Medical Indemnity Costs Soar – Governments Private Health Insurance Agenda Threatened – 25 November 1999

Spiralling medico-legal expenses will force doctors to charge higher fees to private patients or quit practising altogether, Chairman of the Australian Doctors’ Fund, Dr Bruce Shepherd said in Sydney today.

“Victorian doctors have told me that they fear for the future,” said Dr Shepherd. “Some obstetricians will quit medical practice, other specialists will go without insurance.

“But no doctor can consider going bankrupt, which is a certainty if you let your expenses double while your income remains flat.”

He said that the one off levy of up to $27,000, the equivalent of a year’s premiums for every doctor whatever their specialty, imposed on Victorian doctors made a nonsense of the Government’s promises to get rid of the gap fee.

“Literally overnight many Victorian doctors have been told to find $52,000 in medical indemnity fees before they even switch on the light in their surgeries,” said Dr Shepherd.

“Yet the Government and health funds are conning patients into believing that doctors will sign up to deals which cap their fees for years to come.

“Any other businessman who was budgeting for zero or minimal increases in fee income when his expenses were increasing by up to a 100 per cent would be considered unfit to practise.”

The GST was going to add to the crisis, said Dr Shepherd.

“In its wisdom the Government is going to charge GST on damages awards made to patients,” said Dr Shepherd. “That means a doctor will have to find another $100,000 if a patient is awarded $1 million dollars. Doctors will have to insure for that and pay higher premiums.”

Victorian private surgeon Dr Gregory Hoy said the levy has shocked and frightened private doctors in Victoria and served as a warning for doctors and private medicine throughout the country.

“We have had it sprung upon us,” said Dr Hoy. “We are getting a double hit with next to no prior warning.

“We are concerned and frightened for the future,” said Dr Hoy. “I have to find another $20,000 out of nowhere. It means I am not in control of my practice. It means the cost of our practices our being put under incredible pressure.”

He said orthopaedic surgeons were ‘highly unlikely’ to quit private practice but they would have to charge more to their patients and would even consider going without insurance.

“No gap” medical insurance was “dead in the water” in the light of this crisis, he said.

“How ridiculous to expect us to get into a capped fee situation unless they want to cap legal expenses,” said Dr Hoy.

Sydney orthopaedic surgeon, Dr John Harrison, said the Victorian situation served as a warning for the rest of the country.

“We are expecting large rises for orthopaedic surgeons and obstetricians in NSW,” said Dr Harrison. “This is on top of the eightfold rise in doctors’ legal indemnity fees since the mid 1980s.

“The prospects of doctors offsetting these extraordinarily large costs are dwindling.

“For patients that means fewer private doctors practising in some specialties or doctors practising without insurance.”

The legal crisis only served to make ‘no gap’ private health schemes look totally ridiculous, said Dr Harrison.

“No rational doctor who has uncontrollable cost drivers should embark on fixed price, low escalation clauses with health funds.

Dr Stuart Boland, chairman of the NSW medical council of United Medical Protection, Australia’s largest medical indemnity fund, warned thatthere was a major crisis brewing for the high risk specialties – obstetrics and neurosurgery.

“It is getting very close to the time where, unless there is some Government action, obstetricians and neurosurgeons cannot afford to insure themselves.

“There is massive cross subsidisation of these high risk specialties and it simply cannot continue, particularly when American commercial insurers enter the market and offer cheap deals to low risk doctors,” said Dr Boland.

“We are charging obstetricians $42,000 a year in NSW. Before the State government stepped in and paid some of their costs they were costing us $95,000 a year – they are still costing us $62,000 a year.

“Neurosurgeons are costing $150,000 a year – much more than three times what they pay in premiums.

“Since 1987, obstetricians in NSW and Australia have paid $80 million in subscriptions but have generated $170  million in costs.

“They form 1.2 per cent of the membership of United but generate 12 per cent of the total claims by numbers and 24.6 per cent by cost.”

“Once this situation comes to a head and the low risk doctors stop subsidising the high risk doctors there will be a huge crisis in private obstetrics in Australia.”