INSURANCE - MALPRACTICE;

You asked for information about New Zealand and Sweden’s no-fault medical liability compensation systems.

SUMMARY

Compensation programs that do not rely on negligence determinations are popularly referred to as “no-fault” systems. In fault-based models, the claimant must prove four elements: duty, injury, causation, and negligence. No-fault systems eliminate the requirement of proving negligence. The workers’ compensation schemes in operation in all states are an example of the no-fault model.

Several no-fault systems in medicine operate internationally. Collectively, Denmark, Sweden, Finland, and New Zealand have accumulated nearly 80 years of experience in operating administrative schemes that replace medical malpractice litigation. Medical no-fault schemes were introduced in New Zealand in 1974 (as part of its universal scheme), and in Sweden in 1975.

The health care systems in these countries differ significantly from that in the United States, with a heavier reliance on public payment and provision of services. Mechanisms for funding their compensation systems also differ from the doctor paid insurance that characterizes the United States malpractice system. New Zealand’s scheme, for example, draws from general taxation revenue, while Sweden’s draws on premiums charged to regional councils and doctors.

NEW ZEALAND

In 1974 New Zealand abolished tort law remedies for all personal accident injuries and replaced it with a no-fault compensation scheme administered by a state monopoly. The scheme was based on five principles from the 1967 Woodhouse Royal Commission Report. They are:

1. community responsibility (the community collectively bore a basic responsibility for the social costs of accidents);

2. comprehensive entitlement (equity required giving assistance to all those disabled by accidents, irrespective of cause, time, or location);

3. complete rehabilitation (accident victims should recover in the shortest possible time);

4. real compensation (compensation should reflect real loss); and

5. administrative efficiency (collecting funds and paying benefits should be conducted as efficiently as possible).

Benefits are provided without proof of “fault” no matter how or where the accident occurred, whether at work, home, on the road, or while participating in a recreational or sporting event. In return, the common law right to sue for damages for personal injury (except for punitive or exemplary damages) was abolished. The Accident Compensation Commission (ACC) administers the system.

The universal scheme was built on pre-existing funding sources, workers’ compensation and compulsory automobile liability insurance.

The system now has six accounts: Employers; Earners; Non-Earners; Motor Vehicle; Subsequent Work Injury; Medical Misadventure. When initially set up, the primary focus was on providing compensation and promoting rehabilitation. Increasing costs have led to concerns that the behavioral assumptions underlying the scheme are inadequate. As a result the scheme has been continually reviewed.

In 1979, it was decided to review the scheme and assess its overall cost. The review also took into consideration employers’ concerns that they were subsidizing the cost of non-work claims. A Cabinet Committee

recommended that (1) claimants should meet part of the cost of the first two visits to the doctor and (2) lump-sum awards for minor injuries, pain and suffering, and loss of enjoyment of life be abolished except for serious cosmetic disfigurement.

As a result, several amendments were made to the Act in 1982.

These included: changing from a fully-funded to a ‘pay-as-you-go’ system: first week compensation paid by employers for work accidents was reduced from 100% of pre-injury earnings (exclusive of overtime) to 80 % (including overtime); the ACC was given the power to refuse to pay compensation to people injured while committing a crime; and compensation for work-related motor vehicle accidents were no longer funded from the Earners Account but from the Motor Vehicle Account. The maximum compensation for the loss or impairment of bodily function was increased from $ 7,000 to $ 17,000. However, the compensation paid for pain and suffering and loss of enjoyment of life remained at the 1974 level of $ 10,000.

Employer pressure in 1992 led the government to set up another review committee. The Accident Rehabilitation and Compensation Insurance Act 1992 was aimed at controlling premium costs its objective being: “to establish an insurance-based scheme to rehabilitate and compensate in an equitable and financially affordable manner those persons who suffer personal injury”. Lump-sum compensation was abolished, and compensation for work-related motor vehicle accidents was transferred from the Earners Fund.

Despite considerable discussion of the scheme, there have been virtually no empirical studies of its impact by independent researchers. Most studies have been internal.

SWEDEN

The key element of Swedish compensation model is the concept of avoidability. System designers recognized that compensating all injuries arising from medical care would be prohibitively expensive. Thus, only subsets of medical injuries are eligible for compensation.

Adjudicators ask whether (1) an injury resulted from treatment, (2) the treatment in question was medically justified, and (3) the outcome was unavoidable. If the answer to the first query is “yes,” and the answer to either the second or third query is “no,” the claimant receives compensation.

Patients who believe they have been injured as a result of medical care are encouraged to apply for compensation using forms available in all clinics and hospitals. Doctors and other health care personnel are actively involved in approximately 60 to 80% of claims, alerting patients to the possibility that a medical injury has occurred, referring patients to social workers for assistance, and helping them to lodge claims—the sort of assistance U. S. doctors often provide workers’ compensation claimants.

Once a claim is made, the treating doctor prepares and files a written report about the injury. An adjuster makes an initial determination of eligibility and then forwards the case for final determination to one or more specialists who are retained by the system to help judge compensability. Approximately 40% of claims receive compensation. Patients who are dissatisfied with the outcome may pursue a two-step appeals process consisting of review of the determination by a claims panel followed by an arbitration procedure.

Successful claims are paid in a uniform manner using a fixed benefits schedule and include compensation for both economic and non-economic losses. But before patients are eligible for compensation, they must have spent at least 10 days in the hospital or used more than 30 sick days. This “disability threshold” eliminates the minor claims.

The Patient Insurance Compensation Fund, from which all claims are paid, has undergone reforms since it was created in 1975. One example is legislation enacted to rein in fund expenditures. The legislation replaces the scheme’s injury thresholds with thresholds linked to the level of damages awarded in compensable claims (those insured claims where a “deductible” applies). Another reform imposed an upper limit on damages (“cap”) of 200 times the base sum for each “loss events. ” The “base sum” is a unit amount that allows funds that are redistributed by Sweden’s various social insurance programs to be a adjusted annually for inflation and changing certain medical eligibility criteria narrowed categories of compensable injury. For example, wound infections had been compensated from the outset of the program. But, adjusters have become strict about the type of infections that are eligible, specifying that infections caused by a patient’s own bacteria do not meet avoidability criteria and will not be compensated. In effect, this removes “dirty” wound infections from consideration.

Fund administrators explain that the overriding consideration in efforts to control costs through eligibility and benefit reductions is the need to recognize the interconnectedness of social insurance schemes in Sweden. Because medical injury compensation now plays a “fill-up” function in relation to compensation provided through other schemes, benefit reductions in these other schemes requires increased outlays from the Patient Insurance Compensation fund unless commensurate changes are introduced.

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