NHS under pressure from rising compensation claims

Source: NHE Sep/Oct 17

A flawed civil litigation system threatens to undermine the ability of the NHS to fund patient care. The Medical Defence Union’s (MDU’s) professional services director, Dr Matthew Lee, assesses the situation and prescribes urgent reform.

When a patient receives a multimillion-pound compensation payment in a negligence claim against the NHS, it often makes headlines. But how many of us stop to think about the impact of these ever-increasing costs on the money available for patient care? 

In July 2017, NHS Resolution (formerly the NHS Litigation Authority) published its annual report revealing that £1.7bn was paid out to settle clinical negligence claims in 2016-17, up 15% on the previous year. On top of this, future clinical negligence claims are estimated to cost £65bn (compared to £26bn in 2014). 

These are staggering amounts, and the cost of civil litigation matters because the money comes from NHS funds – while the health service is struggling to meet the increasingly complex needs of an ageing population. A recent report from the National Audit Office stated that the government needs to take a stronger approach in order to curb clinical negligence costs. 

There are serious implications for primary care too. Unlike hospital doctors, GPs must pay for their own indemnity and with medical claims inflation rising at 10% a year, this is getting prohibitively expensive and becoming a workforce problem. There is already a shortfall in the number of GPs and it appears to be worsening. The full-time equivalent GP workforce fell by 445 in the three months to December 2016. And the MDU’s own research shows that the spiralling cost of indemnity could be the final straw for many GPs. A third (32%) of nearly 900 GPs who responded to a recent MDU survey said they were considering leaving the profession or retiring because indemnity is becoming unaffordable. 

The blame game 

It has been suggested that the solution to the rising cost of negligence claims lies with the NHS and the medical profession. If the health service stopped hurting patients, the argument runs, then the number of claims would decrease. 

This argument is fundamentally flawed. There is scant evidence linking the number of medical errors to the number of claims. The facts show that claim numbers are primarily driven by changes in the law, societal attitudes and the economy. Clinical standards remain demonstrably high and money is at the heart of claims increases. 

Of course the health service must do all it can to prevent errors, but professional standards remain high and those who argue that the NHS is to blame are ignoring the facts. 

301 2500x1800 - Playing the blame game - chess pieces

Payments doubling 

The principal reason for the rise in claims costs is the ever-increasing size of awards in high-value cases. The causes of this are outside NHS control. An obvious example is the Lord Chancellor’s decision to cut the discount rate (the interest rate used by courts to calculate the size of lump sum compensation payments) to a historic low of minus 0.75% from 20 March 2017. This dramatically increased the size of all compensation awards for claims in the pipeline and future claims, including those arising from incidents that have already happened but where a claim has not been made. Many higher-value cases more than doubled in size overnight, with some individual cases now valued at close to £20m. Although further proposals have been announced which would see this change reviewed and the discount rate adjusted, this is unlikely to make enough of an impact on overall claims costs.

Legal reform 

Such a serious problem can only be resolved through root and branch reform of the legal system. The MDU is advocating the following measures to restore fairness and tackle the issue of unaffordable indemnity: 

  • Repeal outdated clinical negligence law: A law that pre-dates the NHS (Section 2(4) of the Law Reform (Personal Injuries) Act 1948) requires all personal injury defendants to disregard the availability of NHS care when paying compensation. Patients who have been injured while receiving NHS treatment must be compensated on the basis that they will receive private treatment for life. This outdated legislation costs the NHS (which is often best placed to provide care to these patients) billions of pounds. The law should be changed so that defendants could compensate patients by paying the NHS and local authorities to provide damaged patients with specially designed public health and care packages. This would boost NHS funds for the benefit of all patients, including the majority needing long-term care and treatment for severe injury which has not resulted from negligence
  • Introduce fixed legal costs: In lower-value claims, many lawyers receive more in costs than their negligently damaged clients receive in compensation. Recommendations by Lord Justice Jackson to establish a working party to examine fixing costs for clinical negligence claims valued at up to £25,000 do not go far enough. There should be mandatory fixed limits on legal fees in medical negligence claims valued at up to £250,000
  • Greater controls on government decisions: Setting the discount rate is a major financial decision with wide-ranging implications for public services, and yet the former Lord Chancellor introduced a drastic drop in the rate with just a few weeks’ notice. In future, the government is proposing that the Lord Chancellor has access to expert advice to assist in making this important decision
  • 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, because one was a high earner. A cap on future earnings compensation would ensure compensation is awarded on a more equitable basis. High earners can buy income protection insurance if they are concerned about illness affecting their ability to work 

Reform the system 

Effective reform of the clinical negligence system would prevent billions haemorrhaging from the NHS, bring in much-needed additional money to fund public services and halt the unaffordable rise in GP indemnity costs which is threatening their ability to practise. It would also go a long way to securing the future of the NHS.


To find out how to get involved in the MDU’s fair compensation and SaveGP campaigns, visit:



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