If we are heading for another general election soon, it will be a good opportunity to examine the government's record on sticking to its commitments in office.
There is one disappointing broken promise that I want to highlight here. It is the government's repeated pledge to protect GPs from the impact of a dramatic cut in the personal injury discount rate (PIDR) - the formula for calculating lump sum personal injury compensation payments.
When the former Lord Chancellor, Liz Truss, reduced the PIDR to an historic low of -0.75% in 2017, she was made aware that the inflationary effect on medical negligence compensation would have a serious impact on the NHS and on GPs who funded their own indemnity. At the time, and on behalf of the government, she said, 'The Department of Health will also work closely with general practitioners (GPs) and medical defence organisations to ensure that appropriate funding is available to meet additional costs to GPs, recognising the crucial role they play in the delivery of NHS care.'
This has not happened. Despite the introduction of GP state indemnity for future liabilities, the MDU has seen no evidence that the government plans to address appropriate funding for historic liabilities for English GPs who are MDU members. The discount rate cut was applied retrospectively, which means the compensation bill for these historic liabilities has soared in the last two years, doubling and sometimes even trebling the cost of high value claims.
Inevitably, this created a strong inflationary pressure on indemnity costs, though the MDU has done its utmost to protect members from the impact - particularly through our transitional benefits scheme, which ran between November 2017 and the introduction of state indemnity in March 2019.
NHS resources have been severely hit by the discount rate cut too. According to NHS Resolution's annual report for 2018/19, its balance sheet provisions have reached a record high of £83.4 billion, an increase of £6.4 billion on the previous year. And while claims numbers have stabilised, compensation levels have risen by over 13% with high value claims settlements frequently in excess of £20 million.
These are not inconsequential numbers. The £2.36 billion paid by the NHS in compensation in 2018/19 could have funded over fifteen million MRI scans or 112,000 liver transplants.
Meanwhile, the government brought in the Civil Liability Act 2018 in an effort to set a discount rate that is fairer for claimants, defendants and taxpayers alike. This was an opportunity to restore the rate to pre-2017. Disappointingly, in one of his last acts as Lord Chancellor, David Gauke announced that he was raising the PIDR to -0.25%. This was despite advice from the Government Actuary’s Department (GAD) that, 'for a representative claimant the combined expected net return could be reasonably be expected to be plus 0.25%'.
In setting a rate lower than advised by the GAD, the Lord Chancellor built in greater 'prudence' on the part of claimants than the Act had envisaged which will result in a large number of claimants being over-compensated at the expense of the health service. And it's telling that there has been little serious effort to investigate how claimants invest their compensation, apart from a limited research project back in 2013. But most significantly, the calculation fails to take into account the wider implications of adjusting the PIDR.
At a time of growing pressure on the NHS, it is effectively a budget cut that the service can ill afford and which can only have a negative impact.
Setting a negative discount rate, the lowest in the western world according to the Association of British Insurers, prolongs the agony for the NHS, taxpayers and doctors. Although the impact assessment estimates that the new PIDR will result in savings of £80 million a year to the NHS, this is of course in comparison with the historically low rate of -0.75% and not the previous rate of 2.5%.
The MDU's analysis shows that the new PIDR will continue to have a severe impact on lump sum compensation awards.
A prime example of the retrospective effect seen by our claims team involves a patient in their 20s, who sustained an injury at birth attributed to negligence. It is alleged that the patient is not capable of independent living, and with a PIDR set at 2.5% (the rate before the 2017 reduction) the compensation award in this case could have been around £4m.
In March 2017, following the adjustment to the PIDR to -0.75%, that figure more than doubled to £10m, and at the recently set rate of -0.25%, the compensation award could be expected to reach around £8m, still more than double the estimate before March 2017. However, when the incident occurred, the PIDR was 4.5% and the current value at that rate would be just £3m.
We have real concerns that the effect of the new PIDR will be to continue to divert funds from frontline healthcare, especially when combined with our anachronistic civil negligence system which ignores the existence of the NHS when awarding compensation. At a time of growing pressure on the NHS, it is effectively a budget cut that the service can ill afford and which can only have a negative impact.
I fear this will lead to a growing disparity between the experience of the few catastrophically injured claimants who can prove negligence and are entitled to receive round-the-clock private care for life, and the vast majority of catastrophically injured patients, those who are equally deserving and whose needs are just as pressing but who have not been negligently harmed.
Such a two-tier system is not only unjust, it is a considerable incentive for more people to bring claims. It also risks creating a vicious circle where the small minority of successful claims deplete NHS resources further, to the detriment of patient care.
To use an analogy with which we are all now familiar, the iniquities of the civil negligence system have driven the health service towards a cliff edge. Only root and branch legal reform will truly address this crisis. Tinkering with PIDR rate has simply made matters worse.
As a doctor, it saddens me to watch the NHS damaged in this way. It is time for the government to take this issue seriously and stick to its promises.