Written by Sarah Walls
Five countries have comprehensive no-fault compensation schemes covering healthcare injuries: New Zealand (introduced in 1974), Sweden (1975), Finland (1987), Norway (1998), Denmark (1992), and Iceland (2001). As explained in a recent update, in most common law jurisdictions relying on medical negligence claims to compensate injured patients there is dissatisfaction with the system. There has been no move to return to a negligence-based system in any of the countries with no-fault compensation schemes. (Please support our petition for no-fault compensation for Australian injured patients.)
The two countries with the longest experience of no-fault compensation for healthcare injuries are New Zealand and Sweden:
New Zealand:
Scheme history: In 1974 New Zealand introduced no-fault compensation for all personal injuries, including healthcare injuries. The scheme is administered by the Accident Compensation Corporation (ACC), which is tax-funded, government-operated and accountable to a parliamentary minister. It functions alongside a national healthcare system. From 1992 until 2005 injured patients needed to demonstrate “medical error” or “medical mishap” in order to receive compensation. In 2005 a single “medical treatment injury” standard was introduced to encourage cooperation by hospitals and health professionals.
Who can file a claim: Claims must be initiated through a physician or other health care provider, who need not be the clinician involved in the injury.
Claim eligibility: The claimant must establish a “medical treatment injury”, a physical injury causally related to treatment by a registered health professional, which is not a necessary part or ordinary consequence of treatment.
Claim costs: Claims can be made free of charge without the need for legal counsel.
Claim processing time: For treatment injuries, which are considered complicated claims, the ACC has up to nine months to make a decision. The ACC informs the claimant if a decision cannot be made within two months.
What compensation covers: Treatment, rehabilitation, loss of earnings and, where applicable, death benefits or lump sum compensation for permanent impairment.
Caps on compensation: A fixed award structure ensures that similar injuries receive similar compensation. The ACC has an extensive database of information on claims. Compensation awards are lower than in negligence-based systems, where legal fees usually absorb 20% to 40% of awards.
Involvement of lawyers: Lawyers are not required to file a compensation claim but are involved if a decision is appealed to a court.
Civil litigation rights: Negligence claims are barred, but claims can be brought for reckless conduct. If injured patients are dissatisfied with the claim decision, they can seek a review, and if still unsatisfied, can appeal to a court.
Percentage of successful claims: In 2019/20 the ACC covered 68% of treatment claims. A study published in 2011 of the first four years of data since the 2005 introduction of the “medical treatment injury” standard showed that 64% of claims were accepted. Most arose in general practice (62%) and most claimants were female (62%). Of the claims, 83% were minor, 12% major, 4% serious and 1% sentinel. Medication caused most injuries (38%) and 60% of serious and sentinel injuries.
Scheme costs: The ACC is funded by a mix of general taxation and levies on vehicle licensing charges, petrol (paid as oil enters the country), PAYE tax, employers and the self-employed. The Treatment Injury Account is funded by PAYE tax levies and general taxation. In 2018/19 treatment injury claim costs represented 1% of New Zealand’s health expenditure.
Patient compensation and physician discipline separated: Since 1994 complaints about healthcare providers have been made to the Health and Disability Commissioner which uses the information to improve healthcare delivery. Since 2005 information cannot be shared between the ACC and the office of the Commissioner. However, the ACC is required to notify the Director-General of Health if there is a risk of harm to the public.
Advantages of the scheme: The New Zealand scheme is considered one of the simplest in the world for injured patients to navigate. It is low-cost, accessible, efficient, facilitates patient safety learning and injury prevention, and preserves trust and communication between the provider and the patient.
Current challenges: In the 2021/22 financial year, the scheme had a net deficit of $0.5 billion. In the eight years from 2014/15 to 2021/22 rehabilitation performance worsened. The scheme is focusing on improved injury prevention and rehabilitation performance to help it remain viable. Since 2016 $49.7 million has been invested in treatment safety programs, for example to reduce neonatal brain trauma and improve surgical safety, but benefits have yet to be realised. A plan for incentives to improve patient safety was put on hold in 2021/22 due to disruptions in the health sector as a result of the pandemic and the transition to a national health service.
Sweden:
Scheme history: Sweden’s no-fault compensation scheme for injured patients was introduced as a voluntary scheme in 1975. In 1995 the scheme was restructured as a mutual insurance company insuring all public hospitals and physicians and private physicians with a contract with the government. In 1997 the Patient Injury Act made it mandatory for all healthcare providers to carry liability insurance. The compensation scheme is part of a larger, tax-funded system of social insurance including a national healthcare system with universal access which covers all medical expenses.
Who can file a claim: Only injured patients can initiate claims, though 60% to 80% of claims are facilitated by healthcare providers.
Claim eligibility: Claims are assessed using an “avoidability” standard: injuries are compensable if they would not have occurred in the hands of a highly skilled and experienced physician in the relevant specialty. There must be a causal relationship between injury and care, and the injury must not be a foreseeable consequence of the patient’s basic illness. Whether the damage was avoidable is decided according to what was known at the time the claim was made, not when the treatment was given.
Claim costs: Claims can be made free of charge without the need for legal counsel.
Claim processing time: Eight months.
What compensation covers: Medical care, pain and suffering, and earnings, with upper limits on payments which are updated from time to time. Minor injuries are not compensated. To obtain compensation, the patient’s injury must result in a permanent disability, significant disfigurement or sick leave for a specified period.
Caps on compensation: Injured patients are entitled to compensation for economic loss, based on their specific injury. Non-economic loss, i.e. pain and suffering, is capped and covered by a schedule of payments.
Involvement of lawyers: Legal representation is required only if the claim goes to arbitration. Over 90% of claims are processed by the company commissioned by the insurer. If the patient is not satisfied, they can appeal to the Patient Claims Panel, comprised of judges and consultant doctors appointed by the government. Three of the seven members represent patient interests. Only about 10% of claims are appealed. Although the panel’s opinions are advisory, the insurer almost always complies with them. The patient can have legal representation at the panel hearing. Cases can go to arbitration by a judge of the Swedish Court of Appeal, whose decision is final.
Civil litigation rights: The no-fault administrative compensation scheme and the tort system exist side-by-side. Injured patients retain the right to use the tort system, but very few do. There are about 18,000 administrative claims each year and only 20-25 court cases. Any award under the scheme is deducted from an award made by the court, so there is no double-dipping.
Percentage of successful claims: About 45%.
Scheme costs: Administrative overhead accounts for about 18% of total costs, leaving about 80% of premiums to reach patients as compensation.
Patient compensation and physician discipline separated: Sweden has a separate system of physician discipline, with a patient complaints board able to investigate complaints and refer cases to disciplinary authorities. Information sharing between the disciplinary system and the compensation system is not permitted.
Advantages of the scheme: Individual healthcare providers suffer no moral blame, financial loss or reputation loss as a result of a successful claim. The less stigmatising avoidability standard facilitates injured patients’ access to compensation for preventable injuries. It preserves physician-patient relationships, encourages transparency about adverse events, and facilitates physician participation in the claims process. A 2015 OECD study found that no-fault schemes for medical treatment injuries which decouple deterrence and compensation reduced per capita health expenditure by 0.11%.
No-fault compensation for personal injury including healthcare injuries has been recommended twice in Australia, once in 1975 and again in 2011. But getting state and territory agreement in Australia’s federal system is complex and each time the Labor government lost power before the scheme was implemented. As explained in an earlier update, in 2011 the Productivity Commission set out detailed recommendations for the medical stream of the proposed National Injury Insurance Scheme (NIIS). The commission suggested that the scheme start by covering lifetime care and support for catastrophic injuries, and after five years be reviewed and consideration given to extending it to cover other significant injuries, economic loss and pain and suffering.
Over a decade later, the medical stream of the NIIS has still not been implemented. Unlike New Zealand, which has an extensive database of information on patient injuries and compensation claims, Australia gathers no national data on this vital yardstick for measuring the safety of its healthcare system. From 2003/04 until 2012/13, national data on healthcare compensation claims and their outcomes was collected by the Australian Institute of Health and Welfare under the Medical Indemnity National Collection (MINC). But in 2015 the Coalition government cut the funding and MINC ceased to exist.
No-fault compensation schemes for healthcare injuries have been demonstrated to be faster, cheaper and fairer than negligence-based compensation systems. As to whether they are safer, the evidence is mixed. But a system that enables the collection of data on injuries and minimises disincentives for reporting them must be an improvement on an adversarial system which leaves the vast majority of patient injuries unacknowledged and uncompensated and which fractures the trust between healthcare providers and patients.
If you believe that Australia’s injured patients deserve better and should no longer be hidden from view, please sign and share our petition. If you can manage it, please donate a few dollars so the petition is distributed more widely.
Gratefully,
Sarah and Vickie.
References available on request to Sarah at exactitude@iprimus.com.au