Feature / Damage limitation?

Phil Taylor believes the NHS could learn from New Zealand’s ‘no fault’ approach to medical negligence

The HFMA’s study tour to New Zealand at the end of last year examined the country’s approach to covering the costs of medical negligence – and on face value it appears to offer potentially improved outcomes for all parties.

In New Zealand, a government body called the Accident Compensation Corporation (ACC) covers claims arising from ‘treatment injury’ and provides comprehensive, 24-hour, no-fault personal injury cover for all New Zealand residents and visitors.  It provides cover for all injuries, not just those sustained during healthcare, including injuries at work or home, during sport and recreation and arising from the use of motor vehicles. 

If a patient suffers some form of treatment injury, there is a single relatively straightforward route to obtain compensation via a claim to the ACC. As a ‘no fault’ system, there is no need to prove negligence.  The patient can claim irrespective of cause.  The scheme can consequently provide speedy and equitable results. 

The quid pro quo is that there is no right to sue for damages for injury unless there is some element of conscious or reckless behaviour by the clinician.

What is covered

The ACC scheme provides:
• Treatment and rehabilitation – mostly free in the NHS
• Compensation for loss of earnings – up to 80% of earnings to a set maximum
• Lump sum compensation – one-off payments for permanent impairment
• Support for dependents – for spouses and children up to the age of 18.

This seems good for claimants, but who pays for it?  The scheme is divided into accounts, each of which have to balance financially. Levies on employers fund work-related injuries, income tax funds non-work injuries, levies on petrol and car tax fund motor-related injuries. The government funds the unemployed, elderly and children. The costs of healthcare treatment injury claims are funded through tax and government.

Total expenditure on treatment injury claims for the year to June 2007 was NZ$69m (£26m) for a population of four million (about £6.40 per person). As a comparison, the NHS Litigation Authority paid out £579m in 2006/07 on clinical negligence claims – about £10 per person.

The ACC pays for treatment and for rehabilitation. About 60% of payouts go on healthcare, representing almost 5% of total spending in the health and disability sector.  The remaining 40% of payouts cover compensation – mostly to cover loss of earnings. The system has some advantages over the UK position:

• Speed – simple claims are processed in weeks with a statutory limit of nine months.
• Equity – claims are processed through a single national unit and awards are based on a fixed benefit schedule, avoiding any legal procedure lotteries.
• Simplicity – easy for claimants to operate.
• Legal and administrative costs – the costs of administration are about 12% of claim value while in the USA legal fees amount to between 50% and 60% of claims.
• Consultants’ liability insurance – the scheme covers injury caused under private practice so that consultants’ insurance costs are very low.


Concerns about the system
The main concern with such a system is that there is little incentive for clinicians to curtail risky practice and adopt more defensive medicine. However, statistics do not support this, with the adverse-event rate not significantly different from the UK.

Another criticism is that levels of compensation can be low compared to some legally-based systems. Yet the fixed benefit schedule means all similar cases are treated the same. If a particular category of claimant is deemed unfairly compensated, calculation of benefits can be easily amended.

The ACC is also a funded scheme. It has NZ$10bn of investments and is moving towards being fully funded by 2014.  These investments will cover all its activities not just treatment injury.  In the UK, a ‘pay as you go’ system would be more likely.

The advantages of this system appear to outweigh the disadvantages.  The system is fair, speedy, simple for claimants to navigate and low on legal and administrative costs.  When it was introduced in New Zealand in 1974, a similar system was considered for the UK but rejected.  It looks like that may have been shortsighted.

Phil Taylor is a management consultant and HFMA international officer


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