Online version of the 2013-14 Department of Health Annual Report

Note 25: Administered - Contingent Assets and Liabilities

Notes to and Forming Part of the Financial Statements

Page last updated: 31 October 2014

Contingent Assets

There were no quantifiable administered contingent assets as at 30 June 2014 (2013: Nil).

 
Indemnities
Claims for costs
Aged Care Accommodation Bond Guarantee Scheme
Total
2014
$'000
2013
$'000
2014
$'000
2013
$'000
2014
$'000
2013
$'000
2014
$'000
2013
$'000
Contingent liabilities
Balance from previous period
(48,000)
(46,000)
(167)
(195)
(27,000)
-
(75,167)
(46,195)
New contingent liabilities recognised
-
-
(164)
(63)
-
(27,000)
(164)
(27,063)
Re-measurement
(5,000)
(2,000)
-
-
-
-
(5,000)
(2,000)
Liabilities recognised
-
-
4
2
-
-
4
2
Obligations expired
-
-
64
89
-
-
64
89
Restructure
-
-
-
-
27,000
-
27,000
-
Total contingent liabilities
(53,000)
(48,000)
(263)
(167)
-
(27,000)
(53,263)
(75,167)
Net contingent liabilities
(53,000)
(48,000)
(263)
(167)
-
(27,000)
(53,263)
(75,167)

Quantifiable Contingent Liabilities

Indemnities

The Schedule of Administered Contingencies reports a contingent liability in respect of medical indemnity payments under the High Cost Claims Scheme of up to $53,000,000 (2013: $48,000,000).

Claims for Costs

The Schedule of Administered Contingencies reports a contingent liability in respect of claims for costs payments related to medical benefits of up to $263,000 (2013: $167,000).

Aged Care Accommodation Bond Guarantee Scheme

The contingent liability for the Aged Care Accommodation Bond Guarantee Scheme was derecognised during 2014 as a result of AAO changes on 18 September 2013 and subsequent transfer of ageing and aged care functions to DSS.

Unquantifiable Contingent Assets

General Practice Education and Training (GPET) Limited

GPET indemnifies the Commonwealth, its officers, employees and agents from and against any and all loss or liability incurred by the Commonwealth; loss of or damage to the property of the Commonwealth; or loss or expense incurred by the Commonwealth in dealing with any claim against it, arising from any act or omission by GPET in connection with this Agreement, where there was fault on the part of the person whose conduct gave rise to that liability, loss, damage or expense; or any breach by GPET of its obligations or warranties under this Agreement.

Compensation from Sanofi

The Department has initiated legal action to seek compensation from Sanofi, the original patent owner of clopidogrel (Plavix®), for additional costs to the Pharmaceutical Benefits Scheme (PBS) resulting from a delay in listing a generic version of clopidogrel. Listing a generic form of clopidogrel on the Australian market in 2008 would have triggered an automatic reduction to the price paid by the Government for clopidogrel through the PBS and is likely to have resulted in a Price Disclosure reduction in 2010. The first generic version of this medicine was listed in 2010 and the first Price Disclosure reduction occurred in 2012.

Compensation from Wyeth

The Department has initiated legal action to seek compensation from Wyeth, the original patent owner of venlafaxine (Efexor®), for additional costs to the Pharmaceutical Benefits Scheme (PBS) resulting from a delay in listing a generic version of venlafaxine. Listing a generic form of venlafaxine on the Australian market in 2009 would have triggered an automatic reduction to the price paid by the Government for venlafaxine through the PBS. The first generic version of this medicine was listed in 2012.

Unquantifiable Contingent Liabilities

Diagnostic Products Agreement

The Australian Government has provided an indemnity to a review of certain matters in relation to the Diagnostics Products Agreement. The indemnity provides certain specified members of the review the same level of indemnity as Australian Government officers for the purpose of the review. For the period ended 30 June 2014 no claims have been made (2013: Nil).

Medical Indemnity

DHS delivers the Incurred But Not Reported Scheme (IBNRS) on behalf of the Australian Government. Eligibility for claim payments under this scheme is dependent on whether the Medical Indemnity Insurer (MII) is deemed to be a participating Medical Defence Organisation under the Medical Indemnity Act 2002 and the Midwife Professional indemnity (Commonwealth Contribution) Scheme Act 2010.

DHS also delivers the Exceptional Claims Scheme (ECS) on behalf of the Australian Government. Under this scheme, the Australian Government will be liable for the cost of medical indemnity claims that exceed certain thresholds. The Consolidated Revenue Fund is appropriated to make payments under this scheme. To be covered by the ECS, practitioners must have medical indemnity insurance cover to at least a threshold of $15 million for claims arising from incidents notified between 1 January to 30 June 2003 and $20 million for claims notified from 1 July 2003. At 30 June 2014, the Department had received no notification of any incidents that would give rise to claims under this scheme. However, the nature of these claims is such that there is usually an extended period between the date of the medical incident and notification to the insurer. For the period ended 30 June 2014 no claims have been made or notified (2013: Nil).

CSL Ltd

Under existing agreements, the Australian Government has indemnified CSL Ltd for certain existing and potential claims made for personal injury, loss or damage suffered through therapeutic and diagnostic use of certain products manufactured by CSL Ltd. For the period ended 30 June 2014 no claims have been made (2013: Nil).

The Australian Government has indemnified CSL Ltd for a specific range of events that occurred during the Plasma Fractionation Agreement from 1 January 1994 to 31 December 2004, where alternative cover was not arranged by CSL Ltd. For the period ended 30 June 2014 no claims have been made (2013: Nil).

Australian Red Cross Blood Service

The Deed of Agreement between the Commonwealth and the Australian Red Cross Society (ARCS) and the National Blood Authority (NBA) in relation to the operations of the Blood Service, includes certain indemnities and limited liability in favour of ARCS. These cover a defined set of potential business, product and employee risks and liabilities arising from the operation of the Blood Service. The indemnities and limitation of liability only operate in the event of the expiry and non-renewal, or the early termination of the Deed, and only within a certain scope. They are also subject to appropriate limitations and conditions including in relation to mitigation, contributory fault, and the process of handling relevant claims.

Under certain conditions the Australian Government, States and Territories jointly provide indemnity for the Blood Service through a cost-sharing arrangement in relation to the National Managed Fund claims, both current and potential, regarding personal injury and loss or damages suffered by a recipient of certain blood and blood products where other available mitigation or cover is not available. Under a Memorandum of Understanding between governments and the Blood Service, the blood and blood products liability cover for the Blood Service remains in force until all parties agree to terminate the arrangements from an agreed date.

For the period ended 30 June 2014 no claims have been made (2013: Nil).

Vaccines

Under certain conditions the Australian Government has provided an indemnity for the supply of certain vaccines to the suppliers of the vaccines. For the period ended 30 June 2014 no claims have been made (2013: Nil). Contract under which the contingent liability is recognised has now expired. However, until replacement stock is sourced the contingent liability for use of the vaccine currently held remains with the Commonwealth.

Human Pituitary Hormone Program

Under certain conditions the Australian Government has provided indemnity for the supply of growth hormones manufactured from human pituitary glands and human pituitary gonadotrophin manufactured before 31 December 1985. For the period ended 30 June 2014 no claims have been made (2013: Nil).

The Australian Medical Association

This is an agreement between the Australian Medical Association Ltd (AMA), the Commonwealth, Australian Private Hospitals Association Ltd, Australian Health Insurance Association and Beyond Blue Ltd for participation in and support of the Private Mental Health Alliance. In respect of identified information collected, held or exchanged by the parties in connection with the National Model for the Collection and Analysis of a Minimum Data Set with Outcome Measures in Private, Hospital-based Psychiatric Services each party has agreed to indemnify each other in respect of any loss, liability, cost, claim or expense, misuse of Confidential Information or breach of the Privacy Act. The AMA's liability to indemnify the other parties will be reduced proportionally to the extent that any unlawful or negligent act or omission of the other parties or their employees or agents contributed to the loss or damage. For the period ended 30 June 2014 no claims have been made (2013: Nil).

Medicare Locals

Due to the Government's commitment to cease all Commonwealth funding to Medicare Locals from 30 June 2015 the Commonwealth is terminating the Medicare Locals Deed for Funding and Program Schedules under clause 22.1 (i). The Commonwealth is therefore liable for any reasonable costs incurred by Medicare Locals which are directly attributable to the termination. Some funds are also expected to be recovered from a number of sites as a result of the termination, which would partially offset the liability. Neither costs nor potential recoveries can be estimated at present.

Significant Remote Contingencies

The Department did not have any significant remote contingencies this year or prior year.