It is an honour and a pleasure to be giving evidence before the committee today. I am grateful for the invitation. By way of introduction, I have been with the MPS for 18 years in a variety of roles and assumed my present position about 18 months ago. Mr. Burns, on my right, has a statistical training and has been at MPS for about six years. Prior to that he worked in the insurance industry for a long time with the Prudential company. Mr. Mason, on my left is the managing partner of Lane, Clark & Peacock, who are independent consulting actuaries to MPS. He has advised the MPS for over 20 years on our business. He also advises the NHS in England, Wales and Scotland. There are three separate pooling funds for medical malpractice in those countries. In addition, he advises five organisations in Australia and has recently advised the Federal Minister of Health on professional indemnity issues there. Sparing his blushes he is at least one of the most experienced if not the most experienced actuary in the world in this particular field. I thought it would be useful to have him here today.
I will try to put all the comments I have to make this morning into context. When we talk about obstetric litigation - and I know that is an area which the committee is focusing on - and cerebral palsy claims we are dealing with most severely handicapped individuals. No matter which side of the fence one sits on one has to have enormous sympathy for them. We have won two cerebral palsy cases at trial recently and while I am pleased that our doctors have not been proved to be negligent, I still have enormous sympathy for the poor children involved. Everything I say should be put in that context because it pales into insignificance compared to the plight of these children.
I would like to say something about MPS. It is a discretionary mutual association founded in 1892. Actually it is an offshoot of the Medical Defence Union. We have over 200,000 members in more than 40 countries and currently there are over 6,000 registered doctors and dentists as members in Ireland. Although the organisation is obviously pro-doctor that does not mean it is anti-patient. One of MPS's aims is to prevent avoidable harm to patients through education and to pay fair compensation to patients where it is due. MPS offers a wide range of benefits to members but only about 20% of the files that we open are related to claims of negligence. The other 80% have nothing to do with claims of negligence. They can relate to representations before medical councils or on manslaughter charges, inquests and so on. We are a discretionary mutual organisation and I do not know of any member who has been left uncovered by MPS, once he or she has paid the appropriate subscription.
MPS earns about €200 million in subscription income each year. They are called subscriptions and not premiums because MPS is not an insurance company. Available assets to meet the liabilities it faces are worth around €625 million as at 31 December 2001. MPS has another asset which all organisations of this type have, namely, the right to make a call upon members. We can go back to members and say: "Terribly sorry, but things have gone wrong and we need extra money." They can be asked for an extra year's subscription. The value of that contingent asset is about €200 million in the current year.
While MPS operates in many countries, it tries to make each major area self-funding over a period of time. That means there should not be cross subsidies between the subscriptions doctors pay in one country and that which they pay in another. So far as the Irish membership is concerned, doctors here receive no subsidy from outside Ireland and do not subsidise doctors outside Ireland. No subsidy is going one way or the other. This has been achieved by the control of legal costs particularly as well as administration costs over the years, careful management of claims, prudent investment strategy and most importantly, with the help of the actuarial bodyguards, the setting of appropriate subscriptions.
Moving on to the professional indemnity scene, Ireland is a difficult place in which to provide professional indemnity for doctors. There are some problems here, in particular with obstetric litigation. There is a problem, but there is no crisis. I am on public record many times saying this. The obstetric problem is not a new one. Almost 15 years ago to the day, MPS held a seminar in London which looked at the problems of professional medical indemnity. Half of that seminar was devoted to the problems with obstetrics. We in the MPS said at the time that 3% of our members, those who were obstetricians, caused 29% of our claims. Obstetrics presents a worldwide problem that we recognised for many years, with Ireland no different to any other country. Obstetrics is a high risk, high cost speciality, a fact we have recognised for a long time.
How big is the problem? I know the committee has received statistics from other parties, including the MDU. We agree with many of the latter's figures, such as the incidence of cerebral palsy being two to three cases for every 1,000 live births per annum. I agree that there are probably 20 obstetric claims in Ireland each year, and it is probable that eight claims are settled annually.
I dispute the cost the MDU has placed on the obstetric cerebral palsy claims. The MDU said these eight claims can be settled for "up to €4 million". They can in fact be settled for in excess of €4 million. If one looks back at the MPS experience, the average settlement in the period 1990-2003 is about €2 million to €2.5 million per claim.
While the committee must look at the total cost to the State of obstetric litigation, one must look at the issue of professional indemnity on an individual organisation basis. Looking back at the MPS claims history in obstetric cases, on average only 40% of the total value of a claim relates to consultant obstetricians because liability is almost invariably shared with other doctors - NCHDs, other consultants and different organisations, midwives and so on.
The MDU quoted a claims inflation figure of 26.5%, which it has been quoting for years. The MPS paper presented to the committee contains a number of examples and analyses. I do not intend to go through the reasons we disagree with the MDU figure, but the MPS experience shows that between 1991 and 2003, obstetric claims were inflating by about 14% per annum. With a small number of claims in a very volatile situation, one has to be careful when looking at the figures. If one took the MDU figure of 26.5% per annum, then looked back at the maximum claim in 1991, which was about €1 million, and then inflated it at 26.5% per annum, one would expect an obstetric cerebral palsy claim to be settled today for €16 million, which is clearly not the case.
We have always said that obstetricians' subscriptions have been subsidised, not only in Ireland but elsewhere. Such subsidies are justified and are possible in Ireland where consultants' subscriptions have been supported by the Government through the reimbursement scheme. This support is justifiable because if one were to charge obstetricians the true risk related rate, one would drive them all out of practice.
Our attitude to subsidy shows the difference between a mutual non-profit organisation such as MPS and the commercial insurance market. If the MPS were a for-profit organisation, and I were chief executive of MPS plc, I would set subscriptions that would ensure that not a single obstetrician, neurosurgeon, orthopaedic, spinal or plastic surgeon would be a member. The reason is that it is very difficult to make a profit out of the risks involved in those areas. That is why medical professional indemnity is a special case that needs to be looked after by mutual organisations that understand the problems. Commercial insurers are not interested in covering the high risks.
The committee has heard about the so-called obstetrics special funds arrangements, which I shall refer to as SFAs rather than secret deals, if I may. There has been much discussion about them. The SFAs have allowed obstetricians to continue in practice in Ireland, particularly in private practice. Bearing in mind the importance of private obstetric practice to the delivery of health care in Ireland, their introduction was correct.
There is a chronology of events in the material supplied to the committee, and I will not go into the matter in detail. Suffice to say that during the period 1996-2000, the number of consultant obstetricians who joined the MPS was about 26. The number of consultant obstetricians in the MPS nearly doubled during that period. Most of them came from the MDU. We were already taking a lot of obstetricians from the MDU, and this was causing us concern. In February 2001 the MDU signalled that it was going to put up its subscription rates for consultant obstetricians to what we believed to be an entirely unjustifiable rate of €450,000. That made the MPS greatly concerned that all obstetricians would join the MPS, which we did not want. One might ask why that should be so, and the answer is that if an organisation is subsidising one class, such as consultant obstetricians, one must ensure that enough money is raised from the other lower risk consultants - not GPs - to fund those obstetric risks. If there is a sudden increase in the number of consultant obstetricians in membership, the subsidy burden on the other specialities clearly becomes unsustainable.
What could we have done? We could have put our obstetric rates up to what we believe is the unjustified MDU rate of €450,000 to stop all obstetricians joining the MPS. We could even have set the rates above the MDU rates in order to lose all our obstetricians. Alternatively we could have decided that the maximum rate for obstetricians should be about €250,000, charged €350,000, taken in all the obstetricians and made a profit of €100,000 per member. These options were clearly wrong, given the effects such rates would have on obstetric practice. We discussed our concerns with the Department of Health and Children and in March 2001 the Department wrote to the MPS and the MDU asking for suggestions on how to solve the problem. Both organisations proposed solutions and, as the committee is aware, the MPS solution was ultimately accepted. The MDU was given a chance to participate in those agreements.
The special fund agreements are prospective. They have no effect on the historic liabilities about which the committee has heard so much, nor any effect on existing MPS obstetric members under the first agreement. Both SFAs left the MPS and the MDU in exactly the same position. They removed the need to subsidise obstetricians going forward and left the historic liabilities untouched.
The committee has been told that there was a subsidy paid to the MPS. As chief executive of the MPS, I entirely refute that. A figure of €50 million has been bandied about. That is incorrect. No subsidy was paid. There is a Government subsidy for consultant obstetricians' subscriptions, which does not go to the MPS.
What about the confidential nature of the deal, its secret element? If I had my time again I would do exactly what I did but I would have pressed the Department of Health and Children to release this deal from the confidentiality aspects which it asked the MPS to observe, and would have discussed it in greater detail with the representative organisations of the profession. I regret I did not do that. I was wrong, and have apologised publicly for that at the IHCA EGM earlier this year. I am pleased to see that the IHCA has now said publicly that it agrees that the special funds are in the public interest. I believe that the chief executive of the Independent Health Care Association of Ireland has suggested a similar scheme for private hospitals in Ireland.
The MDU says that in effect it lost its obstetricians because of the SFAs and therefore lost the chance to fund its historic liabilities. As I said earlier, many obstetricians had transferred to the MPS before the issue arose. The MDU also put its rates up to €500,000. Even if the MPS had put its rates up to €250,000, which was the upper limit of the range which we thought was justifiable for consultants, category one consultants would have a saving of €25,000 if they transferred to the MPS, category two consultants would save €50,000, and a whole-time private practitioner would save an enormous €250,000. It is therefore inconceivable that if the MDU put its rates up to €500,000 it would have any obstetricians left, irrespective of the special funds agreement. The only reason the MDU lost its obstetricians was that it raised its rates up to that unjustifiable figure which, to my knowledge, incidentally is the highest in the world. The committee will have seen in the newspapers and heard about the MDU attitude to historic liabilities. It is probably not appropriate for me to comment on that because that is a matter between the MDU and its members. However, I would say there is a moral obligation upon the MDU and the MPS has distanced itself from it in this regard and written to the Minister for Health and Children to that effect.
I am coming to the end, so I would like to say something about the future. First, the MPS is committed to continue serving members in Ireland so long as it is wanted. Second, I will come back to my opening point: the tort system in this country serves neurologically impaired babies badly. Take two babies, one impaired because of an obstetrician's negligence and the other because of an infection. Both have exactly the same needs. One gets a multimillion euro award while the other gets nothing. In the greater scheme of things perhaps 90% of cerebral palsy babies get nothing other than minimal State benefits. That is why the MPS has advocated since the time of that seminar in the late 1980s a ringfenced no-fault scheme for neurologically impaired babies. That should also be extended to children who are impaired by infections such as meningitis.
In summary, there is a problem in obstetric litigation in this country. There is no crisis. Our statistics show that. More generally for the medical profession, the problem is no worse than elsewhere. We have seen a flattening in claim frequencies in this country over the last two years. Returning to obstetrics, the special fund arrangements have solved the subscription affordability issues for consultant obstetricians. Those agreements are not retrospective. They only affect obstetricians' cover, going forward. There is no subsidy to the MPS whatsoever. The MPS Council - its governing body - disagrees with the MDU's stated position that it might refuse to indemnify its members. Finally, the MPS believes the tort system should be scrapped, certainly for obstetric and cerebral palsy cases, and a no-fault scheme instituted so that there is not a great disparity of treatment for these poor unfortunate children.
