The government stakes its claim

The government is to introduce a system of enterprise liability for medical malpractice this July, two years after issuing the consultation document, Medical Indemnity Enterprise Liability. This will hit commercial insurers and St Paul has already pulled out of the market.

As part of the scheme, the Exchequer will take over direct funding of medical malpractice claims against state hospitals, hospital trusts, junior doctors and the vast majority of claims against consultants.

In future, the institution or organisation that provides the medical care will be responsible for dealing with medical negligence claims, not individual doctors and their medical defence bodies. The only significant exclusions are general practitioners, who are independent contractors, and consultants working in private clinics. This is similar to the scheme introduced in England in 1991, now run by the NHS Litigation Authority.

The new State Claims Agency - the part of the government's asset and liability management arm that deals with personal injury and property claims against the state - will take over responsibility for managing medical negligence claims.

Probably the most important reason for the move to enterprise liability is the escalating cost of medical negligence cover. The cost to the Exchequer of medical indemnity/insurance cover payments, excluding institutions, rose from €12.32m (£7.52m) in 1991 to €41m

(£25m) in 2000). With hospitals and hospital boards included, the amount is currently estimated to be about €76m (£46.4m) a year.

Although about 45% of the population has some private medical insurance, 80% of health expenditure falls on the government and consultants undertake much of their private treatment within public hospitals.

The Department of Children and Health also believes that having separate schemes for each of the main healthcare groups increases costs by creating multiple defendants. Other reasons for the government's proposal are the lack of incentives to introduce best practice and the complexity of administration.

Enterprise liability
According to department spokesman Brendan Phelan, the government intends to use the savings in cover and insurance premiums to implement risk management systems and procedures. The department will shortly go out to tender for its principal risk management system.

About 18 months ago, it appointed Marsh Ireland to put in place the infrastructure for enterprise liability. One area that was deficient, says Marsh Ireland managing partner Stephen Byrne, was historical claims experience. Marsh therefore commissioned group company Mercer to undertake an actuarial review of claims over the past ten years. The numbers have not yet been finalised, but, according to Byrne, the government should receive the results around late March.

For institutions like hospitals, medical negligence forms part of the overall public liability cover, which is the main reason why no precise figure is available for the size of the market. Three companies have been writing this insurance: Church and General Insurance, Irish Public Bodies Mutual Insurance Company and St Paul Ireland.

The St Paul renewed cover for institutions in December/January for 2002, before the group announced that it would withdraw from its global book of medical malpractice business.

The institutional policies will either run to the end of the year or be taken over by the state scheme; it has yet to be decided, according to the company's Paula Hodson.

Since 1997, St Paul Ireland has also underwritten the Medical Indemnity Scheme (MIS) for hospital doctors and other public service physicians, excluding consultants. MIPS will run until 30 June and cover should then go seamlessly into the state scheme. The company will then run off both books of business over some years, since the cover is written on a claims-made basis.

Consultants are generally insured through one of the defence mutuals, the UK-based Medical Defence Union (MDU) and the Medical Protection Society; the government reimburses the cost, less a proportion for their private work. These organisations also have the lion's share of the market for GPs, who are not included in enterprise liability. St Paul has a small book of GPs and there are about 800 members of the GPs' mutual, Medisec, which is a tied agent of the Allianz.

The worst affected
Eagle Star Ireland, part of Zurich Financial Services Group, underwrites the cover offered by the MDU for its Irish members, excluding obstetricians and gynaecologists, with a limit of €12.7m (£7.75m) from 1 April 2001. The Medical Protection Society operates an indemnity fund, not an insurance scheme, although it does reinsure.

Even physicians in low risk areas saw their subscriptions to the MDU or the Medical Protection Society increase by around 250% between 1991 and 2001. Worst affected have been obstetricians and gynaecologists, because of awards to children who were brain-damaged at birth.

Obstetricians paid annual subscriptions of € 11,809 (£7,211) to the Medical Protection Society in 1991. By 2000, their charges had risen to € 54,599 (£33,341), while the MDU subscription had risen to € 87,205 (£52,254) a year. Finally, in June 2001, the MDU said that consultant obstetricians and gynaecologists were "uninsurable in Ireland" and membership was offered on a discretionary basis at € 499,007 (£304,730) per year.

However, the Medical Protection Society has, continued to offer protection to obstetricians and gynaecologists in Ireland for about € 66,026 (£40,320) per year. Medical director Dr John Hickey says: "We feel we have a duty as a medical organisation to allow these people to continue to practice."

Hickey believes the obstetrics issue has been overstated. He says awards for the worst cases are higher in the UK. His concern is more with the high average of awards under the € 127,000 (£77,500) benchmark and lack of reform in the legal system to parallel that of the UK, which keeps legal costs high. "The steps-of-the-court settlement is alive and well in Ireland," he says.

For the time being, the government has decided against trying to introduce tort reform with the limited exception of a pilot, no-fault scheme for brain-damaged infants. In an election year, it is more concerned with the overall state of the health service. According to a report commissioned from Deloitte & Touche, entitled An Audit of the Irish Health System for Value for Money, the health service is struggling to balance growth in demand and rising costs for treatment and services exacerbated by under-investment in the 1980s.

Lee Coppack is a risk management writer and analyst. Email: lee@coppack.co.uk