NOTE 22: Administered Contingent Assets and Liabilities

Contingent assets

There were no quantifiable administered contingent assets as at 30 June 2011 (2010: $0).

Contingent liabilities

	Guarantees	Guarantees	Indemnities	Indemnities	Act of Grace Payments	Act of Grace Payments	Total	Total
	2011 $’000	2010 $’000	2011 $’000	2010 $’000	2011 $’000	2010 $’000	2011 $’000	2010 $’000
Balance from previous period	0	2,438	34,000	0	60	0	34,060	2,438
New	0	0	0	34,000	37	60	37	34,060
Re-measurement	0	0	5,000	0	0	0	5,000	0
Liabilities recognised	0	(2,438)	0	0	(15)	0	(15)	(2,438)
Obligations expired	0	0	0	0	(20)	0	(20)	0
*Total contingent liabilities*	0	0	39,000	34,000	62	60	39,062	34,060
*Net contingent liabilities*	0	0	(39,000)	(34,000)	(62)	(60)	(39,062)	(34,060)

Quantifiable Contingent Liabilities

Indemnities

The schedule of Administered contingencies reports a contingent liability in respect of medical indemnity payments of up to $39,000,000 (2010: $34,000,000).

Act of Grace Scheme

The Schedule of Administered contingencies reports a contingent liability in respect of Act of Grace payments related to medical benefits of up to $62,000 (2010: $60,000).

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.

Unquantifiable Contingent Liabilities

Aged Care Accommodation Bond Guarantee Scheme

A Guarantee Scheme has been established through the Aged Care (Bond Security) Act 2006 and Aged Care (Bond Security) Levy Act 2006. Under the Guarantee Scheme, if a provider becomes insolvent or bankrupt and is unable to repay outstanding bond balances to aged care residents, the Australian Government will step in and repay the bond balances owing to each resident. In return, the residents’ rights to pursue the defaulting provider to recover the accommodation bond money transfer to the Government. In the event the Government cannot recover the full amount from the defaulting provider, it may levy all providers holding accommodation bonds to recoup the shortfall. It is not possible to quantify the Australian Government’s contingent liability in the event that the Guarantee Scheme is activated. From the latest available information, the maximum contingent liability, in the unlikely event that all providers defaulted, is $10.6 billion. Since the scheme was introduced it has been activated 5 times requiring payment of $25 million (as outlined in the table below). It is difficult to predict if the past pattern of payments are indicative of future payments.

The Department has implemented risk mitigation strategies which should reduce the risk of default and thereby activation of the Guarantee Scheme.

Financial Year
2006-07
2007-08
2008-09
2009-10
2010-11
Total

Payments made $ million
0
0.6
8.4
15.5
0
24.5

Number of times scheme activated
0
1
2
2
0
5

For the period ended 30 June 2011 no claims have been made.

Financial Year	2006-07	2007-08	2008-09	2009-10	2010-11	Total
Payments made $ million	0	0.6	8.4	15.5	0	24.5
Number of times scheme activated	0	1	2	2	0	5

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 2011 no claims have been made.

Medical Indemnity

Medicare Australia administers 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. One MII is still determined to have unfunded IBNRS liabilities, but is not included in the Scheme and this MII should be eligible for claim payments under the IBNRS. Accordingly, an unquantifiable administered contingency exists to necessitate payment to this MII.

Medicare Australia also administers 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 2011, 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 2011 no claims have been made.

CSL Bioplasma Ltd (formerly CSL Ltd)

Under existing agreements, the Australian Government has indemnified CSL Bioplasma 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 Bioplasma Ltd.

The Australian Government has indemnified CSL Bioplasma 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 Bioplasma Ltd. For the period ended 30 June 2011 no claims have been made.

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 Australian Red Cross Blood Service (ARCBS), 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 ARCBS. 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 ARCBS 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 ARCBS, the blood and blood products liability cover for the ARCBS remains in force until all parties agree to terminate the arrangements from an agreed date. For the period ended 30 June 2011 no claims have been made.

Vaccines

Under certain conditions the Australian Government has provided an indemnity for the suppliers of certain vaccines. For the period ended 30 June 2011 no claims have been made.

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 2011 no claims have been made.

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. 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 2011 no claims have been made.

Significant Remote Contingencies

The Department does not have any significant remote contingencies.

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