Dr Trevor Mudge, AMA Vice President, with Howard Sattler, Radio 2SM

What's been used up till now is a thing called the United Medical Protection group, UMP. Now, UMP has gone into voluntary liquidation, and all sorts of figures are now being bandied around the place, which should chill anybody. And the Sunday program on Channel 9 yesterday did an excellent investigative piece, I thought, on this whole UMP - I'll call it a scandal - which revealed a $450 million blowout in potential medical indemnity payouts was missing. Also it revealed that 12,000 of the members on the books of UMP are actually not practising doctors, and amongst them, 589 are dead. Really.

The Australian Medical Association, they interviewed the president, Kerryn Phelps, said she'd been assured that UMP's financial position was sound not, too long ago and that there wouldn't be a call for more money from members, that it wouldn't be necessary. Guess what happened? Quite the reverse. On the line from the AMA - Kerryn Phelps is not available today - but vice-president, Dr Trevor Mudge. Hello, Doctor. How are you?

MUDGE: Good, Howard.

SATTLER: Were you surprised in any way about those revelations yesterday?

MUDGE: Well no, they're not revelations at all, they're an indication of the problems with the industry.

SATTLER: But what about the fact that 589 doctors on the books are dead?

MUDGE: Every medical defence organisation in the world has dead doctors on its books because they have to be covered for the next 25 years. I'm an obstetrician; a baby I deliver tomorrow can sue me in 25 years' time. That is the problem.

SATTLER: Okay. What I'm suggesting is the Federal Government believes there are a lot more active members on the books than there were.

MUDGE: I don't know what the Federal Government believes. And, of course, we'll get the figures from the provisional liquidator once he's finalised the finances of UMP and actually knows whether they're solvent or not, because nobody still knows whether they're solvent. They appointed a provisional liquidator not because they were insolvent but because the directors of the company couldn't renew their own professional indemnity insurance, which is a curious irony really.

SATTLER: Isn't it? All right, but what about what you were told only in the last couple of years, or Dr Kerryn Phelps has suggested that you were told there wouldn't be a call on your members for any more money and there was.

MUDGE: Yes. Well, I think that's exactly right. The members of UMP were told by their board…

SATTLER: That's about what, 50% of all doctors, or more than that, is it?

MUDGE: It's more than that, it's about 80%. UMP is really the major player now in the market. There are about four others with small market shares. No, they were told that their finances were good and that a call on the members wouldn't be required, and then within six months a call was made. That of course created a lot of angst and concern amongst their members, which is why the AMA commissioned the Ernst & Young report into - to try and get some data out of UMP.

SATTLER: Okay. Now, that Ernst & Young report when it was put to Dr Phelps, why she hadn't released that to the members, she didn't seem to have much of an answer. Do you know why?

MUDGE: Well, the reason was that, of course, the AMA exposed itself significantly in trying to get any information out of UMP. UMP clearly didn't want to divulge the sort of commercially sensitive information like the numbers of claims and the quanta of settlements which we'd been struggling to get to inform public policy. The Government was able to say, well, there's just no information on why the costs are going up. We had hoped that out of that Ernst & Young report we'd be able to get enough information to be able to go along to Government and say, "Look, here are actually the figures." The Ernst & Young report was never able to inquire into what the IBNR, that is the future liabilities of UMP would be. Of course, UMP wouldn't allow that in the terms of reference, nor indeed was it possible because one of the things about the tail, or the IBNR, or the future liabilities is that by their very nature they're incapable of being estimated. I mean, who knows what the child with cerebral palsy will sue for in 25 years' time? Fifteen trillion?

SATTLER: You've told me that 80% of its members are doctors, I imagine the vast majority of them would be members of the AMA. Under what basis could they refuse to release information to the auditors you tried to send in?

MUDGE: Well, I guess the same basis that the details of your contract with your radio station and your salary are confidential. I mean, the commercial information normally is kept confidential so that it is - for reasons of competition with others, it is…

SATTLER: Except they're asking your members for premiums. They want your members to keep them going and yet they can't tell you what's going on within the organisation.

MUDGE: Well, in the sense that that's a matter for the organisation and its membership. I mean, we as the AMA certainly share most of the members with UMP and that's really why we commissioned the Ernst & Young report to do what we could to try and increase the amount of transparency that UMP were dealing with its members.

SATTLER: Well, of course, transparency might have helped because it now looks like the place was at the very least hopelessly mismanaged, doesn't it?

MUDGE: No, I think that what the Sunday program really highlights is the enormous chaos under which the industry is run, and that's because the wheels have fallen off the industry. The ability of the industry always had to cope with the settlement in 25 years' time by being able to, one, guess it reasonably accurately, and secondly, collect the premiums in the next 25 years, that has gone because of the escalation of settlements. I mean, 10, 15 years ago, cerebral palsy would attract at most a half million dollar settlement. Now it's 14 million, and in 25 years it could be 14 trillion. That's the problem.

SATTLER: Okay. Look, with the Federal Government giving some comfort for a few months, where are you all at now? I mean, you've still got to sort out your insurance for the year to come and most of the people will be required to try and do that by next month, won't you?

MUDGE: Next week in fact, yes.

SATTLER: Next month is next week.

MUDGE: Yes, that's right. Look, there is a major problem, I think, looming in the provision of health care because our members are saying that unless there's some certainty about this they won't be able to work.

SATTLER: So the Federal Government's saying, "Oh, we'll give you another six months," means what? Next to nothing to you, or what?

MUDGE: Well, I think it's of some help that - and we hope it's a core guarantee and not a non-core guarantee, it's not backed up by legislation yet of course. But I mean, that's a short-term fix. The other thing is a long-term fix which is going to be very difficult to achieve because we've got to reform the system enough to make it manageable again and it's really so much out of control, just like public liability in general only the premiums for medical public liability have gone up 28% per year every year for five years.

SATTLER: Okay. So next week are we going to have a flight of medicos, or are they all going to be hanging in to see what the Federal Government's going to come up with?

MUDGE: I hope we're not going to have a flight of them out of practice. It's going to be very hard to stop…

SATTLER: You've got your ear to the ground. What do you hear?

MUDGE: We've got members who are very, very concerned about it and certainly are giving thought to giving up practice altogether. They're taking a month holiday…

SATTLER: What, next week?

MUDGE: Yes, yes, next week. I mean, next week is the crunch time for us because the provisional liquidator has to decide whether he can issue notices of reinsurance for UMP's members, which is 80%, as we've said. And so we are really in for a crunch time. Solution is going to be very difficult indeed to find a solution that's acceptable to doctors and to the general public.

SATTLER: Do you believe any fraud was conducted within UMP?

MUDGE: I'm sorry, I missed that. Any?

SATTLER: Do you believe any fraudulent activity has been conducted within UMP? Do you believe that the funds have been mismanaged?

MUDGE: I have no evidence for that at all.

SATTLER: All right, appreciate your time today. Thanks for joining us.

MUDGE: Bye bye.

SATTLER: Dr Trevor Mudge of the AMA. Now, you might say that's doctors' business, but doctors' business is patients' business, and if they're taking - in droves and at least take a month off to try and work it where they're at, if they do that in droves, you're all going to be in trouble, we're all going to be in trouble. I need a doctor too. And for the longer term, it just is going to mean absolute chaos in this country. And it's been looming for some time. The AMA, Dr Kerryn Phelps, said yesterday on that Sunday program she'd been talking about a train on the tracks about to hit, go off the rails, some two years ago, but nobody would believe it. Well, you'd better believe it now.

Ends