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HomeMedico-LegalProposed 'pay as you go' compensation system badly flawed, argue experts

Proposed 'pay as you go' compensation system badly flawed, argue experts

Symbol of law and justice in the empty courtroom, law and justice concept.Draft legislation for a "pay as you go" system to compensate victims of state medical negligence are badly framed and will force patients back to the very facilities that harmed them in the first place, experts argue in a Financial Mail report.


The scale of the medico-legal claims is staggering, the FM's Tamar Kahn writes. By the end of the 2016-2017 fiscal year, government faced contingent liabilities – the cost if all claims were successful – of R56.1bn. That equates to almost a third of the R170.9bn consolidated health budget for 2016-2017. And, the report says, the limited figures currently available for the 2017-2018 year suggest the picture has only got worse.

The Eastern Cape Health Department’s contingent liabilities rose from R16.8bn in 2016-2017 to R24.3bn in 2017-2018, it revealed in parliament in May. In Gauteng, the figure rose from R17.8bn to R22bn over the period, while Limpopo’s more than doubled from R2.1bn to R4.35bn.

The report says the increase has been driven by a toxic combination of deteriorating public healthcare services, limited state legal capacity, greater patient awareness, corruption – and changes to the Road Accident Fund that have prompted personal injury lawyers to shift their attention to medico-legal claims.

The number and size of individual pay-outs has steadily ticked upward. More than 5,200 claims were lodged against the state between 2014-2015 and 2016-2017, Health Minister Aaron Motsoaledi told parliament last year: 1,562 claims were filed in the 2014-2015 financial year‚ 1,732 the year after, and 1,934 in 2016-2017.

While the final amounts awarded to victims are generally considerably lower than they claim, they can nevertheless be sizeable, the report says. In May the courts ordered the Eastern Cape Health Department to pay R21.5m to a trust to be administered on behalf of a 12-year-old boy with cerebral palsy, while a R19.2m settlement was recently reached between the Gauteng Health Department and the mother of a five-year-old girl with birth injuries.

The impact on the health system is devastating. The report says the debt-ridden Gauteng Health Department paid out over R500m to 138 claimants between January 2017 and March this year. "The more damages to be paid, the less money is available for service delivery, the poorer the quality of the service rendered … the more room for negligence and error, the more the claims. If it is not addressed the entire public health system could implode," says a discussion document published last year by the SA Law Reform Commission, which was asked to look into the issue by the minister of health and the state attorney’s office.

It flagged concerns about the way medical malpractice is determined and paid, noting that the common law principle that people may claim "once and for all" means they risk being under-or overcompensated. There is currently no law that deals specifically with medical malpractice.

The report says the commission has yet to complete its work, but based on its recommendation, government is pushing for changes to the State Liability Act as an interim measure. It gazetted an amendment Bill for public comment in May, proposing that payments for more than R1m be made in annual tranches, and that future health-care services be provided at public facilities. If state services are unavailable, claimants would be permitted to use private health-care services, but they would have to foot the portion of their bills that exceed public sector rates.

This would be a big departure from the status quo, the report says. At present, successful claimants get a lump-sum pay-out, intended to cover the victim’s future health-care needs for the rest of their life, calculated at private-sector rates.

The trouble with the current system is if a successful claimant of medical negligence dies prematurely, the money cannot be clawed back by the state. To make matters worse, many of the victims are severely disabled children: if family members squander the money, the victim ends up relying on public health care and the state effectively pays twice, says JP Ellis, legal manager at EthiQal risk protection, a division of Constantia Insurance. The "once and for all" rule in the current system can also prejudice families, as they have no further recourse if the damages they receive turn out to be inadequate, he says.

The report says critics are concerned about the measures in the Bill that restrict victims’ choice and limit them to using state services. "It means patients could have to go back to the hospital where they were harmed, and potentially even to the same staff," says Ellis.

"The State Liability Amendment Bill is a good idea, but very badly drafted," Norton Rose Fulbright director Patrick Bracher is quoted in the report as saying. Properly crafted, structured settlements should leave patients better off. But it doesn’t make sense to stipulate that periodic payments cannot be made more frequently than once a year, and the R1m threshold is arbitrarily low, he says.

Paying instalments to plaintiffs instead of lump sums may defer the financial losses to the state in the short term, but over time they will accumulate, warns David Bass, a medical adviser in the Western Cape Health Department’s medico-legal unit. "It will require substantial administrative infrastructure to ensure that an exponentially increasing number of annual obligations are accurately budgeted for and promptly satisfied," he says.

While lawmakers mull over changes to the Act, provincial health departments can take steps to mitigate the risks they face from medico-legal claims by beefing up their legal capacity, say experts. "In the private sector, medical malpractice cases are handled by specialist lawyers and advocates. But the people in the state attorney’s office handle all the litigation for the state and they are inundated with work: one state attorney may have 500 cases on, "his or (her) desk," says Ellis.

The report says the Western Cape Health Department illustrates the benefits of investing in an in-house team to handle claims. It is currently dealing with 302 active claims with a collective contingent liability of just R357m. It has a reputation for vigorously defending claims it deems to be without merit, and settling out of court, as quickly as possible to contain legal costs, those it considers indefensible.

The department has introduced a new model for the trusts established to manage the funds set aside for children harmed by medical negligence. A case manager helps determine what and when the trust should pay out. The funds revert to the state in the event of premature death and it is obliged to top up the funds should the child live longer than expected.

"These are safeguards to ensure that where we have made a mistake, the public money we pay out is appropriately used," says Bass. "It has been our sad experience in the past that many of the children who received medical awards for care in the private sector bounced back into the state hospital system after a few months, due to awards being depleted by family members," he says.

The report says nowhere is the need for improved legal capacity better illustrated than in the Eastern Cape. It recently contracted two law firms – Smith Tabata and Norton Rose Fulbright – to reduce its bills. Between November 2017 and March this year, they saved the department more than R45m, says the department’s former spokesperson, Sizwe Kupelo. Prior to the appointment of the consortium, the state attorney’s office had managed to win just four out of 155 medico-legal claims brought against it since 2014.

The report says the Bill’s progress and the outcome of the law reform commission’s work will be keenly watched by private health-care providers, who are also grappling with an increasingly litigious environment. "Rising claims are driving up (personal indemnity) insurance premiums for private sector doctors," says Ellis. "It’s becoming unaffordable. If the act is panel-beaten into shape, we can implement something similar for the private sector too."

[link url=""]Financial Mail report[/link]
[link url=""]State Liability Amendment Bill[/link]

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