Dr Kerryn Phelps, AMA President - Radio 2SM, with Clive Robertson

PHELPS: Good morning, Clive.

ROBERTSON: Yes, I am trying here and I'm looking at the articles side by side. Perhaps you could tell me, then, you had discussions with the Assistant Treasurer about, is it the payout of negligence or any monies due by doctors who are sued? Is that basically it?

PHELPS: That's pretty much it, yes. When the court makes a settlement amount, that can be in the realm of millions of dollars and at the moment, if that settlement goes to the person as a lump sum, it's not taxed. But if they chose to take it as an annuity over their lifetime, it is taxed. And so the two treatments are very different. And the analysis that we've had done is that there would be significant savings to the system if there could be a change to the tax laws for these medical negligence payouts that enabled doctors, enabled the courts, at least, to have annuities or payments made over a person's lifetime, and that they were taxed in the same way as lump sums, which are not taxed.

ROBERTSON: So the lump sum, say it was $500,000 off the top of my head, $500,000. If you took that as an annuity, you wouldn't end up with a net $500,000, would you?

PHELPS: Not at the moment. But the laws that we've been trying to have changed would enable that to be paid to the plaintiff, the successful plaintiff, over a period of time.

ROBERTSON: But how does that make any difference? You're insured against this anyway? Why would it make any difference to the medical practitioners?

PHELPS: Well, it goes to absolute cost of the insurance itself. We know that the premiums for some obstetricians in New South Wales in the next year are going to be in the order of $132,000. That's just for the insurance premium.

ROBERTSON: Gee.

PHELPS: And so it's becoming unffordable for doctors in a number of specialties, and obstetrics and neurosurgery are at the pointy end of this at the moment. But it's going to spread to the other procedural specialties before too long as well. And so the whole system has become unffordable and what we've needed to do through the AMA is to speak to not only the Federal Government and various portfolios - the Attorney General's department, the Health Minister, the Assistant Treasurer - plus people in the ALP as well, and this structural arrangement is now ALP policy.

And what we've been trying to do is to get changes to the State laws that govern the way courts handle these medical negligence cases, as well as getting the structured settlement thing happening federall. And New South Wales, just a couple of weeks ago, you might have noticed, passed their reforms to the law and we certainly have now some positive signs that the Federal Government will look at this aspect. It's a very complicated scenario.

ROBERTSON: But how do you know there's any relationship between these suggestions, which you're both working on, and the fact that the insurers will lower the price of the actual negligence insurance. I mean, have I missed the point here?

PHELPS: Well, it really is a matter of putting the building blocks together. The Australian Health Ministers Advisory Council is also looking at a report at the moment which sees what else the State Governments can do in terms of streamlining processes within the State system as well. And if we can put all these pieces together, the actuaries from the medical indemnity insurance organisations are telling us that this will have an impact on at least containing the increases in premiums, and we're hoping that there'll be a decrease. Of course, the collapse of HIH has thrown a great big red herring into the whole thing, but we do need to do something, and urgently, because we're losing doctors from areas like obstetrics.

ROBERTSON: How many companies are insuring the medical people?

PHELPS: Well, there's one company that is insuring about 70 per cent of doctors in Australia, and that's United Medical Protection. But there are other groups such as, there's a group in Victoria, there's a group in Western Australia, there are a number of smaller outfits that also insure doctors, but it's an industry wide problem. We know that United Medical Protection have had some difficulties and had to make a call - which is doctors who thought they were up for let's say $50,000 - $60,000 this year for insurance have got a letter saying you're going to have to pay that amount again next year - and that hadn't been budgeted for. Of course, that has to flow into the amount that patients are paying.

ROBERTSON: Yes, of course. So do you think there's a lack of competition in the people who insure?

PHELPS: I don't think it's a competition issue because these are organisations that are run as mutuals, so it's a matter of just trying to balance what they expect they're going to have to pay out with the premiums that they're bringing in, and a lot of those payouts in the courts are quite unpredictable.

ROBERTSON: I understand when you say how complicated it is and I suspected as much. I read through both articles, it's a really heavy issue. I mean there's no easy solution here, is there?

PHELPS: No, there isn't. The AMA's actually been working on this for about 14 years. We've been seeing the crisis coming for a long time and the structured settlements issue has been on the table for that length of time. And one thing about the changes to the tax laws in structured settlements, which is almost unique in this area, is that the lawyers and the doctors are in agreement about the fact that it needs to happen.

ROBERTSON: Goodness, you haven't thought of getting the WorkCover legislation to cover this because that seems to have wonderful ceilings to it?

PHELPS: Well, I think this is quite a separate issue and, of course...

ROBERTSON: But you know what I'm saying, though?

PHELPS: Yes, I do.

ROBERTSON: How you can dictate these things. I mean, how much of this - those wonderful little aspirants who go to university and become interns and what have you - is this a deterrent to their going actually into the course or whatever? I mean, how heavy is it when you're actually studying, realising that the upfront cost before you do anything is going to be that high? Is this a factor at this stage or not?

PHELPS: Yes, it's certainly starting to impede training in obstetrics and neurosurgery, particularly, and quite a high percentage of the young obstetrics and gynaecology registrars are indicating they have no intention of delivering babies. That's the particularly high-risk area. And in neurosurgery the last couple of years they haven't been able to fill about 30 per cent of their training cases. So, it really is leading to very serious potential shortages and actual shortages and, in rural Australia, for example, I think it's a reduction of about 40 per cent of GP obstetricians over the last five years. So, women in country areas, almost entirely related to this medical indemnity crisis, are having to travel hundreds of kilometres away from home and away from their families to have their babies.

ROBERTSON: In that condition your timing's got to be good, too, hasn't it?

PHELPS: Anyone's who's ever been involved in having babies knows that it's not always quite so predictable.

ROBERTSON: No, of course not. We come along when we come along, don't we?

PHELPS: Absolutely. And to be away from your other children and your families, it really is a serious issue, and it's one that I'm very pleased to say that the Federal and State Governments are now starting to take very seriously and to try to do something about.

ROBERTSON: As a matter of interest, finally, on this thing, do midwives have to take out insurance as well?

PHELPS: If they are working independently, yes. If they're working within the public hospital system, they're indemnified by the respective State Government.

ROBERTSON: Did you see why I thought that when you talked about the number of women having to come to the city to have the child, well then wouldn't the role of the midwife now be increasing?

PHELPS: Well, certainly, they're going to be seeing an increased pressure on the more centralised public hospital system, yes, and there is also a problem in the nursing workforce crisis as well because we can't enough people to go into midwifery as well.

ROBERTSON: I know, it's falling apart. Alright, Madam, thank you for explaining that. I now have a full bottle on this. Thanks for your time.

PHELPS: Thanks, Clive.

ROBERTSON: Doctor Kerryn Phelps, who's National President of the Australian Medical Association, and, of course this affects us all, this is not something in isolation. A lot of money, indemnity insurance, the lawyers have it, too. They've had it for yonks and it means that if something goes wrong you insure against it, your negligence, and, of course, the costs go up. I suppose because we've gone a bit the American way where everyone sues everyone, don't they? Yes, they do. Anyway, to medical aspirants - the sort of thing you have when you have a headache, isn't it, I'd like a medical aspirant, much better, instant active and gentle to the stomach - medical aspirants, I don't know what you do with all this, this could be quite a deterrent to doing it all, but you must not be put off, no, no, no.

Ends