Dr Matthew Lee tells how to tackle the issue of unaffordable indemnity and restore fairness to the civil negligence system

Woman doctor with stethoscope

The new government takes office at a time when the NHS is under great strain. Primary care services in particular are struggling to cope with an overwhelming workload, a shortage of GPs and limited funding. 

Clinical negligence inflation has been running at 10 per cent for several years, well above the current rate of retail price inflation. But a decision by the previous Lord chancellor has made matters worse by adding millions of pounds to the cost of clinical negligence claims.

The interest rate used by courts to calculate lump sum payments to personal injury claimants has been cut to a historic low of – 0.75 per cent. The decision to drop the discount rate, as it is known, will divert even more money from NHS services.

The discount rate drop illustrates how personal injury law changes usually have far reaching and detrimental consequences. 

In the budget, the chancellor of the exchequer had to set aside an additional unplanned £5.9bn to cover increased NHS liabilities for the next three years because of this. The decision will also drive up costs for GPs who, unlike hospital doctors, must fund their own indemnity. 

To take just one example: a 14 year old patient with a 50 year life expectancy who was awarded £8.4m under the previous rate of 2.5 per cent is likely now to receive a lump sum of £17.5m, an increase of 108 per cent. 

The discount rate drop illustrates how personal injury law changes usually have far reaching and detrimental consequences. 

For GP practices in particular, a sharp rise in indemnity costs in the current climate could push many more to the brink. An Medical Defence Union survey of over 800 GPs found that a third are thinking of leaving the profession early or retiring because of the unaffordable cost of indemnity. It may also deter potential new GPs from entering this essential area of practice. If this happens it will be bad for the NHS and for patients.

Way forward

The MDU is advocating the following five steps to tackle the issue of unaffordable indemnity and restore fairness to the civil negligence system:

  • Additional financial support to help GPs meet increased indemnity costs

In an effort to mitigate the impact of the discount rate change, the previous government pledged that: “The Department of Health will work closely with GPs and Medical Defence Organisations to ensure that appropriate funding is available to meet the additional costs to GPs, recognising the crucial role they play in the delivery of NHS care.” 

The new government must honour this pledge and the MDU has been working with departments to help them find a solution since December 2016. The election has delayed this process but with the new government in place, we hope a solution will be found. 

The clock is ticking and the situation cannot be allowed to drift. The impact of the discount rate change is immediate and inflates the costs of claims being settled now.  

Setting the discount rate is not just a legal matter, it’s a major financial decision

If the promises of financial assistance are not honoured, it will be up to general practices to pay the cost, regardless of how unaffordable this is. 

  • Reform the way the discount rate is calculated

Setting the discount rate is not just a legal matter, it’s a major financial decision with profound financial and economic repercussions that need to be fully understood. There should be an independent panel of experts to advise the decision maker, who must consult all parties affected by the change and take their views into account. 

The decision maker must be mandated to weigh the benefit to the very small number of individuals who will now receive substantially larger compensation awards, against the wider public interest, such as the detrimental impact on the NHS and other vital public services. 

  • Repeal outdated clinical negligence law

The main reason that compensation awards have been doubling in size every seven years is that they must pay for private sector care. A law that predates the NHS (S2(4)of the Law Reform (Personal Injuries) Act 1948) requires all personal injury defendants such as the MDU to disregard the availability of NHS care when paying compensation.

It cannot be right that lawyers get more in costs than their negligently damaged clients receive in compensation.

This outdated legislation should be repealed so all personal injury defendants can buy from NHS packages of care that meet the patient’s health and social care needs. This will boost NHS funds for the benefit of all patients, including the great majority whose severe injury is not a result of negligence.

  • Introduce fixed legal costs

It cannot be right that lawyers get more in costs than their negligently damaged clients receive in compensation. But this happens, especially in lower value claims. For example, in one GP claim involving failure to diagnose pancreatic cancer settled by the MDU in 2016, the claimant was awarded £7,500 but their lawyer got £85,000 in costs. 

The MDU believes there should be mandatory fixed limits on legal fees in medical negligence claims worth up to £250,000. In a recent consultation, the DH proposed fixing costs for claims up to £25,000 but this would have little effect. 

  • Cap compensation for loss of future earnings

Two patients with similar injuries and care needs can currently receive vastly different levels of clinical negligence damages, simply because one is a high earner and will receive compensation for loss of future earnings. 

Financial compensation should be awarded on a more equitable basis. For example, a cap of three times the national average salary per year.  

It is in the interests of everyone in society to help safeguard the future of general practice from the impact of the spiralling cost of claims. 

You can show your support in the following ways:

  • Visit and share our web page with your colleagues 
  • Follow us on twitter @the_mdu (#savegp)
  • Raise this issue with your MP and ask them to take action.