Fifth report on the costs of the Australian Government’s
Run-Off Cover Scheme for medical indemnity insurers
A.3.1 The legislation defines claims broadly. Claims need not involve legal proceedings. Claims may include civil claims for negligence, administrative proceedings, disciplinary proceedings (including those performed by a professional body) and inquiries or investigations into conduct (subsection 4(1) of the Medical Indemnity Act).
A.3.2 A ROC claim is payable to an MII or MDO under section 34ZC in relation to a claim eligible under subsection 34ZB(1) if:
- it was first notified to the MII or MDO on or after 1 July 2004;
- it relates to a person eligible under subsection 34ZB(2) (see Appendix 2);5
- it relates to incident(s) occurring in connection with the person’s practice as a medical practitioner (see paragraph 34ZB(1)(b));
- either the person is indemnified for the claim by an MII in accordance with section 26A of the PSPS Act, or the person is indemnified under incident-occurring based cover provided by an MDO (paragraph 34ZB(1)(e)); and
- the claim would be paid in the ordinary course of the MII’s or MDO’s business.
A.3.3 Where these criteria are met, the Commonwealth is liable to pay run-off cover indemnities regardless of whether the MII or MDO has sought private reinsurance (section 34ZF).
A.3.4 Applications for ROC indemnity payments must be made to Medicare Australia (section 36 of the Medical Indemnity Act). They are paid by the CEO of Medicare Australia before the end of the month that immediately follows the month in which the MII applies for the indemnity (section 37).
A.3.5 The Scheme operates after the HCCS. Thus, part of the cost of eligible large claims is first met by the HCCS with the rest being picked up by the Scheme (subsection 34ZH(2)). Where the total incurred cost of an eligible ROC claim exceeds $300,000, the HCCS meets 50 per cent of the amount by which it exceeds $300,000.
5 Under the occurrence model, the Scheme accrual for a year refers to the present value of future ROC indemnity payments that are attributable to medical incidents which occur during that year. For example, our previous report estimated $11.1 million in Scheme accrual for 2008-09. By comparison, this year’s report estimates $9.4 million in Scheme accrual for 2009-10.