The National Health Service spends £327 million a year compensating
patients injured during medical treatment, according to research by Paul
Fenn, Alastair Gray and Neil Rickman, published in the June 2004
Economic Journal. Yet they also estimate that the total cost of a Swedishstyle
‘no-fault’ system would be £2.1 billion a year, over six times the
estimated current cost of fault-based compensation.
And the suggestion in the Chief Medical Officer’s (CMO) consultation
document (published in June 2003) for a scheme with a claim value ceiling of
£30,000, would cost £116 million. Claims valued above £30,000 would
continue to be dealt with under the current rules: the researchers estimate a
combined cost of £518 million a year.
In order to receive compensation under the current system, claimants must
demonstrate negligence on the part of their clinician when supplying their
treatment; this may include litigation. This ‘fault-based’ approach has
encountered mounting criticism from, among others, the Kennedy Inquiry, the
National Audit Office and the House of Commons Public Accounts
Committee.
Concerns relate to a perceived failure to provide fair compensation for
patients or to encourage doctors and hospital managers to take care. In
particular, the system is said to be costly and time-consuming because of the
need for patients to prove fault, with the consequence that too few of them
obtain compensation for their losses.
In spite of this barrier to claiming, it is nevertheless argued that clinicians
concerned about the threat of litigation engage in ‘defensive medicine’, and
fail to report mistakes. Consequently, the CMO’s proposed reforms that
diminish (without removing) fault as the basis for compensation, and allow
access to ‘fast-track’, low-cost determination of eligibility and benefits for
claims of relatively low value.
This paper presents new research (originally carried out for the Department of
Health’s review) that aims to assess the costs and benefits of the current
system and several possible alternatives. Taking the current system first,
widely publicised figures suggest that the cost to the NHS of our system of
clinical negligence is over £4 billion. This is an accruals-based calculation that
takes into account anticipated future liabilities that may arise from the current
stock of claims.
An alternative measure is the annual cash cost of operating the system, which
Fenn et al estimate to be £327 million using the latest data. Undoubtedly, both
figures have merit, depending on the questions they are used to address. To
the extent that NHS resource allocation is an annual process, the cash figure
gives an appropriate measure of the financial burden placed by patient
compensation on the health service. But the cash figure does reflect the
outcome of mistakes made in the past, whereas the accruals figure is an
attempt to measure the impact of current mistakes on future cash flows. It is
also important to appreciate that these cost calculations do not take account
of the benefits that the system may generate in terms of improvements in
patient safety.
The study next considers alternative patient compensation systems
resembling those in the current UK debate: a full no-fault system along the
lines of that used in Sweden, and a small claims system like that discussed in
the CMO’s report. The costings use original data from a population survey
conducted by MORI for this purpose.
The total cost of a Swedish-style system is estimated to be approximately
£2.1 billion a year. This estimated total cost is sensitive to assumptions made
in relation to the generosity of awards, the propensity of patients to make
claims, and the mean cost of administering each claim.
The estimated costs of a small claims scheme would vary between £48 million
and £158 million a year, depending on the eligibility threshold chosen for the
scheme. The current suggestion in the CMO’s consultation document is for a
scheme with a claim value ceiling of £30,000, which would cost in the region
of £116 million. Claims with a value above £30,000 would continue to be dealt
with under the current rules, and the combined cost would be £518 million a
year.
In general, the researchers argue, the link between those responsible for an
injury, and the amount of compensation paid, serves to place incentives
appropriately, whether liability is based on fault or causation only. A key
feature encouraging health care providers to take care is the direct financial
cost faced by the clinician or hospital from each mistake made.
This link should be a part of any well-designed compensation system but
there is a danger that it is being diluted by recent reductions in cost-sharing
measures in the NHS and that reforms emphasising ‘no fault’ schemes could
exacerbate this position.
The value of these proposed reforms will of course depend on how they are
implemented; increasing numbers of valid claims arising from clinical errors
are potentially valuable signals, and providing they are used effectively as
such, there could be benefits to patient safety alongside wider access to
compensation.
ENDS
Note for Editors: ‘The Economics of Clinical Negligence Reform in England’
by Paul Fenn, Alastair Gray and Neil Rickman is published in the June 2004
issue of the Economic Journal.
Fenn is at the University of Nottingham Business School; Gray is at the Health
Economics Research Centre, University of Oxford; Rickman is at the
Department of Economics, University of Surrey and CEPR.
For Further Information: contact Neil Rickman on 01483-686960 or 01483-
689171 (sec) (email: N.Rickman@surrey.ac.uk); or RES Media Consultant
Romesh Vaitilingam on 0117-983-9770 or 07768-661095 (email:
romesh@compuserve.com).