Published: 07/11/2002, Volume II2, No. 5830 Page 31 33

Though the number of claims against the NHS is falling, their value is still rising. Lyn Whitfield reports on new pressure to stop the bill rocketing higher

One of the many subjects on which Prince Charles feels strongly enough to write to ministers is the rise of 'compensation culture' in the UK.

There is a well-worn NHS version of this; it says that patients are ever more willing to sue and lawyers are happy to help them. Fortunately, the evidence is against it.

A National Audit Office report, Handling Clinical Negligence Claims in England, found the number of claims per 1,000 finished consultant episodes increased by 72 per cent between 1990 and 1998.

However, the number of claims is now stable and may be falling because of reforms to the civil justice system and the introduction of a new NHS complaints system.

The value of claims is still rising. At the end of March 2000, there were 23,000 claims outstanding against the NHS, with a net present value of£2.6bn - double that of March 1997.

The NAO additionally estimated a£1.3bn liability for 'negligent incidents' that had occurred but not yet generated a claim.

Added together, the two figures suggest the NHS is facing a total compensation bill of£3.9bn (it actually pays out about£400,000 per year).

The value of claims is rising primarily because of technical changes to the way in which awards are calculated for people who suffer catastrophic damage, in particular babies asphyxiated at birth.

The key components of such awards are the way in which the cost of care is calculated - according to its cost in the private sector - and the assumptions made about how a lump sum will be invested so it lasts a lifetime.

In 1999, the House of Lords ruled, in a set of test cases, that accident victims should not be expected to put their money into equities and should be able to invest in less risky, but lower yielding, government stock instead.

The result was to lower the discount rate (the figure by which lump sums are reduced to allow for investment income) from 4.5 per cent to 3 per cent. This has since fallen further because of the low returns on gilts.

The falling discount rate has meant rising awards because, as Richard Foster, a senior partner at law firm Weightman Vizards, puts it: 'The lower the yield on your investment, the more you have to get to start with.'

Such technicalities have not stifled demands for action to tackle the 'rocketing' NHS compensation bill.

Last July, following the NAO report, health secretary Alan Milburn asked chief medical officer Professor Sir Liam Donaldson to chair a committee looking at options.

A paper, A Call for Ideas, suggests the committee is particularly interested in no-fault compensation, a fixed tariff, structured settlements and mediation (see box).

The introduction of no-fault compensation has been floated many times and has the support of some patient and medical groups and a number of MPs.

However, it is unlikely that the government could stop people suing the NHS. The Human Rights Act enshrines a right of access to the courts.

And even if it didn't, Christian Dingwall, head of Bevan Ashford's NHS claims department, points out that the government would be trying to create 'one law for one section of the population - NHS patients - and another for the rest - private ones'.

The idea of a tariff is also fraught with difficulties. The last Conservative government introduced a tariff-based system for compensating the victims of crime. The£10,000 it automatically offered to the parents of murdered schoolboy Damilola Taylor was criticised in the press, as similar payments have been.

In response, Home Office minister Charles Taylor told the Commons such awards were not meant to put a value on a life, but as 'a gesture of condolence on behalf of society'.

It is hard to imagine the government getting away with 'a gesture of condolence' in NHS medical negligence cases.

Yet a tariff that puts proper value on life and health would be incredibly expensive - almost certainly too expensive to get past the Treasury.

The government could still decide to introduce a more limited fault scheme, leaving patients with the option of suing, geared towards smaller claims and possibly linked to the NHS complaints system.

Advocates of a no-fault scheme claim this would make it easier for the NHS to admit fault and speed up compensation payments.

However, Mr Dingwall questions this, since patients would still have to prove their NHS treatment caused their problems, which would generally require expert investigation. It could also push up costs, by encouraging more people to claim.

A no-fault scheme for claims up to, say,£20,000 would leave the system for dealing with catastrophic harm untouched. Yet it is this area that most lawyers would like to see reformed.

Indeed, Mr Foster says that if the government really wanted to be radical, it could address some big issues of civil justice.

'If you have two babies born in a maternity unit, both of whom are disabled, and [the parents] of one can prove negligence and the other can't, then one will get a large compensation claim and the other will have to rely on benefits, ' he says.

'Is that fair? Arguably, It is not.

You could say that society would be right to look after [both] children according to their needs.

'We cannot get anything that radical, because society would not accept it - and might not be able to afford it. But if you wanted to look fundamentally at the system, that is the sort of question you would pose.'

Less radically, the government could look at the assumption that the cost of care must be based on the cost of care in the private sector.

A suggestion that the NHS might provide 'non-financial compensation', such as daily nursing visits, was floated in the press earlier this year, and roundly condemned as 'penny pinching' by the Bar Council.

However, many lawyers would like to see a proper rehabilitation service set up for claimants that would also benefit other braindamaged patients.

This idea is supported by doctors' insurer the Medical Defence Union. It claims that 'at least£1bn of the NHS total liabilities of£3.9bn could be cut from the negligence bill and redirected into NHS care, if patients who needed long-term care were guaranteed it [through such a service]'.

Nigel Montgomery, a partner at Beechcroft Wansbroughs, says the widespread support for such an idea might surprise the public and politicians.

'Lawyers working in this field get a very bad press, but most are believers in the NHS and the idea that all patients should have the best treatment possible, ' he says.

But there are problems. It is not clear that funds could be earmarked for a rehabilitation service in this way, for example.

It would also reduce the choice open to victims of medical accidents at a time when healthcare policy generally is moving in the opposite direction.

An idea that is likely to emerge in a white paper, however, is a move away from lump-sum awards to 'structured settlements' in which people get a smaller lump sum and annual (or regular) payments.

These could be generated in a number of ways, but the version favoured by the NHS Litigation Authority and many lawyers is the so-called bottom-up settlement, in which needs are assessed and payments made to meet them.

Janet Sayers, partner and head of healthcare at Kennedys, says this would have distinct benefits for claimants. Research has shown that some currently run out of money, while others are afraid to spend what they need for fear of running out.

It would also guarantee that money was spent on the purpose for which it was awarded and stop if the claimant died earlier than expected, instead of leaving families with a windfall.

The big question is whether claimants should be able to reopen their claims if their needs changed. This could cause 'chaos' - claims would never close - and add to legal costs. However, Ms Sayers says there is no reason why awards could not be structured according to the likely needs of claimants at different ages.

Mr Dingwall also argues that rights to revisit claims could be severely limited, for example to cases in which any deterioration could not have been anticipated.

Calls for radical reforms of the NHS compensation system seem to be based on a distrust of lawyers and misunderstanding about why the value of claims is rising.

There are no simple solutions, which Sir Liam may have discovered. His paper, which was intended to appear in time for a white paper this spring, is now slated for 'this autumn'.

Mediation: It is good to talk

Mediation is a system in which the two sides to a dispute meet and, with the help of a trained mediator, talk through issues instead of going to court.

Janet Sayers of Kennedys says it is one of a number of 'alternative dispute resolution' methods being actively promoted by the courts. And she is a fan.

'It is an opportunity for both parties to see each other face to face, often for the first time, for the claimant to say what it is they actually want and for the respondent to deliver an apology, [offer compensation etc], ' she says.

Mediation is better able to bring about practical changes - new and better leaflets, for example. But Ms Sayers says it also works for big claims.

Indeed, Christian Dingwall of Bevan Ashford argues that the cost of mediation - 'it is not a cheap option' - means that it should be reserved for them.

He also says mediation is 'brilliant' - giving people a chance to have their say, rebuild trust, avoid the stress of court proceedings and avoid publicity.