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2002-2003-2004
THE
PARLIAMENT OF THE COMMONWEALTH OF
AUSTRALIA
HOUSE OF
REPRESENTATIVES
MEDICAL
INDEMNITY AMENDMENT BILL 2004
MEDICAL
INDEMNITY (IBNR INDEMNITY) CONTRIBUTION AMENDMENT BILL
2004
EXPLANATORY
MEMORANDUM
(Circulated by authority of the Minister for Health and
Ageing,
the Honourable Tony Abbott MP)
MEDICAL INDEMNITY AMENDMENT BILL
2004
AND
MEDICAL INDEMNITY (IBNR INDEMNITY)
CONTRIBUTION
AMENDMENT BILL 2004
These Bills give effect to two new aspects of the Government’s
medical indemnity package, announced on 17 December 2003 by the Minister for
Health and Ageing and the Minister for Revenue and Assistant
Treasurer.
The Bills provide for replacing the Incurred But Not Reported
(IBNR) Claims Contribution with the United Medical Protection (UMP) support
payment and implementing the Premium Support Scheme (PSS). Other aspects of the
medical indemnity package in relation to the Run-off Reinsurance Vehicle will be
dealt with in later legislation.
These aspects of the Government’s
medical indemnity package aim to address concerns of doctors by providing a
single financial transaction for doctors to pay their insurance premium and UMP
support payment and to receive their PSS premium reduction (if applicable).
Doctors will generally only have to deal with their medical indemnity insurer
(MII) or their medical defence organisation (MDO), not the Health Insurance
Commission (HIC) or the Department for these transactions.
These Bills
build on the measures provided under the Medical Indemnity Act 2002, the
Medical Indemnity (Prudential Supervision and Product Standards) Act
2003and the Medical Indemnity (IBNR Indemnity) Contribution Act
2002.
OUTLINE
This Schedule provides for amendments to the Medical Indemnity Act
2002 with respect to the administration of the medical indemnity
contributions. It calculates the UMP support payment in a different manner to
the calculation of the former Incurred But Not Reported (IBNR) Contribution by
limiting the amounts payable through a new exemption for persons with low income
and capping the number of contribution years that a person will have to pay. It
clarifies the administration of the existing exemption for persons with
retroactive cover.
This schedule replaces the arrangements for the former IBNR contribution
with new arrangements for the UMP support payment. It provides for persons to
pay their UMP support payment through their medical indemnity insurer (MII) if
insured or through their medical defence organisation (MDO) if not insured but
still a member of an MDO, or in all other cases, through the HIC.
As
the manner of calculating the UMP support payment and the new exemptions
significantly reduce the liability of each person and link their liability to
their capacity to pay (with reference to their current income), the existing
provisions for making IBNR payments through a lump sum payment or through
instalment are repealed. This will streamline payment administration.
This schedule provides for renaming the IBNR contribution to UMP support
payment, renaming medical indemnity contribution to medical indemnity payment
and renaming contribution to payment.
This schedule enables the new Premium Subsidy Scheme to be implemented
and clarifies the definition of health care related vocation.
This Bill makes amendments to the Medical Indemnity (IBNR Indemnity)
Contribution Act 2002 which imposes the IBNR indemnity contribution as a
tax. It provides for calculation of each person’s liability by reference
to their capacity to pay (with reference to their current income) and
significantly limits each person’s liability through caps on payment for
each contribution year.
FINANCIAL IMPACT
The amendments to the
IBNR indemnity contribution will result in the Commonwealth collecting $25m less
revenue over the next 4 years.
The Premium Support Scheme will cost
the Commonwealth an additional $100 million, in support to doctors, over the
next 4 years.
The Government intervened in the medical indemnity market following the
collapse of United Medical Protection/Australasian Medical Indemnity Limited
(UMP/AMIL) and its application to be placed under provisional liquidation in
April 2002. On 30 April 2002, the Government provided a guarantee to take
effect from 29 April 2002 to allow members of UMP/AMIL to continue practising
whilst longer-term solutions were developed. UMP/AMIL came out of provisional
liquidation on 14 November 2003.
Following on from its initial
guarantee, the Government implemented a package of measures to ensure the
long-term viability of the medical indemnity industry and affordability of
medical indemnity cover for doctors. These measures were:
• an extended guarantee to UMP/AMIL to continue trading until 31 December 2003;
• a scheme to address the unfunded Incurred But Not Reported (IBNR) liabilities of medical defence organisations (MDOs);
• a scheme to provide assistance with high cost claims;
• direct financial support for doctors undertaking high-risk
specialities of obstetrics, neurosurgeons, general practitioners performing
procedures, and GP registrars undertaking procedural training, who pay
relatively high premiums; and
• a scheme to meet 100 per cent of any
damages payable against doctors that exceeds a specified threshold.
The
Government legislated to bring medical indemnity provision into an insurance
framework subject to regulation by the Australian Prudential Regulation
Authority (APRA) and to impose product standards on the industry.
Medical indemnity cover had been offered to doctors in Australia for
over 100 years through MDOs, which are mutual associations of doctors.
Traditionally, MDOs provided cover on a ‘claims incurred’ basis,
meaning that doctors paid a premium for a year and knew that they would be
covered forever for any incident in that year. Following pressure from the
reinsurance market, MDOs moved to provide cover on a ‘claims made’
basis, whereby doctors have to maintain cover by continuing to pay annual
premiums to the same indemnity provider. The move to claims made has taken
several years starting in 1997. All providers now offer claims made cover. If
doctors wish to change provider or leave practice, they have to purchase run-off
cover.
Following the introduction of prudential and product reforms on
1 July 2003 through the Medical Indemnity (Prudential Supervision and Product
Standards) Act 2003, medical indemnity insurance has been provided by
general insurers as legally enforceable contracts of insurance. As a result,
MDOs no longer directly provide medical indemnity cover for their member medical
practitioners but have established insurers through which they now provide this
cover. These medical indemnity insurers (MIIs) are ‘captive’ of the
MDOs that establish them. Therefore in practice medical practitioners who are
members of an MDO may take up insurance with that MDO’s captive insurer.
Currently there are seven MDOs with five insurers (three MDOs access insurance
for their members through the same captive insurer).
The Government
continued to consult with representatives of the medical profession in the
lead-up to the amount and conditions of the IBNR contribution being concluded.
It extended the scope and cost of the package to provide exemptions from the
IBNR payment for:
• members of UMP/AMIL who are 65 and over;
• members who at the beginning of an IBNR contribution year have a physical, intellectual, psychiatric or sensory impairment of 20 points or more under the Impairment Tables in Schedule 1B to the Social Security Act 1991;
• members who die during an IBNR contribution year;
• the estates of deceased members;
• members who did not practise in Australia after 31 December 2001;
• members who have a medical income on or after the financial year starting 1 July 2001 that is less than $5,000 per financial year;
• student members as at 30 June 2000;
• members who have purchased comprehensive insurance cover for all incidents covered by the IBNR scheme; and
• salaried medical practitioners employed in the public sector, or with
arrangements where their private medical income is returned to those hospitals
as long as their private medical income, outside of that returned to hospitals,
is less than $5,000.
The change to medical indemnity insurance products
caused concern for doctors, especially those in high-risk areas of medicine.
Contracts of insurance have limits on cover (unlike the discretionary assistance
provided by MDOs and paid for with subscriptions). Doctors were concerned that
a claim against them might exceed their level of insurance cover.
The
Government responded to these concerns by the introduction of the Exceptional
Claims Scheme (ECS). Under this Scheme, the Government will meet 100 per cent
of a claim that exceeds $20m or a medical practitioner’s cover limit,
whichever is the greater.
Once IBNR contribution notices were issued,
the medical profession universally responded adversely to it, culminating in
threats of resignation of doctors. Following discussions with the medical
profession, the Government announced a number of changes to medical indemnity
arrangements. Among these were an 18 month moratorium on IBNR payments of more
than $1,000 per year and a Medical Indemnity Policy Review.
The Medical
Indemnity Policy Review Panel (the Panel) conducted a review of medical
indemnity affordability, sustainability and the IBNR levy. The Panel, which
reported to the Prime Minister on 10 December 2003, was chaired by the Minister
for Health and Ageing, the Hon Tony Abbott MP. Other members of the Panel
included the Minister for Revenue and Assistant Treasurer, Senator Helen Coonan,
representatives of the medical profession, a lawyer and a financial expert. The
Panel made a series of recommendations to address medical indemnity issues. The
report has been made public.
Three key concerns that doctors continue to have about medical indemnity
insurance are:
1. The affordability of cover;
2. The Incurred But Not
Reported liabilities (IBNR) levy; and
3. The security of cover
These
concerns remain despite the steps the Government, in consultation with the
medical profession, has already taken over the eighteen months to December 2004.
One of the features of the current arrangements for medical indemnity is that
increased competition between MDOs and their captive MIIs, combined with
pressure from lower risk doctors, has led to increased risk ratings for
different sectors of the profession. This means there are now considerable
differences in premium prices between high and low risk areas of practice. This
is leading doctors to withdraw from particular specialties and so adding to
workforce problems.
Increasing premium costs also lead to the issue of
the cost of medical indemnity insurance relative to income. Before Government
subsidies, some 7,600 doctors (18 per cent of doctors working under Medicare)
are paying more than 10 per cent of their Medicare billable income (including
gap payments) on premiums. This cost has been identified as unsustainable and
as a contributor to doctors leaving the profession. Medical indemnity premiums
have been increasing steadily since the late 1990s as MDOs moved to improve
their overall financial position. Some MDOs also made “calls” on
their members (equivalent to one year’s subscription, payable over several
years). Premiums have risen more sharply since 2000-2001. As a result of these
changes, MDOs are now in a better position to fund fully previously unfunded
IBNRs.
Premiums for doctors covered by some other MIIs are likely to rise
significantly as cover is renewed in mid-2004, with a national average increase
of 14 per cent in 2004-05. This shows that the affordability problem continues
for doctors.
The IBNR levy
Although the IBNR levy was a key
part of the IBNR Scheme, it nonetheless contributes to doctors’ overall
medical indemnity costs. The IBNR contribution is:
• paid by those who
were members of UMP at 30 June 2000; and
• set at the rate of 50 per
cent of the premium the member paid in 2000-01.
This means that under the
current arrangements the levy is limited to past risk, not present capacity to
pay (which may have reduced since 2000-01). It is important to note that the
levy arrangements were developed in consultation with representatives of the
medical profession.
The levy arrangements apply to all doctors who were
still practising at 31 December 2000. After the levy was introduced, it became
apparent that the levy might present a financial obstacle for doctors wishing to
take a period out of the workforce for further study or for child
rearing.
In the current medical indemnity insurance market only claims made cover is
available. Doctors continue to prefer claims incurred over claims made cover in
terms of the security it offers doctors and patients. Under claims incurred
cover doctors pay a premium for a year and know that they will be covered
forever for any incident in that year (providing that their insurer remains
solvent).
Under claims made arrangements doctors have to maintain cover
by continuing to pay annual premiums to the same indemnity provider. If they
wish to change provider, or leave practice they have to purchase run-off cover.
Retiring doctors need to have access to run-off cover.
The current
arrangements are providing run-off cover at a nominal cost for retiring doctors
with long periods of membership, and the Government has regulated to require
MDOs/MIIs to offer run-off cover for up to six years for retiring doctors. This
does not mean that every doctor can easily afford run-off cover. Nor does it
give certainty for doctors or their patients beyond the six-year period.
A lack of security for doctors is equally a lack of security for patients.
If a doctor is not sure whether he or she will be covered for claims settled
many years down the track, the patient cannot be sure either. The current lack
of certainty and affordability of cover for doctors has led some to leave the
profession and others to threaten to do so if these problems are not
resolved.
The Government’s objectives are to ensure that the medical
indemnity insurance industry is financially viable and sustainable whilst
ensuring that indemnity insurance is affordable and provides appropriate
security to enable doctors to remain in practice. An important objective is
that the Australian community continues to have ready access to medical
services.
The Australian Government is considering implementing a package of measures
which will support further the medical indemnity market. These measures are
based on recommendations presented by the Panel.
1. To provide more
broadly based premium subsidy assistance to doctors, paid directly to their
insurer;
2. Introduce a Run-off Reinsurance Vehicle (RRV) and require MDOs to
offer run-off cover to other doctors either free or at cost;
3. Reduce the
High Cost Claims Scheme threshold further from $500,000 to $300,000;
4. Address IBNR levy concerns.
Premium Support
Scheme
A Government-run premium support scheme (PSS) would assist
doctors who pay more in total medical indemnity costs than a determined
affordability threshold or thresholds and would replace the current subsidy
arrangements for doctors. No doctor currently receiving a subsidy will receive
less support under the new arrangements. The Scheme would provide support to
doctors automatically without any application process, with the Government
support shown separately on premium notices. This Scheme would come into
operation on 1 July 2004, with transitional arrangements to offer an
equivalent level of assistance to insurers for the six months beginning 1
January 2004.
Run-off Reinsurance Vehicle
Under a
guaranteed Run-off Reinsurance Vehicle (RRV) the Government would assume the
liability for and pay for the claims against doctors aged 65 or over who have
permanently retired from private medical practice, and doctors (irrespective of
age) who die, are permanently disabled, leave the workforce for more than 3
years or who go on maternity leave. In addition, the Government would also
consider:
• requiring MIIs to offer free cover to doctors in other
circumstances where they meet qualifying periods (funded by insurers through
premiums); and
• requiring (at a cost to doctors) insurers to offer
run-off cover in all circumstances (not covered by options above).
The
RRV would be funded by a charge on MIIs and passed on through premiums. The
cost of run-off cover would be incorporated into normal annual premiums to
ensure that run-off was available free of charge at the time a doctor needed
it.
High Cost Claims Scheme
Under the High Cost Claims
Scheme (HCCS), the Government currently meets 50% of all medical indemnity
claims that exceed $500,000 up to the doctor’s level of insurance. The
Government now proposes to reduce that threshold further to
$300,000.
Incurred But Not Reported liabilities (IBNR)
levy
The Government now proposes that it will not recoup from those
liable to pay an IBNR levy the full cost of the IBNR Scheme. This is currently
estimated at $480 million (net present value). Rather those liable to pay will
contribute to this cost. The Government now proposes to rename the levy the UMP
support payment. The new payment rates for the UMP support payment will be the
lesser of 50% of their 2000-01 premium, 2% of their gross medicare billable
income or $5000. This means that those liable to pay will meet about a quarter
of the estimated costs.
There are a range of alternative options the Government has considered
including:
• eliminating the IBNR levy;
• transferring a
larger quantum of liabilities and costs from medical indemnity insurance to the
Government (the Australian Medical Association has put the proposal to the
Government that it assume responsibility for medical indemnity claims 3 years
after their occurrence [for adults] and after 6 years [for
children]);
• introducing a long-term care scheme for the
catastrophically injured;
• moving to a sole provider model for
providing medical indemnity cover.
These options, whilst they may offer
opportunities for various forms of financial relief for doctors, would require
significant structural changes (eg. a long-term care scheme, sole provider
model) to effect.
The industry is still adapting to the regulatory
arrangements introduced on 1 July 2003, and the effects of tort law reform are
yet to flow through the system. On balance, the Government concluded that it
would be better to modify the current system to address its problems during this
transitional period rather than imposing another major upheaval on doctors and
insurers at this time. It noted that building on the current system would allow
urgent problems to be addressed more promptly and would provide stability and
certainty in the short-term in a cost-effective way to the Australian community.
In respect to the recommendation of the Panel relating to the
implementation of Medical Indemnity Review Panels to decide on the merits of
clinical issues in a case, this is a matter for the State Governments and will
not be considered further in this Regulation Impact Statement.
The directly affected parties are:
• medical
practitioners;
• MDOs and their captive insurers;
• patients;
and
• plaintiffs (persons who make personal injury claims against
medical practitioners).
Impact on medical practitioners
The PSS will provide
increased assistance to doctors, irrespective of specialty, based upon premium
cost relative to income. Doctors would not need to apply personally to receive
assistance through the PSS as the subsidy is payable to MIIs and passed on by
them to their policyholders by way of a reduced premium.
The cost of
run-off cover will continue to be incorporated into normal annual premiums,
which may result in some adjustment to ongoing premiums to cover these costs,
rather than as a separate cost upon leaving practice. This ensures that doctors
have access to run-off cover at the time when they need it. For doctors who
die, are disabled, retire at age 65 or over, permanently leave the workforce
(for more than 3 years) or go on maternity leave, no further premium payments
will be required after they leave the profession (or are temporarily absent from
it). Doctors under the age of 65 who retire will be required to pay run-off
cover to their MII for a period of three years before the scheme would
apply.
As a result of a portion of the previous IBNR liabilities being
transferred to the RRV, all doctors paying premiums will contribute to this
cost.
The current Medical Indemnity Subsidy Scheme (MISS) will continue to
operate in its present form until 30 June 2004. The PSS will have effect from 1
January 2004 and will entirely replace the MISS from 1 July
2004.
Impact on MIIs
MIIs will be required to ensure that
subsidies paid to them by the Government result in members paying a reduced
premium where their costs are more than an agreed affordability threshold.
There will therefore be increased administrative requirements placed on MDOs and
insurers.
Administrative requirements may be increased for insurers
through the RRV as it will require insurers to make a separate payment to the
Government for run-off cover as well as making reinsurance payments to other
reinsurers. Under the new Scheme they will also have to offer and directly
provide run-off cover for a period of three years for doctors who retire before
the age of 65.
MIIs will receive significant financial advantages by
transferring some of their liabilities to the Government,
including:
• reducing their overall liabilities;
• meeting
capital adequacy standards (set by APRA) more quickly (due to reduced
liabilities); and
• tax advantages accruing from requiring lower
profits to meet capital adequacy standards.
Impact on
patients
The increased certainty and affordability for doctors
provided by these measurers will assist doctors to remain in practice and will
therefore ensure the ongoing provision of vital medical services to the
Australian community particularly in high-risk specialties and for rural and
remote regions. Costs to patients may also be contained due to reduced medical
indemnity costs for doctors.
Costs
The Government will
provide additional taxpayer funding in the ranges shown below:
|
|
2003-04
|
2004-05
|
2005-06
|
2006-07
|
|
Fiscal balance ($m)
|
168.2 to 157.2
|
108.0 to 139.4
|
79.8 to 132.1
|
81.9 to 135.8
|
The RRV will be funded by doctors through their normal annual premiums it
should be budget neutral in its impact over time. Under previous medical
indemnity arrangements doctors purchased claims incurred cover. The premiums for
these policies included cover for claims arising after leaving the
profession.
There will be increased cost to taxpayers through the funding
of the IBNR liabilities that are not taken up by the RRV. The above table
indicates the net increase in Government expenditure, including the impact of
revenue forgone by not maintaining the IBNR levy.
The above costs are
additional to the cost of the previous package of measures, which was predicted
would cost the taxpayer $55.8m over the 2005-06 financial year.
The Panel members included representatives of the medical profession, a
lawyer and a financial expert. The Panel undertook wide-ranging consultations
with professional groups, insurers and actuaries. It also received a range of
factual reports from consultants about the current medical indemnity market and
the impact of recent Government actions (by the Commonwealth and the States and
Territories).
The proposed measures address the three key concerns of doctors as
expressed to the Panel of affordability, security and the IBNR levy.
The
preferred option package is in addition to the Government’s original
package of measures introduced following the collapse of UMP, as outlined in the
background on page 1.
It replaces:
• Current subsidy
arrangements under the Medical Indemnity Subsidy Scheme;
• Current
arangements in relation to the IBNR levy; and
• The old High Cost
Claims Scheme threshold of $500,000 with a new threshold of
$300,000.
Although there will be a large cost to taxpayers, the benefits
for the community through the ongoing provision of medical services are assessed
to outweigh the costs.
The Health Insurance Commission (HIC) will administer the PSS and RRV.
The Department of Health and Ageing will continue to take policy responsibility
for these measures. Liabilities and benefits of the schemes will accrue from 1
January 2004. Contracts will be entered into during the early part of 2004.
The RRV will commence operation in the 2004-05 financial year.
The
Government will also consider establishing a working party in mid 2005
to:
(a) evaluate the effectiveness of the new arrangements put in place in
2004;
(b) if the current market arrangements have failed to deliver
sustainable and affordable cover give detailed consideration to the feasibility,
costs and benefits of alternative arrangements, including the option of a single
doctor-owned monopoly insurer; and
(c) consider developments in relation to a
long term care scheme, the handling of clinical disputes, and improvements in
claims handling.
NOTES ON CLAUSES
Clause 1 This item sets out the short
title for the Bill.
Clause 2 This
clause provides that the Bill commences on Royal
Assent.
Clause 3 This clause provides
that each Act that is specified in a Schedule to this Act is amended or repealed
as set out in the applicable items in the Schedule concerned, and any other item
in a Schedule to this Act has effect according to its terms.
Items 1 – 2 Provide notes which refine the application of a
definition for medical indemnity insurer in the Act.
Item 3 This
item limits the exemption in relation to a person’s medical income in
paragraph 52(2)(c) to the contribution year starting on 1 July 2003. This is
done because this exemption is generally less generous than that inserted by
item 2, which only requires income to be under the $5,000 limit in one year,
rather than the two required by paragraph 52(2)(c).
Item 4 This
item inserts new paragraphs (ca) and (cb) to create new exemptions. Paragraph
(ca) exempts a person who is a medical practitioner and had a gross Medicare
billable income during the income period for the contribution year of less than
$5,000. Paragraph (cb) exempts a person who is a health professional but not a
medical practitioner during the income period for the contribution year and has
a gross medical income for the income period of less than $5,000.
Item
5 This item inserts two new paragraphs after paragraph 52(2)(d) to create a
new exemption to cap the number of contribution years for which a person is
liable to the number of years that the person was a member of the MDO, up to a
maximum of 6 years.
Item 6 This item inserts four new subsections
after subsection 52(3).
Subsection (3A) provides that the references to
gross medical income, gross Medicare billable income and income period have the
same meanings as in the Medical Indemnity (UMP Support Payment) Act 2002.
Subsection (3B) provides for the number of years for which a person is
determined to be a member of an MDO to include the number of years that a person
was a member of an MDO that was taken over by the participating MDO, and
provides for the rounding up of the number of years.
Subsection (3C)
provides a definition of an MDO taking over another MDO. Examples of where
former coverage by an indemnity provider taken over by an MDO will be covered by
subsection (3C) include the take over by United Medical Protection Limited of
members of:
• the Medical Defence Union of the United Kingdom;
and
• the New South Wales and Queensland members of the Medical
Protection Society of the United Kingdom.
Subsection (3D) provides for a
definition of indemnity provider for the purpose of new subsections (3B), (3C)
and (3D).
Subsection (3E) clarifies that a reference in
paragraph (2)(da) or (db) to a liability to pay a UMP support payment
includes a reference to a liability, before the commencement of that paragraph,
to pay an IBNR indemnity contribution.
Item 7 This item adds a
new paragraph at the end of subsection 53(2) to provide that for the retroactive
cover exemption, there is a new requirement that the person must give to the HIC
a certificate by the insurer, or (if there is more than one insurer) by each of
the insurers, that paragraphs (a), (b), (c) and (d) apply in relation to the
person. This requirement is to streamline
administration.
Schedule 2—Payment
and collection
Item 1 Provides a definition for the term
invoice which will include any document issued by a medical indemnity insurer or
MDO which quotes an amount payable for a contract of insurance or
subscription.
Item 2 This item excludes a lump sum payable under
section 64 from the definition in subsection 4(1) of late payment penalty as
section 64 is to be repealed.
Item 3 This item adds to the
definition of late payment penalty in subsection 4(1) a penalty payable
under section 66B in relation to an amount that a medical indemnity insurer or
an MDO is required to remit to the HIC under paragraph 66A(4)(b).
Item
4 This item inserts a new definition in subsection 4(1) of medical
indemnity insurer as a body corporate that: is authorised under section
12 of the Insurance Act 1973 to carry on insurance business in Australia
and in carrying on that business, enters into contracts of insurance providing
medical indemnity cover for other persons.
Item 5 This item
removes section 63 from the table as this section dealing with payment by
instalments is to be repealed.
Item 6 This item removes section
64 from the table as this section dealing with lump sum payments is to be
repealed.
(Note: the existing sections 57-59 in the Medical
Indemnity Act 2002 are not amended by these bills, as the enhanced UMP
contribution has not been invoked.)
Item 7 This item adds to
the table section 66B which relates to late payment penalties for medical
indemnity insurers and MDOs.
Item 8 This item adds to the table
section 66A which relates to the collection of the UMP support payment by
medical indemnity insurers and MDOs.
Item 9 This item repeals
paragraph 52(2)(e), as it is a reference to lump sum payment under section 64
which is to be repealed.
Items 10 and 11 – these items
remove section 63 and 64 from the table as these sections are to be repealed.
Items 12 and 13 - these items add new sections 66B and 66A to
the table.
Item 14 This item removes references to section 63 and
64 as these sections are to be repealed.
Item 15 This items
repeals sections 63 and 64.
Item 16 This item replaces the term
medical indemnity contribution with a medical indemnity payment.
Items
17 – 19 remove references to lump sum payments as section 64 is to be
repealed.
Item 20 This item provides the mechanism of payment
through either an MII/MDO – if the payment is all or part of an amount
specified in an invoice issued under section 66A by a medical indemnity insurer
or MDO, as an amount of UMP support payment – or through the
HIC.
Item 21 This item removes a reference to lump sum payments
as section 64 is to be repealed.
Item 22 This item adds new
section 66B in the reference to late payment penalties.
Item 23
This item removes the reference to subsection 66(2) as the subsection is to be
repealed consequential on the removal of lump sum payments.
Item
24 This item provides that new paragraph 66(1)(a) in relation to payments
to an MII/MDO does not apply to an amount recovered under section 68.
Item 25 This item inserts two new sections.
New section 66A
provides the conditions under which medical indemnity insurers and MDOs are
collection bodies for the UMP support payment, the conditions under which the
HIC may give a notice of UMP support payment payable to the medical indemnity
insurer or MDO and what the collection body must do.
It also provides
that a payment by a person to a collection body discharges their liability to
the extent of the payment, and that any interest earned is attributed to the
collection body. It provides a limitation on where a collection body can invest
any money collected until payment day.
New
section 66B imposes a late payment penalty if medical indemnity insurers and
MDOs do not pay the amounts collected, as paid by persons in discharge of their
liability, by the specified days.
Item 26 This item inserts a
reference to a late payment penalty in relation to medical indemnity insurers
and MDOs in the section dealing with refund of overpaid amounts.
Item
27 removes a reference to the capacity of a person to offset an overpayment
in subsection 67(1).
Item 28 repeals subsection 67(2) - the
capacity for a person to make an offset an overpayment in subsection 67(2) and
subsection 67(3) – the capacity for a person to have an overpayment of a
lump sum refunded.
Item 29 This item repeals subsection 68(2) in
relation to lump sum payments and substitutes a provision that an amount that a
medical indemnity insurer or an MDO is required to remit to the HIC under
paragraph 66A(4)(c) is a debt due to the Commonwealth.
Item 30
This item inserts a reference to new section 66B in subsection 68(3) so that a
late payment penalty payable by a medical indemnity insurer or MDO is a debt due
to the Commonwealth.
Item 31 This item repeals subparagraph
70(1)(a)(ii) in relation to lump sum payments as section 64 is to be repealed.
Items 32 – 33 These items add a new subparagraph
70(1)(a)(iv) adding a late payment penalty in relation to an amount that a
medical indemnity insurer or an MDO is required to remit to the HIC under
paragraph 66A(4)(c) to the list of matters in respect of which the HIC may issue
an evidentiary certificate.
Item 34 This item adds to the list of
matters in section 71 in respect of which the HIC may request information
whether a person has medical indemnity cover provided by a contract of insurance
with a particular medical indemnity insurer and whether a person is a member of
a particular MDO;
Item 35 This item inserts a new section 74A
after section 74 to provide an offence for medical indemnity insurers or MDOs
failing to comply with requirements for collecting UMP support payments under
the new section
66A.
Schedule 3—Renaming the
IBNR indemnity contribution
This schedule
renames ‘IBNR indemnity contribution’ to ‘UMP support
payment’. It renames medical indemnity contribution to ‘medical
indemnity payment’. It renames ‘contribution’ to
‘payment’.
It also makes other amendments consequential on
the renaming. Most of the renaming is in the Medical Indemnity Act 2002, but the
following Acts are also amended: the Health Insurance Act 1973; the Health
Insurance Commission Act 1973; and the National Health Act 1953.
The
effect of the renaming is that there will no longer be an IBNR contribution.
Instead, there will be a UMP support payment. This renaming of itself will not
affect liability to pay. The other effects of limiting the amount of each
person’s liability are dealt with in other schedules.
Schedule 4—Other matters
Item 1 This
item extends the definition in subsection 4(1) of health care related vocation
to include a health care related vocation in relation to which there is at least
one State or Territory under the law of which a person must be registered in
order to practise. This broadens the meaning of ‘health care related
vocation’ as used throughout the Medical Indemnity Act
2002.
Item 2 This item makes provision for the new Premium
Support Scheme to be a medical indemnity scheme by providing for the Minister to
formulate one or more schemes under subsection 43(1) which may make payments to
medical practitioners or medical indemnity insurers and MDOs on behalf of
medical practitioners, and providing that the scheme may help meet the costs to
medical practitioners of purchasing medical indemnity, and the costs to medical
indemnity insurers and MDOs of administering schemes under the section and
complying with their obligations under section 66A relating to UMP support
payments.
Item 3 replaces the term the scheme with a scheme in
subsection 43(2).
Item 4 This item extends paragraph 43(2)(c) to
allow a scheme to impose conditions on persons to whom a subsidy is paid. This
will allow conditions to be imposed on medical indemnity insurers and MDOs
taking part in a scheme.
Item 5 This item extends the scope of a
scheme set out in subsection 43(2) to make provision for payments to medical
indemnity insurers or MDOs to reduce the costs of medical indemnity for medical
practitioners and the entering into of contracts setting out conditions for such
payments to medical indemnity insurers or MDOs.
Item 6 This item clarifies that subsection 43(3) may apply to more
than one scheme under subsection 43(1).
Item 7 This item that a
scheme formulated under section 43 of the Medical Indemnity Act 2002
before the commencement of this Schedule continues in effect after that
commencement as if it had been formulated under that section as amended by this
Schedule, thus allowing the current Medical Indemnity Subsidy Scheme to
continue.
Item 8 This item inserts a new section 44A to provide
for the HIC to be able to notify medical indemnity insurers or MDOs of whether
or not a doctor is liable to make or has made a UMP support payment and the
amount of that liability.
Item 9 This item clarifies that
subsection 48(c), which provides an appropriation for payments made under a
scheme, may apply to more than one scheme under section 43.
MEDICAL INDEMNITY (IBNR CONTRIBUTION) AMENDMENT BILL 2004
NOTES ON CLAUSES
Clause 1 This item
sets out the short title for the Bill.
Clause 2 This item
provides that the formal provisions of the Bill commence on Royal Assent. The
amendments made by Schedule 1 of the Bill commence at the same time as Schedule
1 to the Medical Indemnity Amendment Act 2004.
Clause 3 This
clause provides that each Act that is specified in a Schedule to this Act is
amended or repealed as set out in the applicable items in the Schedule
concerned, and any other item in a Schedule to this Act has effect according to
its terms.
Schedule 1 - Amendments
Item 1 This item
amends the short title of the Act in section 1 to substitute (IBNR
Indemnity) Contribution with (UMP Support Payment).
Item 2 This
item inserts a definition into section 3 of gross medical income for a health
professional for a period as meaning the sum of the amounts payable in respect
of health care related services rendered by, or on behalf of, the health
professional during the period.
Item 3 This item inserts a
definition into section 3 of gross Medicare billable income for a medical
practitioner for a period as meaning the sum of the medical expenses payable in
respect of professional services that were rendered by, or on behalf of, the
medical practitioner during the period and for which Medicare benefits were or
are payable under Part II of the Health Insurance Act
1973.
Item 4 This item amends section 3 to provide that
health professional has the same meaning as in the Medical Indemnity Act
2002.
Item 5 This item repeals the definition of IBNR
indemnity contribution in section 3.
Item 6 This item inserts a
definition into section 3 of income period for a contribution year as
meaning the period, of the length specified in the regulations, ending on the
day in that year specified in the regulations. If regulations do not specify a
period, the income period is a period of 12 months ending on 30 September in
that contribution year.
Item 7 This item amends section 3 to
provide that medical expenses has the same meaning as in the Health Insurance
Act 1973.
Item 8 This item amends section 3 to provide
that medical practitioner has the same meaning as in the Medical Indemnity
Act 2002.
Item 9 This item amends section 3 to provide
that professional service has the same meaning as in the Health Insurance Act
1973.
Item 10 This item inserts a definition into
section 3 to provide that UMP support payment means the payment that is
payable under Division 1 of Part 3 of the Medical Indemnity Act
2002.
Item 11 This item further clarifies the definitions at
the end of section 3 of gross medical income and gross Medicare billable
income in subsection (1) by stating that:
(a) the amount payable in respect of a health care related service; or
(b) the medical expenses payable in respect of a professional service;
is
taken to be the amount paid for the service, or (if no amount has been paid) the
highest amount stated in the account for the service as the amount payable for
the service.
Item 12 This item replaces an IBNR indemnity
contribution and substitutes a UMP support payment in section 4.
The
note alters the heading to section 4 by omitting IBNR indemnity
contribution and substituting UMP support payment.
Item 13 This
item provides that there may be different imposition days for different classes
of participating members of a participating MDO.
Item 14 This
item provides that for a later contribution year (after the 2003-04 contribution
year) the default imposition day in subparagraph 5(3)(b)(i) is 1 May,
(instead of 1 August). This day can be changed by regulation.
Item
15 This item provides in section 5 that regulations made for the purposes
of subparagraphs 5(3)(a)(ii) or 5(3)(b)(ii) may specify different
imposition days, for a contribution year for a participating MDO, for different
classes of participating members of the MDO. It is envisaged that this provision
will be used to prescribe different payment days for people covered by different
medical indemnity insurers or MDOs. This is so that collection of the payment
can be integrated in the annual or financial year billing of the insurer or
MDO.
Item 16 This item replaces IBNR indemnity contribution in
subsection 6(1A) with UMP support payment. The note replaces IBNR indemnity
contribution with UMP support payment in the heading.
Items 17 and
18 introduce new limits on the liability of each person for the contribution
year that starts on 1 July 2003 in subsection 6(1A) for the UMP support payment
by limiting the liability to the least of:
(a) the applicable percentage of the member’s annual subscription for the base year; and
(b) $1,000; and
(c) if the member is a medical practitioner during the income period for that contribution year—2% of the member’s gross Medicare billable income for the income period for that contribution year; and
(d) if the member is a health professional during, but is not a medical
practitioner at any time during, the income period for that contribution
year—2% of the member’s gross medical income for the income
period for that contribution year.
Item 19 This item
replaces IBNR indemnity contribution, with UMP support payment in subsection
6(1B).
Items 20 – 22 These items introduce new limits on the
liability of each person for the contribution year that starts on 1 July 2004 in
subsection 6(1B) for the UMP support payment by limiting the liability to the
addition of:
Paragraph (a) the least of:
(i) $2,500; and
(ii) half of the applicable percentage of the member’s annual subscription for the base year; and
(iii) if the member is a medical practitioner during the income period for that contribution year—1% of the member’s gross Medicare billable income for the income period for that contribution year; and
(iv) if the member is a health professional during, but is not a medical
practitioner at any time during, the income period for that contribution
year—1% of the member’s gross medical income for the income period
for that contribution year; and
Paragraph (b) the least of:
(i) $500; and
(ii) half of the applicable percentage of the member’s annual subscription for the base year and
(iii) if the member is a medical practitioner during the income period for that contribution year—1% of the member’s gross Medicare billable income for the income period for that contribution year; and
(iv) if the member is a health professional during, but is not a medical
practitioner at any time during, the income period for that contribution
year—1% of the member’s gross medical income for the income period
for that contribution year.
Item 23 This item introduces new
limits on the liability of each person for the contribution year that starts on
or after 1 July 2005 in subsection 6(1) for the UMP support payment. The amount
of the UMP support payment imposed on a participating member of a participating
MDO for a contribution year for the MDO that starts on or after 1 July 2005
is the least of:
(a) $5,000; and
(b) the applicable percentage of the member’s annual subscription for the base year; and
(c) if the member is a medical practitioner during the income period for that contribution year—2% of the member’s gross Medicare billable income for the income period for that contribution year; and
(d) if the member is a health professional during, but is not a medical
practitioner at any time during, the income period for that contribution
year—2% of the member’s gross medical income for the income period
for that contribution year.
Item 24 This provision makes it clear
that amendments made to change the name of the IBNR contribution to the UMP
support payment does not affect a person’s liability to pay an IBNR
contribution.
Item 25 A reference in a regulation or other
instrument made under the Medical Indemnity Act 2002 or the Medical
Indemnity (IBNR Indemnity) Contribution Act 2002 to the IBNR
indemnity contribution is to be taken, after the commencement of this Schedule,
to be a reference to the UMP support payment.