Justice secretary and Lord Chancellor Liz Truss announced on Monday that the discount rate applied to personal injury claims will be lowered from 2.5% to minus 0.75%.
The MDDUS warned that the change will lead to ‘significant new costs’ to the NHS and medical defence organisations on behalf of GPs when paying out for personal injury claims – meaning GP indemnity costs are likely to rise.
Indemnity fees for GPs are already soaring - a GPonline poll in July 2016 found that 90% of GPs had seen their costs increase over the previous year. The contract deal for 2017/18 acknowledged the pressure indemnity costs were placing on GPs with a £30m fund to help cover rising fees.
GP indemnity costs
But the MDDUS warned that the discount rate change ‘lessens the impact of the efforts’ made by defence organisations, the DH and NHS England to restrain cost pressures driven by a higher number of claims and the higher costs already associated with them.
The change affects large lump sum payments made to patients who experience life-changing injuries. When these patients accept compensation payments, the actual money they receive is adjusted according to the interest they can expect to earn by investing it over their lifetime.
To calculate the finalised compensation amount, courts deduct a ‘discount rate’ from pay-outs to offset any future earnings they are expected to make on the sum.
The adjustment means compensation pay-outs made to patients will increase from when the new rate comes into effect on 20 March. The previous 2.5% rate was set in 2001.
The DH pledged to work with GPs and medical defence organisations to ensure that funding is available to meet additional costs to GPs, ‘recognising the crucial role they play in the delivery of the NHS’.
Ms Truss said: ‘The law is absolutely clear – as Lord Chancellor, I must make sure the right rate is set to compensate claimants. I am clear that this is the only legally acceptable rate I can set.’
The law dictates that claimants must be treated as risk-averse investors, with the deduction linked to the potential returns they would have received through the lowest-risk investments.
The DH said this was because they are financially dependent on the lump sum, often for extended periods. The compensation awards are intended to put the claimant in the same financial position had they not been injured, including loss of future earnings and care costs.
But MDDUS chief executive Chris Kenny said the change was not merited given the current and future state of the economy.
He said: ‘Everybody agrees that those who suffer medical accidents should be properly and promptly compensated. The increase in claims awarded show that this is already happening.
‘Today’s decision, based on a consultation undertaken in 2013, does not reflect that fact nor anything which has happened in the economy and healthcare in the intervening period – nor what is likely to occur in the coming years as a result of Brexit and other pressures.
‘It takes no account of the interests of the NHS, facing acute financial challenges. It ignores the impact of unavoidably high indemnity fees on morale and recruitment in primary care. Future decisions simply must be more joined up.’
Simon Kayll, CEO at the Medical Protection Society, said: ‘We are extremely disappointed and concerned by the decision to reduce the court discount rate so significantly, and the impact that this could have on GPs.
‘Without sufficient support from government this increase in costs will need to be reflected in GP membership subscription rates, and we know this will be very troubling news for our members.
‘The Lord Chancellor’s decision has tipped the balance too far, and the cost to the NHS and society risks becoming unsustainable. The need for a package of legal reforms to tackle the spiralling cost of clinical negligence is becoming ever more pressing.’
Dr Christine Tomkins, MDU chief executive said: ‘We are considering the impact of this decision on our subscriptions and working with the DH and NHS England to find a solution to protect our GP members from the otherwise catastrophic impact this will have on them, the sustainability of general practice and on the public.’