down the path of adding a levy to the current level of premiums, we will be talking to the Government about subsidising premiums so that doctors can stay in practice and the current range of services can be maintained.

I hope that I have given you some idea of the distance that we have come in the last 12 months, which is not insignificant.

I am heartened to see the resources and the effort being applied to this complex issue by the Federal Government.

The AMA has maintained its independence while working closely with UMP and the other MDOs, the various colleges and organisations that represent doctors, and with the Federal and State Governments.

I have no doubt that there are some very tough negotiations still to be had. But I can assure you that the AMA will work with the Government to deliver the best possible outcome for doctors, patients and communities right across Australia.

We will keep you informed every step of the way.

Thank you for your time tonight.

Ends