Medical Indemnity Act 2003
A brief background to the changes created by the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003
Professional indemnity never seems to be out of the news in Australia over the past few years. The collapse of the insurance giant HIH left many thousands uninsured, including thousands in other professions. Medicine and dentistry were only minimally affected by HIH, but when UMP ("United") was placed into provisional liquidation in February 2002, the shock waves ran from individual surgeries, clinics and hospitals across Australia, right up to Canberra. At the time, United had been the largest indemnifier of the medical profession in Australia, as well as indemnifying some dentists - mostly in NSW.
The Government's response was twofold:
- Firstly, to commission an inquiry under the leadership of Justice Ipp, to make recommendations on the legal framework for clinical negligence, the legal remedies when it occurs, and the management of damages and the associated legal costs. The Ipp Report made many recommendations in the hope that these would result in a uniform Federal approach to this question. Following this, most States have now implemented legislative changes ('Tort Law' reforms) - these have been conveniently summarised in various issues of DPL's risk management publication Riskwise Australia.
- Secondly, to introduce the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003 - ("the Act"). This required all new arrangements for professional indemnity for healthcare professionals in Australia (including all renewals of existing arrangements) made on or after July 1st 2003, to be arranged through regulated contracts of insurance..
Many of the MDOs (mutual discretionary organisations) which had traditionally provided professional indemnity for the Australian medical profession, were outspokenly critical of the Government's chosen solution to the medical indemnity crisis, as was the Australian Medical Association (AMA) which effectively threatened the Government with strike action by its members. With the Government also coming under fierce parliamentary criticism from the Opposition, there was hardly overwhelming support for the changes that were introduced.
It is perfectly understandable, in the wake of the UMP crisis, that the Government would wish to see more regulatory control and safeguards in place to prevent a repeat of the events at United, and hitherto the MDOs had remained outside the jurisdiction of the insurance regulators (APRA). But it was more difficult to understand the Government's logic in choosing the very model (ie contracts of insurance from a regulated insurer) that had failed so dismally in respect of HIH. Even if they had concluded that this was necessary and desirable in the case of medical practitioners, the decision to impose the same insurance requirement upon all registered dental healthcare professionals - dentists, hygienists, therapists, oral health therapists, technicians and prosthetists alike - was certainly difficult to comprehend. More recently, a Government review of the scope of the Medical Indemnity Act considered this very question, but decided that there was no pressing need to amend the legislation that it had introduced four years earlier.
Forcing well run, well funded and successful MDOs (including DPL, and several of Australia's medical MDOs) either to become insurance companies, or to set up an insurance company, or to outsource a suitable insurance policy, simply penalised these organisations (and their members) for the failures of others. There are additional costs involved in the provision of insurance which do not arise in mutual discretionary organisations, and these additional costs have to be paid by members (and ultimately, by their patients).