news and events hero

Changing Times: Government publishes response to discount rate consultation

Last week, on the same day that the National Audit Office (NAO) produced its report on managing the cost of clinical negligence in NHS Trusts, the government published its long-awaited response to the consultation on how the discount rate should be set in future following the reduction to minus 0.75% in February this year. A new more regular review mechanism is proposed and significantly the consultation states that if the new  rate were to be set today it would be between 0 and 1%.

While any change may not be made for another nine months depending on the parliamentary timetable, an increase as suggested  will result in significant savings on compensation payments made by insurers, medical defence organisations and the NHS.

Key proposals

Impact for compensators

While it remains to be seen exactly what the discount rate will be, compared to the existing discount rate of minus 0.75%  the multiplier used to calculate future lifetime losses for a 20 year old male drops from  88.96 to 67.22 (0%) or 48.35(1%). With a multiplicand of say £200,000 per annum in a catastrophic injury scenario, this  results in a potential award of £17,792,000 under the present minus 0.75% rate falling  to £13,444,000 (0%) or £9,670,000 (1%); a potential saving of over £8m.

The NAO report indicated that with 10,600 new clinical negligence claims registered with NHS Resolution in 2016-17 compared with 5,300 in 2006-07 , the figure of £1.6bn  spent by NHS Resolution  on CNST claims in 2016-17 is expected to double by 2021. The report concludes with a recommendation for a cross-government strategy to manage the cost of clinical negligence for the NHS, identifying the balance to be struck between providing access to justice and access to health services. Savings will inevitably be made through any future discount rate increase to zero or 1% but ultimately the focus, in the NHS at least,  should remain on learning from errors and prevention strategies so as to reduce both the financial and human cost of medical mistakes.

Practical steps to consider

How Capsticks can help

Capsticks is one of the leading healthcare litigation firms in the country with teams in London and Leeds acting for NHS Resolution, the MDDUS and a number of Lloyds insurance underwriters. We can support organisations and individuals in the defence of medical malpractice claims as well as advise on associated proceedings.

Download page as PDF