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Bid to rein in indemnity costs as government plans discount rate U-turn

A controversial cut in the discount rate applied to clinical negligence compensation will be partially reversed by the government after warnings that the move could fuel further rises in GP indemnity costs.

In a move announced earlier this year, the government slashed the discount rate from 2.5% to -0.75 from April. Medico-legal organisations (MDOs) warned that the decision would more than double the cost of some multi million-pound payouts, potentially adding huge sums to the annual cost of clinical negligence claims and further driving up indemnity fees for doctors.

But draft legislation published by Lord Chancellor and Justice Secretary David Lidington proposes to change the discount rate for the second time this year. It will be recalculated to reflect the fact that recipients of compensation payouts generally make 'low risk' investments with the money they receive - not 'very low risk' as the current figure assumes.

Mr Lidington said it was ‘difficult to provide an estimate’ of how exactly this would affect the discount rate, but suggested it would rise to 'in the region of 0% to 1%’.

MDOs have cautiously welcomed the U-turn , which will considerably reduce the amount medical defence organisations (MDOs) have to pay out in clinical negligence claims - potentially translating into reduced fees for GP indemnity.

Discount rate

However, the rethink will not bring the discount rate back in line with the level it was at earlier this year. The reduction in April from 2.5% to -0.75% by then-Lord Chancellor Liz Truss was heavily criticised by MDOs, who said it undid efforts made by them, the DH and NHS England to restrain cost pressures driven by a higher number of claims and higher costs associated with them.

Mr Lidington's proposals will also put in place measures to investigate fairer ways of setting the discount rate in the future, including establishing an expert panel to better advise the Lord Chancellor and to review the rate at least every three years.

Mr Lidington said: ‘We want to introduce a new framework based on how claimants actually invest, as well as making sure the rate is reviewed fairly and regularly.’

Simon Kayll, CEO of the Medical Protection Society (MPS), said: ‘The government’s decision to change the personal injury discount rate significantly increased the cost of settling future loss claims against GPs, at a time when the cost of clinical negligence is already worryingly high.

‘The framework which determines the rate itself also failed to consider the impact on the NHS, the public purse and the affordability of professional protection for healthcare professionals.

Clinical negligence

‘It is vital that government gets this right if we are to avoid further sudden shocks to the cost of compensation, and the proposed new framework is welcome step which could result in a more common sense approach with the reality of how claimants invest compensation payments at its core.’

Dr Matthew Lee, Medical Defence Union (MDU) professional services director, warned that a rate between 0% and 1% ‘would still be too low’ in terms of affordability.

He said: ‘Even before the discount rate change in March, many GPs found they couldn’t afford to pay for indemnity and it was turning them away from practice.

‘The MDU has held off passing on the cost of the previous discount rate change to GPs – which would be simply unaffordable for many – to give the government time to develop a promised solution to protect GPs.

‘The proposed change in the discount rate, even if enacted, will take time to implement and it won’t address the fundamental problem that compensation costs are out of control.

‘We urgently need far more radical tort reform. Today’s discount proposals are a small step but the clinical negligence procedure needs root and branch reform.’

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