Tuesday, August 11, 2009

What assumptions underly the costing of the Government's midwife indemnity scheme?

[An excerpt from the Proof Committee Hansard (p CA 68) of the Senate Community Affairs Legislation Committee permitted some light to be thrown on the Department's (lack of) substantial evidence to support its recommendation to exclude homebirth from government supported private midwifery practice under the new legislation.]

Senator BOYCE—I have a few questions on the actual costings and the way you worked out the indemnity scheme. What were the assumptions underlying how you costed it? Where did
you get to with that?

Ms Hancock—I understand you are asking about the assumptions used underlying the costings for the professional indemnity component of the package?

Senator BOYCE—Yes.

Ms Hancock—I am hoping that I am giving you the information that you are looking for.

Senator BOYCE
—You start and we will see. It was deliberately broad.

Ms Hancock
—We had some assumptions about the likely number of midwives to be covered and some assumptions concerning the possible rate of claims and size of claims. Those were based on advice given to us by the Australian Government Actuary on the basis of a fairly large amount of information that he had considered, both from medical indemnity insurers and from other information sources.

Senator BOYCE
—Would that be historical information? I ask that because no-one has been insured since 2001 in the midwifery field.

Ms Hancock
—Yes, that is right, being both historical information and information from other countries. We also used information concerning claim rates relating to birth related
incidents from medical indemnity insurers who currently insure obstetricians.

Senator BOYCE
—Can you give us some more detail about those figures? You are saying you made some assumptions about the number and size of claims that will be made.

Ms Hancock—The costings are based on a claim rate of 1.1 incidents per 1,000 births and an average claim size of $227,000.

Senator BOYCE
—Those are for the 2010-2011 year?

Ms Hancock—Well, that is overall the likely situation. The claim rate is the same throughout the four years, I believe.

Senator BOYCE—That is an average for the four years?

Ms Hancock

Senator BOYCE—Are you able to give us any tables or anything else on that? Does it vary from state to state?

Ms Hancock
—That is essentially a high-level extrapolation from all the data that had been gathered from that wide range of sources with a huge amount of consideration fed into
those kinds of answers at the end. My suspicion is that it is an actuarial assumption and if you got different actuaries to sift through the figures they would probably come up with slightly different scenarios. The Australian Government Actuary is our best source of information and actuarial advice.

Senator BOYCE
—Taking the 1.1 incidents per 1,000 and the $227,000 per claim, what do they give us for a year? What is the average costing? I am not doing the birth rates so I do not know.

Ms Hancock
—I cannot remember. The entire package is for $25 million over four years.

Senator BOYCE
—Would you happen to know what the average claim rate for obstetricians is?
Ms Hancock—I think it is still about 1.1 per 1,000 births.

Senator BOYCE—So you are anticipating that midwives would have about the same claim rate as
obstetricians. Is that right?

Ms Hancock
—It is more that the actuary did not have sufficient information concerning midwive-led care in Australia to come to a conclusion other than that the rate of birth
related incidents would be roughly the same.

Senator BOYCE—As we have been discussing, homebirths have been technically removed. Was that
considered in your assumptions?

Ms Hancock
—What we were doing was working out how to cost the indemnity component of the package, not in essence how to inform a decision about whether homebirths should be
included or not. The basis of those costings was that homebirths would not be included but my
recollection is that the actuary was unable to say what difference the inclusion of homebirths might make. He did not have sufficient data on which to base conclusions.


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