Saving medical insurers, not public health

The Federal Government last week announced a new plan which is 
ostensibly aimed at ensuring that doctors will not be forced out of 
practice because of high medical indemnity insurance premiums. In reality 
the plan is about bailing out insurance companies and the private health 
system.

Under the plan, indemnity insurance premiums for medical practitioners will 
be subsidised by the government for high-risk operations. There will be a 
50 percent subsidy on claims over $2 million, and claims against the failed 
medical insurance firm United Medical Protection (UMP) will be covered by 
the Federal Government until 2003.

The Australian Prudential Regulatory Authority (APRA) will be involved, 
with medical indemnity providers subjected to the same regulatory 
provisions as general insurers. The Australian Competition and Consumer 
Commission (ACCC) will monitor charges for premiums and will determine 
whether they are reasonable.

The scheme will cost taxpayers an estimated $50 million per annum.

The plan has been greeted with enthusiasm by the provisional liquidator of 
UMP, which would be the immediate beneficiary of the government's scheme. 
The plan has also been greeted with relief by state governments, and by 
medical practitioners, who saw their future careers put at risk because of 
the rapacious conduct of the medical insurers who face losses because of 
highly speculative investment activities.

The scheme will not solve the present shortage of specialists or guarantee 
future services. It is yet another attempt to prop up the private health 
system at the taxpayers' expense.

It throws more money at the private health system and the parasites that 
feed off it. The government already props up the private system with 
billions of dollars a year in tax and Medicare rebates and other payments.

Even as a measure to assist the insurers and shore up the private health 
system they feed off, it will fail.

For a start, relief measures are in themselves likely to cause immediate 
problems. The government's plan sets a precedent for bailing out medical 
insurance companies who collapsed because they do not allow for future 
claims (the "tail", or incurred but not reported liabilities).

This is hardly likely to encourage insurance companies to provide adequate 
funds to cover future liabilities.

Moreover, no indemnity subsidies are offered to private hospitals, some of 
whom have already been forced to close their obstetric wards.

There is talk that private hospitals will reintroduce private hospital 
"gap" charges, many of which had been phased out over the last five years, 
as well as an extra admission charge of $20 to $100 per patient. Private 
health insurance charges are likely to rise as a result of this and other 
features of the plan.

Midwives, who earn much less than obstetricians, and offer an invaluable 
service at relatively low cost to expectant mothers and their families, are 
offered no indemnity subsidy under the Howard scheme. Many midwives are 
being forced out of practice by the current cost of indemnity insurance.

The scheme will be partly funded by a tax-deductible levy on medical 
practitioners, thus transferring much of the financial burden from the 
insurer to the doctor and the taxpayer.

The government has also stated that it intends to pursue the option of 
amending the law so as to limit the liability of medical practitioners in 
cases of medical negligence or malpractice.

However, just as the infamous NSW workers' compensation legislation 
transfers responsibility from insurer to the injured worker, so limiting 
liability for medical indemnity would effectively transfer the cost of 
medical liability from the medical insurers to the patient.

Victorian Health Minister John Thwaites described the plan as "a short 
term, uncosted approach that does not address the underlying problems . in 
particular the long-term care costs of the catastrophically injured, which 
is the issue driving the increase in premiums. The proposal does not 
guarantee that premiums won't continue to rise in future, especially as the 
Commonwealth is requiring medical defence organisations to have increased 
capital."

And there's the rub. One of the greatest weaknesses of the plan is that 
includes no measures to control the future cost of medical indemnity 
premiums. APRA will only monitor charges.

We will see more "choice" — a range of policies and premiums — some 
excluding certain expensive medical procedures (e.g. coronary bypasses) — 
removing the comprehensive coverage that is central to the concept of 
insurance.

A Senate Committee recently recommended extending the power of the ACCC to 
control prices charged by insurance companies if tort law reform (limited 
liability) is introduced by government. (At present the ACCC has no power 
to enforce price control).

Predictably, the Howard Government reacted angrily to this recommendation, 
stating that insurers would not offer premiums at a loss to the insurer — 
not that the ACCC would allow that to happen.

However, it inadvertedly highlights the impossibility of achieving 
satisfactory results when the medical practice regime is based on the 
venality of medical insurance companies.

Indeed, some doctors groups are calling for the nationalisation of the 
entire medical insurance industry.

Concerned at the steady loss of surgeons from medical practice, the 
Committee of Presidents of Medical Colleges and the Australian Consumer 
Association said that there had been a significant market failure in 
providing medical indemnity insurance, and that tort law alone would not 
necessarily reduce costs.

They recommended the establishment of a national insurance pool as the most 
efficient way of spreading the risk. These demands confirm the failure of 
the private system and need for public coverage.

We already have a national, public health insurance scheme. It is called 
Medicare. It works well. It offers efficient, high quality affordable 
services, with universal access. It costs far less to run without the 
multiple duplication of private insurance companies and parasitic layers of 
money grabbing private profiteers that run the hospitals, pathology and 
other services.

It is time the government put the billions of dollars of subsidies propping 
up the private sector back into the public health system. This would bring 
an end to nursing and other staffing shortages, eliminate waiting lists and 
cost the nation far less — as well as the benefits it would bring to the 
health of the community.