No-fault compensation: winners and losers

Some researchers say such a scheme would improve practice and reduce insurance premiums, but payouts would be lower.

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Introducing a no-fault compensation scheme for patients who claim they are the victim of medical negligence would decrease insurance costs and free doctors from practising defensive medicine, according to one Australian researcher.

In an opinion piece published by the Royal College of Physicians in its Future Healthcare Journal, UNSW cancer researcher Adjunct Professor Richard Epstein argued that no-fault compensation was the “fair” way forward.

“From a plaintiff’s perspective, the adversarial system provides no compensation for medical errors or damages which are deemed non-negligent, or which lack proof of proximate causation,” Professor Epstein said.

From a clinician point-of-view, Professor Epstein said, the current system encouraged inefficient “defensive medicine”, i.e. carrying out excessive diagnostic testing to minimise risks of malpractice suits.

The Australian Lawyers Alliance is opposed to compensation schemes, given empirical studies which show that no-fault schemes tend to provide lower payouts than if a patient pursued redress through Australia’s common law system.

“No-fault and welfare-based schemes are inflexible, ‘one-size-fits-all’, statutory systems that do not treat people according to their individual needs and circumstances,” the ALA said.

“Consequently, they often give rise to unfair outcomes, even though people might be treated the same.

“The common law system of awarding compensation commensurate with the injury suffered, which has been developed over hundreds of years, is far more flexible, and can be adapted to suit the needs of the injured individual.”

Indemnity insurers, though, would have the most to lose if a no-fault compensation scheme for healthcare was implemented.

“For a patient seeking compensation in this system, the medical indemnity insurance industry is the sole financial source, and hence ‘the only game in town’,” Professor Epstein wrote in FHJ.

Implementation of a no-fault system, he argued, would need to involve “at least part-replacement” of indemnity businesses, with staff redeployed to the government domain and malpractice premiums channelled into a central fund.

That process would likely take two to three decades of forward planning, Professor Epstein said.

It is, however, possible.

New Zealand, France and Scandinavia all have no-fault compensation models already, funded by taxation and redirected medical indemnity fees.

Australia also introduced a no-fault scheme for covid immunisations in August 2021.

The RACGP told The Medical Republic that it did not have a position on no-fault schemes.

In 2021, though, it was one of the voices calling for the covid vaccine indemnity scheme, and actually proposed that all vaccines on the National Immunisation Program schedule be included.

“At a population level, the very small risk of individual vaccine injury is outweighed by the significant and ongoing benefits of widespread population immunisation,” the college said.

“However, this can occasionally mean that a significant burden, i.e. vaccine injury, is placed on an individual for the protective benefit that vaccines provide to the rest of the Australian population.”

At the time, the vaccine rollout had been significantly slowed after several severe adverse reactions to the AstraZeneca vaccine, and the college said it felt that a no-fault scheme would promote confidence in the public.

Unrelated to covid, two patients who say they were permanently injured during treatment for health conditions started a petition last year seeking a parliamentary inquiry into a compensation scheme for serious healthcare injuries.

“These laws are weighted in favour of health practitioners and hospitals, as well as the insurers and lawyers which defend them,” the petition, now signed by 12,400 people, reads.

“We’re not against doctors and nurses – just unfair, drawn out, expensive legal battles.

“If our governments can provide an insurance safety net for people who are injured at work or in car accidents, they should be able to help Australians who are injured in our healthcare systems.”

This article was updated on 12/04/2023 to reflect the RACGP’s position on no-fault schemes