Explanatory Statement
Issued by the Authority of the Minister for Health and Ageing
Medical Indemnity Act 2002
Premium Support Amendment Scheme 2007
Background
The Premium Support Amendment Scheme 2007 amends the Premium Support Scheme 2004 (Premium Support Scheme) formulated by the Minister for Health and Ageing under subsection 43(1) of the Medical Indemnity Act 2002.
The objective of the Premium Support Scheme is to help ensure the continued availability of medical services in Australia by providing assistance to eligible medical practitioners, via their insurers, with the cost of obtaining appropriate medical indemnity cover.
The Premium Support Scheme provides for the making of subsidy payments to contracted medical indemnity insurers by the Government on behalf of medical practitioners, where these organisations agree to administer the Scheme on behalf of the Australian Government. Currently, there are six medical indemnity insurers that are contracted to the Government to operate the Scheme.
Objective of the amendments
Since the commencement of the Scheme on 1 July 2004, the need has arisen for some clarification of purpose and refinement of processes to ensure that the Scheme delivers on its intended outcomes. The objective of the Premium Support Scheme 2007 is to further enhance and clarify the operations of the 2004 Scheme. The amendments contained in the new instrument will ensure that the 2007 Scheme operates in accordance with previously agreed positions between the Department of Health and Ageing, Medicare Australia, the Australian Medical Association and medical indemnity insurers.
Consultation
Medical indemnity insurers, Medicare Australia and representatives of the Australian Medical Association have been consulted in the process of drafting the Premium Support Amendment Scheme 2007.
Notes on sections and amendments
Section 1
Section 1 specifies the name of the amended scheme.
Section 2
Section 2 provides that the amended Scheme will commence on 1 July 2007.
Section 3
Section 3 provides that the Schedule amends the Premium Support Scheme 2004.
The Schedule – Amendments
Item 1
This item amends subsection 12 (1), omitting the subsection referring to special category members. New eligibility provisions have been added to deal with doctors who do not earn any income in a premium period, including those who were the intended target group of subsection 12 (1).
Item 2
This item deletes subsection 12 (3) and replaces it with subsections 12 (3) to (7). These items deal with doctors who were previously special category members and provides clarity with respect to those who were intended to be included within the scope of the Scheme. The amendments are as follows:
(a) New sections 12 (4) and (5) - these provisions provide that doctors who receive no income from private practice are not eligible for a PSS subsidy (subsection 12 (4)) unless they have cover for run-off or retroactive cover for incidents when they were previously in private practice (s 12(5)). Doctors who have run-off or retroactive cover for previous private practice are taken to be doctors entitled to a PSS subsidy under the PSS calculation (section 14). Section 14 is also amended to make that clear (see new section 14 (3)).
(b) New section 12 (6) is intended to make it clear that doctors who earn no private income and have insurance that is only for damages or medico-legal costs are not eligible members under the PSS and therefore not entitled to any subsidy.
(c) New section 12 (7) provides that doctors whose run-off cover is met by the Commonwealth (ie. the cost of their run-off cover is being fully met by the Commonwealth’s Run-Off Cover Scheme) are not entitled to any PSS subsidy for any other insurance they choose to take out. This ensures that there is no ‘double dipping’.
(d) New section 12 (8) provides that a doctor who has run-off cover provided by the insurer under the compulsory offer provisions of $50 for the premium period (as required by the PSS contract) is not able to claim a PSS subsidy for that amount. The cost of processing a PSS claim for such a small amount (ie. $50) would outweigh the cost of the annual premium charge. The new section 12 (8) removes the possibility for this inefficiency to occur.
Item 3
This item amends paragraph 13 (1) (g) to clarify the requirement that a doctor must participate in a risk management program and/or activities in order to receive the PSS, if that is what is required by the insurer.
This amendment is consistent with the Government’s policy intention that in return for subsidising medical indemnity premiums, doctors agree to participate in risk management and risk minimisation training.
Item 4
This item amends section 14 to clarify the calculation of PSS subsidies for doctors who are eligible under section 12 (5).
Item 5
This item amends paragraph 15 (1) (b) to insert reference to the lowest base premium. This is to ensure that the correct insurance products are used when calculating the subsidy for rural procedural general practitioners.
Item 6
This item amends the note under subsection 15 (1) to show that lowest base premium is defined in section 52.
Item 7
This item deletes section 16. Due to the removal of special category members from subsection 12 (1), the special category calculation is no longer required.
Item 8
This item amends paragraph 18 (2) (c) and deletes paragraph 18 (2) (d) as references to special category members and the special category calculation are no longer required.
Item 9
This item amends subsection 18 (3), omitting the reference to special category members as it is no longer required. It also clarifies the reference to section 22.
Item 10
This item amends subsection 19 (2), omitting the reference to special category members as it is no longer required.
Item 11
This item deletes section 21 as it was originally drafted to cover the first six months operation of the scheme for insurers who didn’t operate on a calendar year basis. The Scheme has been operating for several years now and this early transitional provision is no longer required.
Item 12
This item amends section 22 so that rural procedural general practitioners are not required to provide estimated or actual income if they prefer that only the rural calculation be used to calculate their subsidy, regardless of whether they may be entitled to a higher subsidy under the standard PSS calculation.
This issue has arisen in a handful of cases where rural procedural general practitioners did not wish to provide income information where their PSS calculation was not based on such information. In doing so, they acknowledge that they may have received a higher PSS amount if they did provide income information, but choose not to do so as they do not believe the potential extra amount outweighs the time and resources required to provide the necessary income information.
This amendment allows doctors in such a position to choose not to provide income information and still receive the PSS.
Item 13
This item inserts a note under paragraph 24 (1) (m) stating that the operation of subsection 24 (1) is qualified in respect to offers to provide medical indemnity cover to a member on or after 1 January 2008.
This addition gives medical indemnity insurers time to adjust their internal procedures and electronic record keeping systems to cope with the definition of gross indemnity costs amended by subsection 25A (1) (a) that comes into effect on 1 January 2008.
Item 14
This item inserts a note under paragraph 25 (3) stating that the operation of section 25 is qualified in respect to offers to provide medical indemnity cover to a member on or after 1 January 2008.
This addition gives medical indemnity insurers time to adjust their internal procedures and electronic record keeping systems to cope with the definition of actual income amended by subsections 25A (1) (b) and (c) that come into effect on 1 January 2008.
Item 15
This item deletes subsection 25 (4) as this subsection is no longer required due to clarifications in eligibility.
Item 16
This item inserts a new section 25A to clarify that for doctors who provide both public and private medical services, actual income and gross indemnity costs for the purpose of the PSS subsidy calculation is limited to income or costs that relates to the provision of private medical services only.
To give medical indemnity insurers time to adjust their internal procedures and electronic record keeping systems to cope with the amended definitions, this amendment will come into effect on 1 January 2008.
Item 17
This item amends subsection 29 (1) omitting the reference to special category members as it is no longer required.
Item 18
This item amends subsection 29 (2) adding rural procedural general practitioners to the list of certain doctors who, if they do not provide a statutory declaration of income, then section 22 is used to calculate their final subsidy.
Item 19
This item amends subsection 29 (3) adding rural procedural general practitioners to the list of certain doctors who do not have to provide a statutory declaration of income if they have express their intention not to do so within a certain time frame.
Item 20
This item amends section 30 adding rural procedural general practitioners to the list of exceptions who do not have to provide certain information.
Item 21
This item amends subsection 32 (2) omitting the reference to special category members as it is no longer required.
Item 22
This item amends subsection 32 (4) adding rural procedural general practitioners to the list of certain doctors to whom section 22 applies if they do not provide a statutory declaration of income.
Item 23
This item amends paragraph 42 (b) so that the subsection 43 (5), relating to the estimation of administration costs, only applies to contracted insurers with less than 1,000 members. All other insurers will have their administration fee calculated according to subsection 43 (2). The use of the figure of 1,000 members was chosen with agreement with medical indemnity insurers to differentiate between existing players in the market and new entrants. It allows the Commonwealth to agree on a realistic administration fee in the first few years of an insurers participation in the market, without having to apply the formula in subsection 43 (2) which would result in an amount that would be unrealistically and unfairly low compared to actual costs for the insurer in running the Scheme on the Commonwealth’s behalf.
Item 24
This item replaces section 43 with a new method for calculating the administration fee payable to a contracted insurer for administering the PSS on behalf of the Commonwealth.
Contracted insurers with more than 1000 members will receive a proportion of the available administration fee pool based on their percentage share of the total number of insured doctors.
As discussed in Item 24 above, contracted insurers with less than 1000 members will be paid an administration fee based on their estimated costs.
Item 25
This item amends section 48 omitting the word ‘the’ and substituting ‘an’ before the words ‘authorised officer’ in order to achieve consistency throughout the Scheme.
Item 26
This item deletes the following definitions from section 52 as they are no longer required: public sector organisation; special category calculation; special category member; and transition period.
Item 27
This item inserts definitions for the following terms into section 52: gratuitous services; lowest base premium; private medical service; and rural procedural general practitioner.
Item 28
This item amends the definition of retroactive cover in section 52 in order to achieve greater clarity.
Item 29
This item amends the definition of run-off cover in section 52 to exclude the types of cover referred to in subsections 12 (7) and (8).