The MDU's Transitional Benefits are launched not a moment too soon. They have been welcomed by GPs as an answer to the unaffordability of indemnity which has been deterring them from clinical practice. Indemnity costs are deterring GPs from working the sessions they wish to, deterring young doctors from entering general practice and making others take early retirement.
In response to the Department of Health's comments on the MDU's transitional membership benefits in the addendum to its announcement of the Government's intention to introduce a state-backed indemnity scheme for GPs, the MDU is able to reassure its GP members:
- We are certain the MDU's Transitional Membership benefits meet the requirements of the GMC for adequate and appropriate indemnity.
- The MDU has been very clear and transparent in all the information we have provided to members coming to renew onto Transitional Benefits. We have explained in detail the specific differences from our standard membership benefits. We have provided members with a copy of the revised member guide setting out the new benefits in detail. We have also explained why we are no longer able to offer occurrence benefits and our belief that any provider continuing to do so should be reflecting the full financial impact of the discount rate change.
- Members who remain with the MDU on Transitional Benefits remain as secure as members of any other MDO. MDU members can practise with confidence knowing they are part of a mutual, non-profit making organisation that has members' interests at its core and provides the highest quality support for members.
- To be workable, fair and to meet the financial commitments given to all GPs, the Government's scheme will need to pick up both future claims costs and existing unpaid (or historic) claims at the date when the scheme is introduced - for all GPs. Given the crisis facing general practice the steps taken by the MDU to help GPs meet the unaffordable costs of indemnity now should be welcomed by all concerned.
- Details of the state backed scheme are yet to be agreed but if the Government were to leave GPs to meet some claims arising from a period of Transitional Benefits, GPs who stay with the MDU until they retire (where this retirement is at or after their NHS pension schemes' normal pension age) will not have to pay anything for Extended Benefit Rights (which the Department calls 'run off cover'). Similarly, their estates would not have to pay anything if they die.
If they leave the MDU before this time, the annual cost of Extended Benefit Rights will be between £500 and £1,500 rising slightly over time. The number of years such payments would have to be made would depend on the detailed arrangements for the state-backed scheme but the total subscription collected over a small number of years will not exceed that necessary to pay claims arising from the transitional period. The advantage for members is that the MDU will not collect more up front than it eventually needs.
The background to this is that a retrospective change to the discount rate caused a massive increase in the damages paid in GP claims. For example, with a GP claim that would have settled at £8.4m at a 2.5% discount rate, we would now expect to settle at £17.5m and £20m is no longer unthinkable. Following the catastrophic change in the discount rate, initially the MDU decided not to increase its subscriptions for its standard membership benefits.
We did this because GPs simply cannot afford to pay any more for indemnity - it is not a problem of their making and we don't think GPs should foot the bill. Also, there was a commitment by the Lord Chancellor who said: 'The Department of Health will work closely with GPs and the medical defence organisations to ensure [our emphasis] that appropriate funding is available to meet additional costs to GPs, recognising the crucial role they play in the delivery of the NHS.'
However, we could not continue with this stance indefinitely since it would result in claims being underfunded. It took the DoH over eight months to reach the position where it could make its announcement on 12 October, and the DoH envisages it will take at least 12-18 months to introduce a state backed scheme. As a result we had to take action to ensure that our GP members could afford indemnity and that claims would be correctly funded pending the introduction of a state backed scheme.
The options were:
- To continue to offer the same 'occurrence' benefits and hold prices. This would have been the wrong position to take as the MDU would knowingly have not been taking in enough money to pay the claims against its members, or alternatively would be charging more to GPs today than it needed if and when the Government introduces state-backed indemnity for claims.
- Introduce a new form of membership which provides affordable benefits to GPs and allows the MDU to charge an appropriate subscription.
If an occurrence subscription rate does not fully take account of the massive increase in damages paid in GP claims, with retrospective effect, caused as a result of the 3.25% reduction in the discount rate, it is too low to provide the funding needed for those GP claims (ie, it is underfunded). An underfunded occurrence membership can only continue on the assumption that the Government will provide a solution that meets both future and existing unpaid claims. If the Government scheme, details of which are unclear, were to leave GPs to meet any such claims, an underfunded rate would mean that insufficient subscriptions had been collected from members to fund these.
The MDU's transitional benefits provide an excellent basis now from which to deliver a solution to the problem posed by the Lord Chancellor's decision on the discount rate and the current uncertainty over the introduction of a state-backed indemnity scheme for GPs.
This guidance was correct at publication 18/10/2017. It is intended as general guidance for members only. If you are a member and need specific advice relating to your own circumstances, please contact one of our advisers.