19 July 2018

The NHS must reform its wasteful, outdated compensation system


Case 1. Baby James was born severely disabled and was diagnosed with cerebral palsy. His distraught parents were reassured that there was a very low risk of recurrence in future pregnancies and James’ deficit was pure bad luck and not their fault. He entered the local care pathway with complex and intensive multi-disciplinary team support.

Case 2. Baby Patience suffered catastrophic brain damage and was left with no bowel or body control after her parents deliberately banged her head against a hard surface. Gregory and Kirsty Griffin were jailed for inflicting brain damage on their baby and then lying to doctors.

Case 3. Baby John also has severe brain damage, but this time as a result of being starved of oxygen. There was a 51% chance of this being avoided if there had been more timely transfer from a Midwife-led Unit at a District General Hospital to a Specialist Unit with 24-hour Consultant cover.

What do these three cases have in common? And how do they differ? They all involved tragic levels of disability. Cases which arose from devastating bad luck – be that some genetic anomaly, inborn error of metabolism or freak in utero brain haemorrhage – received NHS care.

Baby Patience suffered as a result of Non-Accidental Injury and receives all future care through the NHS. Additionally, she received an award through the Criminal Injuries Compensation Scheme. The tariff for this scheme sets a maximum level of financial compensation, with the maximum overall payout capped at £500,000. Therefore, through no fault of her own, Baby Patience will receive a maximum of £500,000.

In contrast, the case of the midwife obstetric incident is dealt with under civil rather than criminal law and the situation is very different. With no upper limit set for compensation, typical awards for birth injuries are now in the region of £10-20 million, reflecting the need for life long care.

The vast majority of personal injury cases are for adults and for much smaller amounts of money. The Ministry of Justice operates a parallel system for all injuries. For example, in a civil claim the recommended award for facial scarring is £11,800-19,750 (if graded significant) to £20,000-£64,000 (severe) for general damages (often referred to as “pain, suffering and loss of amenity”).

In addition, the claimant will be awarded special damages, which reflect individual circumstances including loss of earnings. Therefore, if the claimant argued they could no longer earn a £100,000 salary for their public-facing role, the special damages would reflect this. Hence awards may run into the millions of pounds.

On the other hand, the Criminal Injury Compensation Scheme gives much lower general damages payouts for facial scarring – £2,400 for “significant” scarring and £11,000 for serious scarring, with loss of earnings set at statutory sick pay and an overall payout cap – unlike NHS Resolution, the Criminal Injuries Compensation Authority publish every award.

There is a clear unfairness at work here – in the criminal situation, where there is malice, harmful intent or severe recklessness, the victim gets far less than in the civil situation. Why?

It stems from legislation dating all the way back to 1948, which states that all future care needs must be funded on the assumption that everything will be provided through the private sector. Care costs assessors work privately and have a tendency to price at very generous levels. Care provided by one’s own relatives is also costed. The law forbids any calculation or assumption that any care might be provided by the NHS.

There was a logic when the Act was passed in 1948. The NHS had only just been established, care was much more basic, it was uncertain whether the NHS would succeed and disciplines such as rehabilitation were yet to be invented. The situation in 2018 is unrecognisable from 1948. All agree that the system is now under enormous funding pressure and that more resources are required if future Baby Johns and Baby Patiences are to receive outstanding care.

How much does this anomaly between civil and criminal payouts cost? The NHS has liabilities of £65 billion for litigation cases. The largest single award in 2016/17 was £25.3m. The recent NHS Resolution annual report saw clinical negligence damages soar 50% in 2017/18 to £1.63bn. And this does not include cases arising from GP negligence as GPs currently have to indemnify themselves, something government has been forced to look at now because of the GP crisis.

Until the change in the personal injury discount rate (the “Ogden rate”) a year ago a full-time GP would typically be paying £10,000 annually in indemnity. The Ogden change essentially doubled all costs. There have also been increases in car insurance and other personal liability insurances which feeds through to the consumer in higher prices. Perhaps this is now why in broad areas of life the UK seems to be such a Nanny State, not because of excessive Health and Safety regulations, but because of the highly protective approach taken by local authorities and other organisations fearful of litigation costs.

The largest award paid out in 2016/17 by NHS Resolution was £25.3m. How does the civil litigation award get utilised? A £10m award is costed based on future care needs with the expectation this is all the money is used for future care. However nobody knows or monitors how the money awarded in a lump sum once received is spent. Remarkably NHS Resolution, the body now paying out almost £2bn a year on civil claims, is not allowed to know if the money is being used for care.

A logical thing to do would be to use NHS and other state services wherever possible. Bizarrely, even if a claimant were to die the day after receiving an award, their estate would inherit the
payment, even though it is meant to cover the cost of care.

There are quality problems in the NHS. It does very well in some areas and less well in others, although overall in independent benchmarks, comes out at or close to the top compared to peers. Yet there are still many problems and much opportunity to improve the standards and outcomes for all.

Much of this relates to better processes, structures and systems rather than new technologies and inventions. Initiatives such as the Healthcare Safety Investigation Branch, modelled on air accident investigations are welcome, but need to be massively scaled up. Instead, the NHS is being hobbled by a compensation system which is outdated and unfit for purpose. Baby James, Baby Patience and Baby John all deserve equality of care, no matter how their injuries occurred.

The key measure to be taken in this anniversary year of the NHS is repeal of the Section 2(4) of the 1948 Act and associated measures outlined by the author in a Centre for Policy Studies position paper last year. We can then enact a system which is equitable for all, no matter how their injuries befell them.

Dr Paul Goldsmith is a consultant neurologist, a non-executive director of the Medical Defence Union and a research fellow at the Centre for Policy Studies.