The burning issue of spiralling inflation in clinical negligence compensation payments can only be tackled by long-term solutions.

On 7 February, during Health Questions in the House of Commons, John Pugh MP asked: 'Will the Minister update the House about NHS litigation, which rocketed to £1.4 billion last year? Are they anything like under control?' The Secretary of State for Health answered: 'The hon Gentleman is absolutely right; this issue is a very big concern. The only way, in the long run, to reduce those litigation costs is to have safer care. That is why the Government have prioritised safety in everything we do.'

It is true that claims generally arise because something has gone wrong or an outcome was unexpected or unwelcome: but to suggest by implication that 'unsafe care' is responsible for litigation costs and that safer care would reduce claims costs and frequency is wrong. The main drivers of claims and their costs are legal, economic and social as explained in the NHS Litigation Authority's Annual Report for 2014-2015, which set out the main reasons, including:

  • an increase in the number of patients who claim but who do not recover compensation
  • an increase in the number of lower value claims
  • disproportionate claimant legal costs for lower value claims
  • excessive claims for legal costs from some claimant firms
  • rising lump sums and annual costs (usually, for care), over and above inflation, for high value claims.

Claims costs are indeed a very big concern. The marked deterioration in the frequency of claims can be traced back to the changes introduced by the Legal Aid, Sentencing and Punishment of Offenders Act 2012. The Act intended to reduce the disproportion in claimants' lawyers' costs by mandating new payment arrangements from 1 April 2013.

Unfortunately its unintended consequence was to create a massive spike in claims ahead of that date and long afterwards as the lawyers quickly signed up their clients under the old, more favourable terms. Claims numbers rose dramatically but we also saw our rebuttal rate for medical claims, that is claims we do not settle, rise from 70% to over 80%.

The main reasons claims cost so much is that clinical negligence defendants such as the NHSLA and the MDU are required by law to disregard the availability of NHS care when making compensation payments to patients who have sustained serious injury as a result of negligence. These patients need a high level of health and social care for the rest of their life, which is often 30 or 40 years or more.

Defendants are not allowed to fund NHS or local authority care but must compensate on the basis that the care will be sourced privately by the claimant, whether or not it actually is. Not surprisingly it is no longer unusual for the MDU to be notified of medical claims where, for just one claim, the damages sought may be well over £10 million.

Added to this, the Lord Chancellor announced a massive fall in the discount rate from 2.5% to minus 0.75% on 27 February 2017. The discount rate is the mechanism used by the courts to adjust large compensation payments to take account of future investment returns. Reducing the rate, as the Lord Chancellor has done, adds billions to the cost of claims, and not just in the future. It also has retrospective effect. This change increases the costs of compensation awards dramatically and immediately for known claims which have already been reported. It will also increase the costs of claims arising from incidents in the future.

Even worse, it applies retrospectively to claims for incidents that have already happened, where a claim has not yet been made but will be at some future date. This is a particular feature of medical negligence claims where there is often a long time lag, sometimes decades between the date of an incident happening and the date when the claim arising from that incident is actually made against the doctor.

Clinical negligence defendants such as the NHSLA and the MDU are required by law to disregard the availability of NHS care when making compensation payments...

None of this is fair. In fact it is calamitous. Although NHS hospital doctors are protected from the costs of litigation because claims are paid by the NHS, all taxpayers are responsible for a share of the NHSLA's £56.4 billion liabilities. And GPs and private consultants are named themselves in claims and have to pay for their own indemnity.

2016 saw GPs voicing understandable and justified concern at this unfair and intolerable burden and NHS England has committed to protect them from at least the inflationary element of their subscriptions for two years. Now, however, they face the additional threat inflicted on them by the 3.25% reduction in the discount rate. The impact of this is enormous and we are working with the Department of Health and NHS England to find a solution to protect our GP members from the otherwise catastrophic impact this will have on them, on the sustainability of general practice and on the public.

Whatever measures are put in place, the fundamental problem of spiralling claims costs remains with all the adverse effects this has on the delivery of healthcare. We need a long term solution to the inflation busting rises we are seeing in clinical negligence compensation payments. Personal injury law needs root and branch reform. Patient safety is vital and we have for many years done all we can to help members to make care for patients as safe as possible.

But improvements in patient safety have not and will not reduce litigation costs. The Lord Chancellor's decision to reduce the discount rate is a stark illustration of the fact that the drivers of claims and their costs are far removed from the clinical coalface. Claims costs will continue to spiral out of control and billions will be spent on litigation the NHS and society cannot afford. We must have law reform and I urge you to join the MDU in our campaign for fair compensation. Details are on our website here.

This page was correct at publication on 02/03/2017. Any guidance 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.