Increase in claims costs

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When claims severity and frequency threaten to compromise our members' practice and patients' access to healthcare, it is time to act. That time is now, says Dr Christine Tomkins, MDU chief executive.

England and Wales have amongst the highest level of personal injury damages awards in the world. Damages inflation far exceeds other inflation measures and now runs at about 10% a year. In each of the last three years, the MDU settled several claims at over £5m and higher. Claims frequency is also rising steeply: we opened 15% more medical claims files in 2012 than 2011.

The effect on subscriptions is self-evident, but there are less obvious implications. Ultimately, we are all paying for a system which awards damages at a level that outstrips society's ability to pay for it. Large sums of money are leaving the NHS to pay for clinical negligence claims – in 2011, £1.2bn was paid out and NHSLA total liabilities stood at £16.7bn, all funded by the taxpayer. Ever-rising medical defence subscriptions, needed to meet unrealistic claims payments, are already a significant factor in the economics of private and general practice and will eventually deter doctors from entering or staying in the specialties most affected. 

It is not as if we have never seen this problem before. Australia faced a medical professional indemnity crisis in 2002 which resulted in wholesale reform of the way clinical negligence claims were dealt with. In Ireland, the government introduced caps on claims against private practitioners to ensure that private practice did not become unaffordable, thus placing an excessive burden on publicly-funded healthcare. In many US states, tort reforms have been introduced, differing from state to state, in response to a claims environment which was driving doctors out of practice and preventing patients from receiving the care they needed.

What can we in the UK do? Some answers lie in the way the law requires us to compensate for the cost of long-term future care and loss of earnings. Loss of earnings awards are based on an estimate of what the patient could have expected to earn, had the negligence not prevented them from doing so. These can be very large sums. Some jurisdictions have capped loss of earnings to, for example, three times the national average salary, which might seem reasonable to most people. One way or another, everyone is paying for these awards. 

Awards for long-term care costs are based on Section 2(4) of the Law Reform (Personal Injuries) Act 1948, which requires that 'there shall be disregarded, in determining the reasonableness of any expenses, the possibility of avoiding those expenses or part of them by taking advantage of the facilities available under the National Health Service....'. This might have made sense in 1948 when the NHS was new and untested, but makes no sense now.

The practical effect of the Act is that defendants who must pay for the future healthcare and treatment of negligently damaged patients must do so on the presumption that care will be provided by the independent sector, and ignore the fact that good NHS treatment may be available. This creates a classic vicious circle. Compensation is paid for out of NHS funds, diverting resources from NHS care. For every patient whose injuries are the result of negligent care there are many more with similar injuries, not caused by negligence, and the same requirements for future care. The current system means millions of pounds are diverted from the NHS to set up care arrangements for a tiny number of individuals at public expense. This in turn may encourage a perception that privately-funded care is superior, and also the incentive to seek access to privately-funded care through litigation.

If the money currently being diverted out of the NHS was used to set up specialised NHS care units and facilities, the resources could be retained in the NHS to allow an equal or better standard of care to be delivered than through private arrangements. This does not mean that defendants should escape paying care costs in personal injury cases. Defendants should continue to meet the reasonable costs of negligently injured claimants. However, if legislation were introduced to ensure that the NHS and other public bodies could recover costs from defendants to fund public sector care packages as part of personal injury compensation awards, the money could be used by the NHS and local authorities to extend the provision of these services generally. Over time, there would be greater choice of public services available to claimants, as well as those many others who also need these services.

Changes to Section 2(4) and other tort reform measures will not be easy. Nor is it realistic to expect the NHS and other public authorities to be able to provide the necessary care immediately and consistently throughout the country. But those are not good reasons for allowing the current destructive system to continue unchecked.

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