Medical costs: should the victim pay?

The Government is proposing to make insurers liable for the medical costs of road accident victims, but victims could find it is their settlement figure that is hit, says Peter Livingstone. Peter Livingstone is a partner at Clarke Willmott & Clarke.

New measures proposed by the Government to recover the cost of medical care for road accident victims could hit the victims the hardest.

In his budget on 2 July, the Chancellor, Gordon Brown, gave brief details of proposals intended to assist the National Health Service in recovering from defendants the cost of treating road accident victims. He hinted that insurance companies will in future have to pay the full cost of treating such victims.

The Government is selling this proposed change as a move to prevent those who are guilty of causing accidents from dumping the cost of medical treatment on the NHS. In fact, the saving to tax payers will be marginal, and the new measures may carelessly add insult to injury by imposing the biggest burden on the accident victims themselves.

Under the Road Traffic Act, car insurers have been required to pay for medical costs up to fairly modest limits but, in general, NHS trusts have failed to pursue these sums, probably due to the expense involved in making claims.

The ceiling for such claims is now to be increased, but trusts are still likely to be reluctant to chase them. The cash-strapped Government will need to try something else to remedy the situation. A new form of Compensation Recovery Unit (CRU), for example.

During the 1990s the Government initiated the CRU to recover on behalf of the tax-payer the amount of state benefits paid to accident victims, but the insurers have got off lightly again and the actual effect of the scheme is to hit victims much harder.

The regulations provide that the benefits be deducted from the overall settlement figure to which the victim would, in the absence of the benefits recovery scheme, be entitled. The benefits have therefore been knocked off the victim's damages rather than paid on top.

This effect is perhaps felt most keenly where the plaintiff recovers compensation only on a split liability bias, perhaps because the accident has been partly his fault. In those circumstances, only half the compensation is recovered, but the Government takes back its state benefits in full.

As a result, many plaintiffs have found that claims are not worth pursuing. Others have settled for a small "consolation prize" payment as being the best they can hope to recover.

Changes to the way CRU operates are due to come in at the beginning of October. These will improve matters for the plaintiff but injustices will continue to occur because the rules still shy away from providing that the defendant has to pay back the benefits on top of the damages, and from giving the court an overriding power to ensure simply that after the CRU's deductions, the plaintiff is not overcompensated.

Despite the problems with the operation of the CRU it is likely that the Government will establish a similar body to recover the cost of medical treatment for road accident victims.

The danger here is that if two separate figures now need to be repaid from any damages claim, namely state benefits received by the victim and the cost of medical treatment, this will blow huge amounts of the victim's compensation.

Insurers will be rubbing their hands in anticipation if this means that even more plaintiffs find their claims are not worth pursuing at all.

Overall, the measures are likely to come down to more smoke and mirrors by the Government. The suggestion is that tax payers will save money because people who cause accident, being notionally the bad guys, will have to pay for the medical treatment that ensues. In reality, the bad guys will be insured and it goes without saying that most car drivers are taxpayers and vice versa.

The people really paying the price for this change are likely to be the victims of road accidents themselves. Insurers may have to make slightly larger payments following accidents, but they can easily adjust by altering their premiums.

Victims, however, cannot adjust so easily. They cannot decide whether or not to have an accident and, having been involved in one, must face the consequences.

The Government's new moves will be cold comfort for those pursuing claims.