Addressing the funding gap for NHS trauma care – ensuring that the insurance industry pays its fair share

One of the lesser known aspects of NHS funding is that the insurance industry has a legal duty to pay the healthcare costs of any individual who has been injured in an accident and where the injured person has made a successful claim for personal injury compensation.

This duty was imposed on the insurance industry over 80 years ago and initially related only to those injured in road traffic accidents. However the duty was extended in 2007 to cover all cases where people claim and receive personal injury compensation.

These legal provisions are designed to reflect the widely supported principle that the NHS should not have to pay for the treatment of patients injured by a third party. Instead, those causing injury (and their insurers) should pay for the cost of their actions, including a reasonable contribution to the cost of NHS treatment.

In fact, one of the reasons why road users and employers are required to have insurance is so that the NHS can recoup the costs of treating those injured in road traffic accidents or accidents at work.

But whilst private hospitals are able to recoup the full costs of treating an injured person following a personal injury claim, the amount the NHS can claim for each patient is capped and it is unclear whether the current compensation arrangements are leading to a shortfall in NHS funding for trauma care.

Rather than allow NHS Trusts to charge insurance companies the full cost of any care provided, the 2003 Regulations (which came into force in 2007) set the amount to be charged at a standard rate for providing NHS treatment, rather than at a tariff specifically designed to reflect the cost of providing trauma care. Because of this the initial scheme recognised that “compensators will in fact rarely have to pay the full costs of hospital treatment”

As a result there is the potential for a funding gap to emerge between what the NHS is spending on trauma care and what it is able to recoup from insurers.

The latest tariffs for the Injury Cost Recovery Scheme – which are increased every year for Hospital and Community Health Services inflation - pays the NHS a fixed fee of £891 per inpatient day up to a maximum of £53,000 per patient. Once payment is made for inpatient care, any outpatient appointments are not funded by the scheme.

In 2010 the National Audit Office estimated that the actual cost of providing trauma treatment to patients was between £300 million and £400 million a year. However, the NHS (in England, Scotland and Wales) recouped less than £200m in 2018-19 which is less than half the amount of the total estimated cost to the NHS.

In addition, the NAO found that this funding gap impacts most significantly on those hospital trusts that “treat higher volumes of trauma”.

There are also problems in recouping the cost of trauma care from insurers - the Department of Health notes that an average of 22% of claims made by the NHS under the cost recovery scheme are not paid.

The big difficulty is that the exact cost of trauma care for the NHS is unknown – again, the NAO found that there is no national tariff in existence which reflects the true costs of providing trauma care.

The median total hospital cost for a patient receiving acute trauma treatment is estimated to be around £18,500 but this is not based on any recent surveys of the major trauma centres in the UK and their actual expenditure. As a result, it is possible that the cost of treating some patients will exceed the current £53,000 cap imposed by the government.

If it is indeed found that there is a substantial gap between the amount spent on trauma care and the amount recovered from the insurance companies then this ought to require the insurers to pay more to the NHS. In turn, it is likely that this will lead to higher insurance premiums for drivers and employers.

But it should also be noted that the insurance industry stands to gain significantly from recent government proposals to extend the cap on the amount that the loser in a civil litigation case is required to pay for legal costs. If introduced this is likely to benefit the insurance industry significantly.

The stated purpose of the Injury Cost Recovery Scheme when it was introduced in 2007 was to ensure that the NHS did not subsidise those liable for causing injury to others and unjustly enrich them.  It was also designed to increase the incentives for employers and others to have effective health and safety measures in place to prevent accidents and harm to individuals.  And the structure of the scheme was designed to maximise the funds available to NHS Trusts to treat trauma patients.

It is now unclear whether the current scheme meets these policy objectives.

Indeed, at Moore Blatch we work closely in partnership with a number of hospitals, including King’s College and St George’s hospitals in London, and have seen first-hand the demands on major trauma centres.

At the very least, it is important that the government commit to a legislative review of the way major trauma treatment is funded so it is fit for purpose today, reflects the increasing costs of medical care and ensures that those responsible for accidents bear the cost to the NHS of treating patients who are harmed.