Lower discount rate will have 'massive and immediate adverse impact on the NHS' – MDU warns MoJ
The Medical Defence Union responds to the Lord Chancellor’s review of the discount rate for personal injury damages awards, warning a discount rate drop could increase indemnity costs, pushing some GPs out of practice.
The MDU shares the widespread concern among personal injury defendants at the statement released by the Ministry of Justice (MoJ) on 7 December. The MoJ said the Lord Chancellor will announce the results of the ongoing review of the discount rate (the figure used to calculate a reduction in lump sum compensation payments to account for expected investment returns over time) for personal injury damages awards by the end of January 2017. If the current discount rate of 2.5% was lowered, it would immediately add significantly to the cost of personal injury damages, including clinical negligence claims.
MDU Chief Executive Dr Christine Tomkins said: “A lower discount rate would have a massive and immediate adverse impact on the NHS and that must not be ignored. It would add substantially to the pressures already on primary care and divert greater sums of NHS money to fund compensation awards while drastically reducing funds available to provide services to all patients.
“We have calculated that a drop of just 1% ‒ to give a discount rate of 1.5% ‒ would add a sum equal to about half a year’s subscription income to MDU provisions for claims against GP members. Inevitably the cost of indemnity for NHS GPs would increase. Such a step change would affect the cost of known and of future claims which will be brought many years ahead for incidents that have already happened but where no claim has yet been made.
“For clinical negligence claims the time lag between the incident and the date a claim is made can be many years, sometimes decades. Lowering the discount rate would move the goal posts retrospectively and unfairly since the planned funding for these claims was based on the 2.5% discount rate and not some unknown changed rate.
“GPs already have to bear the burden of a harsh medico-legal climate for which they are not responsible and over which they have no control. Claims inflation rises steadily at 10% per year, far higher than any other type of inflation. A further rise in indemnity costs caused by a discount rate change could create an intolerable burden for many GPs, especially those who work part-time. This could be disastrous for primary care which the public relies on and which is already seriously under-staffed and needs to attract thousands of new GPs.
“Lowering the discount rate would affect all clinical negligence claims, including those paid on behalf of NHS trusts by the NHS Litigation Authority. NHSLA total estimated liabilities were £56.4bn in 2016 and a lower discount rate would divert billions of pounds away from frontline NHS services immediately and in the future.
“The MoJ statement had an almost immediate effect on claimants’ lawyers. Many have already referred to it in discussions and negotiations with the MDU’s claims team. A discount rate drop will increase the damages they seek for their clients. Some are refusing to negotiate on ‘quantum’ (ie the amount of damages their client seeks) until the Lord Chancellor announces the decision. Others are reserving the right to reconsider the size of damages in the light of a rate change.
“The way clinical negligence compensation is awarded needs root and branch reform.
“We are asking the MoJ to ensure that the decision announced in January takes into account all relevant factors. The impact on the NHS and the public interest cannot be ignored.”
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