Written by Sarah Walls

Australia’s healthcare system has embraced the ideal of person-centred healthcare, which is based on the values of compassion, respect for individual patient choice, and openness and transparency. But there is a contradiction in the way this ideal is put into practice: when a healthcare injury occurs, these values extend only as far as an explanation and an apology. If the patient needs more than this, they have no option but to go through litigation to obtain compensation for losses. Once the patient files a claim, their relationship with healthcare institutions and practitioners inevitably becomes adversarial. (Please share our petition for no-fault compensation for Australian injured patients.)

Medical indemnity insurance makes big profits

As seen in our last update, the private medical indemnity insurance market was on the brink of collapse in the early 2000s but has since become highly profitable. In 2016 the Australian National Audit Office estimated that since 2003, the Commonwealth had spent nearly $500 million subsidising it. In 2020 the Australian Government Actuary reported that the medical indemnity insurance market’s average profit margin between 2010 and 2020 was 13.8% of gross earned premium. Despite this, the vast majority of Australia’s injured patients never receive compensation.

Approximately 80,000 Australians each year suffer healthcare injuries that result in some degree of permanent disability. Current Victorian data suggests that only around 3% of serious healthcare injuries are compensated. Even among those who suffer catastrophic injuries from medical treatment, around half are left without compensation, according to the Productivity Commission’s 2011 report on Disability Care and Support.

The Productivity Commission recommended a National Injury Insurance Scheme (NIIS) partly funded by insurance premiums

The Productivity Commission recommended the introduction of two schemes: a National Disability Insurance Scheme (NDIS) and a National Injury Insurance Scheme (NIIS). The most important difference between the schemes was that the NDIS would be funded through federal taxation, whereas the NIIS would be a federation of state-based schemes funded through insurance premiums and other state and territory sources.

The proposed NIIS was intended to be a no-fault compensation scheme providing lifetime care and support for catastrophic injuries. It had four streams: motor vehicle accidents (accounting for about 50% of catastrophic injuries), work-related accidents (8%), medical treatment injuries (11%) and other general and community injuries (32%). A no-fault compensation scheme for personal injuries including medical treatment injuries had first been proposed in 1974, but the Whitlam government lost power before it was implemented. So, this was the second time that a no-fault compensation scheme covering healthcare injuries had been recommended.

Healthcare injuries are the only injuries where the insurance premiums paid do not support a no-fault compensation scheme. Even in 2011, no-fault or hybrid no-fault/fault-based schemes already covered motor vehicle and workplace accidents; in contrast, injured patients had, and still have, no other means of obtaining compensation than through litigation.

Why litigation does not serve injured patients

The Productivity Commission looked in detail at litigation and no-fault schemes as a means for compensating healthcare injuries. It reported that:

• Medical indemnity claims were particularly difficult to resolve, with nearly 60% of claims not finalised two years from the date of claim commencement, and 15% still not finalised more than five years after the claim was initiated;
• Litigation undermined health and recovery because the size of the award depended on the severity of the injury, thus providing an incentive to delay recovery;
• Litigation was not always effective at assessing the lifetime care and support needs of people with catastrophic injury, as compensation was determined once and for all at a particular point in time even though needs and costs may span decades into the future.
• Litigation was more expensive on a case-by-case basis than no-fault claims;
• Legal costs absorbed around 20% of compensation amounts.
  
  Overall, the Productivity Commission found, “no-fault systems were likely to produce generally superior outcomes compared with fault-based systems”. 

The flaws in fault-based arrangements were experienced most acutely in relation to lifetime care and support for people with catastrophic injuries: “inequity, delay, uncertainty, poorer outcomes and inefficiency.” Reviews of New Zealand’s Accident Compensation Corporation, which has provided no-fault compensation since 1974, had shown that the scheme operated with lower costs than most fault-based systems and was generally associated with better outcomes.

What a medical no-fault National Injury Insurance Scheme (NIIS) would look like

Establishing whether medical treatment caused an injury is more complex than with motor vehicle or workplace accidents. The confounding factors include the impact of the patient’s underlying health status, the inherent risks of medical treatment, and the potential classification errors, especially in cases involving antenatal, birth or neonatal care.

The Commission therefore recommended that a no-fault compensation scheme for catastrophic injuries from medical treatment should include:

• A single comprehensive and widely accessible national database, enabling systematic collection and analysis of data;
• An expert panel to decide questions of eligibility based on evidence and, if necessary, advice from external experts;
• A legislated timeframe for decisions (the NZ Accident Compensation Corporation has a legislated timeframe of nine months; the median time for a decision is 37 days and 110 days for complex claims);
• No determination of a practitioner’s fault, but in cases of potential risk to public safety, notification to an appropriate disciplinary or investigative body;
• Varying premiums depending on whether the health sector and practitioners follow best practice protocols and have the appropriate training and credentials.

The one exception from the scheme’s coverage was cerebral palsy cases, which the Commission said should be covered by the NDIS, and not the NIIS, given the difficulty of determining the role of medical care in such cases.

Financing the medical stream of the National Injury Insurance Scheme (NIIS)

The medical injuries stream of the NIIS was to be funded by:

• Savings on medical litigation costs;
• Reduced medical indemnity insurance costs due to the transfer of cerebral palsy cover to the NDIS;
• Australian government subsidy schemes;
• Contributions from hospital and practitioner medical indemnity insurance premiums.

Hospital and practitioner insurance costs could reduce by $40 million

The Commission estimated that the scheme would cost around $45 million, but that hospital and physician insurance costs could fall by around $40 million with the transfer of cerebral palsy cover to the NDIS. It recommended that the NIIS, with its capacity to send price signals through premiums set according to risk management, should be established by 2015 and before the rollout of the NDIS. 

The Commission clearly saw the no-fault compensation scheme for catastrophic injuries as a first step towards a more comprehensive scheme: it recommended that the NDIS and the NIIS both be reviewed in 2020, and consideration be given to extending the NIIS to all significant injuries and including cover for economic loss and pain and suffering.

Why we still don’t have no-fault compensation for healthcare injuries

The Commission’s recommendations on the rollout of the two schemes were not followed. Only the NDIS was fully established. In a 2017 report on NDIS costs, the Commission said that of the four streams proposed for the NIIS, two were complete or almost complete, motor vehicle accidents and workplace accidents, though most of these schemes were pre-existing; only one state established a no-fault scheme under the NIIS umbrella: National Injury Insurance Scheme Queensland (NIISQ). 

In June 2017, the Council of Australian Governments (COAG) agreed not to proceed with the medical and general accident streams. For the second time in 40 years, the prospect of a no-fault compensation scheme for healthcare injuries was almost dead.

The ALP remains committed to the NIIS in its 2021 national platform but the commitment is now in jeopardy: there is no mention of the NIIS in the draft 2023 national platform to be debated and adopted in August.

How failure to implement the medical NIIS has contributed to the blowout in NDIS costs

There has been considerable media coverage of the blowout in NDIS costs. One contributing factor is the failure to introduce the NIIS. As there is no agreement on funding for catastrophic healthcare injuries, anyone who acquires such an injury receives supports through the NDIS. This has a direct impact on NDIS costs.

In 2017 the Productivity Commission estimated that the number of people entering the NDIS, who would otherwise be covered by the medical or general accident streams of the NIIS, would be a small number in any one year, about 400 people. But over time this would have a cumulative effect. The cost to the NDIS of the medical and general NIIS streams not operating would be $23 million in 2018-19, rising to $1.3 billion by 2040-41. 

Failure to implement the medical NIIS has benefited medical indemnity insurers

While the medical NIIS was not implemented, the Commission’s 2011 recommendation that cerebral palsy cases be covered by the NDIS was adopted. In 2022 3% or 17,334 NDIS participants had cerebral palsy. Medical indemnity insurers no longer have to budget for their lifetime care and support needs, a considerable saving as birth-related medical negligence claims are among the most expensive.

In addition, people whose healthcare injuries are not catastrophic but have left them with significant disabilities are covered by the NDIS. How many people are involved is impossible to know, as they are invisible in the NDIS data, which is listed by type of disability, not by cause of disability. But the figure is likely to run into thousands. Again, with the NDIS meeting their needs, such people are less likely to pursue litigation, representing a further saving for medical indemnity insurers.

Thus failure to proceed with the medical stream of the NIIS effectively shifts costs from medical indemnity insurers and state and territory governments to the Commonwealth. In so doing, it adds to the cost pressures on the NDIS. Recognising this, in 2017 the Productivity Commission recommended that if the medical and general accident streams of the NIIS were not implemented, then state and territory governments should bear the additional costs borne by the NDIS.

Relying on litigation for healthcare compensation is not in the interests of health practitioners, taxpayers or injured patients

Given the millions of dollars spent on insurance premiums and government subsidies, it must be asked whether this money is used effectively in protecting a litigation system that dates back to the 19th century and is increasingly unfit for purpose in providing compensation for healthcare injuries. 

Do health practitioners really want to pay premiums for a system under which, if a claim is brought against them, they risk reputational damage, severe stress and destruction of the doctor-patient relationship? Do taxpayers really want to see their tax dollars spent on a system in which claims take years to resolve when a no-fault scheme can resolve them in a fraction of the time? Do injured patients really deserve to run the gauntlet of a system that holds out the prospect of compensation but delivers it only to a favoured few? Surely it is time to consider a timetable and plan of action for establishing a no-fault compensation scheme for healthcare injuries, as was recently recommended by Australian oncologist and research scientist Professor Richard Epstein (https://www.rcpjournals.org/content/futurehosp/10/1/85 )..

We need a no-fault compensation scheme for healthcare injuries now

The benefits of a no-fault compensation scheme for healthcare injuries are not solely economic. Such a scheme is more consistent with the values of compassion, openness and transparency that buttress person-centred care. As the Productivity Commission said in 2011, “[T]the availability of no-fault lifetime care and support through the NIIS significantly enhances the quality of health services and the level of assurance that can be offered to patients in the disturbing event of a catastrophic treatment injury. This is an important enhancement to the practitioner-patient relationship and the high level of trust that is relied upon between parties.”

What you can do

Please continue to share our petition and encourage people to sign it. If you live in New South Wales, consider writing to your MP to support the inclusion of patient harm and appropriate compensation in the terms of reference for the forthcoming NSW special commission of inquiry into health services. 

Wherever you live, let the ALP and your federal MP know that it is vital that the ALP maintains its commitment to the National Injury Insurance Scheme. The deadline for submissions on the draft national platform is Friday 23 June. There is not much time left to make your feelings known to the ALP. Here is how to do it: https://www.change.org/p/i-almost-died-from-surgical-harm-injured-australian-patients-deserve-fair-compensation/u/31636600 

Gratefully,

Sarah and Vickie

References are available on request to Sarah at exactitude@iprimus.com.au