Potentially life-saving procedures could disappear from the health service because the high risks involved will force doctors to take out unaffordably expensive medical insurance, the British Medical Association has warned after it emerged that the NHS compensation fund may be privatised to curb the burgeoning cost of medical litigation.
Documents obtained under the Freedom of Information act show that last October officials in the Cabinet Office drew up a "business assessment" for the NHS Ligation Authority (NHSLA), which pays out legal fees and compensation claims in medical negligence cases, for a "credible business plan" that would be an "alternative to [the] existing service delivery model".
The plan says the Confederation of British Industry has identified the litigation authority as a "potential opportunity" and suggests the "need for a joint venture partner" that could provide "investment, expertise, access to markets". A month later the authority, which paid out £1bn last year in compensation – up from £280m in 2001 – was asked about pursuing a course of "mutualisation".
Doctors' leaders said any move towards a privatised model would mimic the worst aspects of US healthcare. In America there are well-documented cases where physicians simply do not take up jobs in risky specialisms such as obstetrics, where the cost of insuring operations are too high or where insurance companies fail to honour their moral obligations to pay out.
Mark Porter, chair of the consultants committee at the BMA, said: "We do not want to go down the US route of private insurance. You can travel whole sections of the east coast and not find an obstetrician."
"Only a pooling of risk across the NHS can protect hospitals from catastrophic events. We did not know that certain arthritic drugs caused heart attacks 15 years ago when they were started being prescribed. But that is what happened. Medical techniques are a risky area. You can never engineer risks out completely. And no one hospital or doctor could ever bear the costs of a catastrophic event. That's why we have an NHS-wide insurance scheme for doctors and patients."
The government began a review of the litigation authority last March – undertaken by Marsh, one of the world's biggest insurance brokers – but has yet to make its findings public. In an email from a civil servant in the Cabinet Office to the litigation authority, the recommendation is described as a "Marsh show stopper".
The proposals also expose a divide between Downing Street and the Cabinet Office, which are at the forefront of public sector reform, and the Department of Health. The paper says the "Cabinet Office [was] requested by No 10 to include specifically look at NHSLA … DH has agreed to keep open (sceptical) mind".
It emerged on Thursday that Andrew Lansley, the health secretary, had secured £185m in new funding for the authority this year, partly to offset an anticipated legal ruling that might mean bigger payouts for victims of clinical negligence.
There is little doubt that payouts are rising. Cerebral palsy victims now get £6m each – three times the amounts courts awarded a decade ago. Even in the UK private sector obstetricians are faced with insurance premiums of £50,000 a year.
Doctors say the reason is not a "compensation culture" but that payouts are not capped and that patients can take legal action against the NHS 25 years after an operation occurred. Sir Sabaratnam Arulkumaran, the head of obstetrics and gynaecology at St George's hospital, Tooting, said centres of excellence would be penalised for taking on harder cases.
"We are referred cases that are likely to have much more risk. Premiums would reflect that and [St George's] pays £5m in maternity contributions to the NHS litigation authority to deliver 5,400 babies every year. Instead of changing the NHSLA the government needs to look at capping payouts and paying in instalments so that if the patient were to die the payout could be stopped. That would cut costs."
Andy Slaughter MP, Labour's justice spokesman who obtained the documents, said the government was turning the NHS over to the private insurance industry. "Despite the doubts of the Department of Health, the NHS and practitioners, the Cabinet Office still continues to fly in the face of public and professional opinion," he said. "Cameron and Lansley are combining disruptive top-down reorganisation with an aggressive bottom-up programme of selling as many subunits of the NHS as possible to insurers and private health interests."
Sources within the Department of Health said the plans represented "blue sky thinking" and that the litigation authority was "under review". When pressed for a statement it said: "There are no plans to change the structure of the NHS Litigation Authority, and it will continue to provide cover to its members and their employees."
