By Thapelo Molefe
Medical negligence payouts against the state exceeding R2 million could be shifted away from large once-off awards towards structured settlements, with most future damages paid periodically over the lifetime of an injured person.
The proposal is contained in the South African Law Reform Commission’s Report on Medico-Legal Claims, published this week, which recommends that courts must generally order structured settlements in successful state medical negligence claims above R2 million.
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Under the proposal, courts would still award part of the compensation as a lump sum, while future healthcare, caregiving, assistive devices and other services could either be provided or funded by the state, with costs not covered directly generally paid periodically.
The commission says the approach is intended to address problems associated with large lump-sum awards, particularly in cases involving children who suffer serious birth injuries and require care for the rest of their lives.
Research commissioned by the Actuarial Society of South Africa and cited in the commission’s report says: “Lump sums are particularly large where the cases relate to birth injuries as the purpose of the award is to fund the expenses of a disabled child over their lifetime.”
The researchers said calculations for such awards depend heavily on assumptions about future costs, meaning the amount awarded may ultimately fail to match the injured person’s actual needs.
“Therefore, the award provided can only be an estimate of the actual expenses of a child injured at birth. It will inevitably be either too much or too little,” the researchers said.
Under the proposed structured settlement, a claimant would still receive a lump sum for general damages, past expenses, immediate expenses and certain assistive devices that cannot be provided by the state.
Future damages would generally be paid periodically, including costs linked to healthcare, assistive technology, caregiving and loss of earnings.
“The Commission recommends that compensation for future damages should, in general, be paid by means of periodic payments,” the report says.
The proposed legislation provides that periodic payments must be made at least once a year and only during the lifetime of the injured person, with automatic annual increases linked to the average consumer price index.
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A court would also be able to vary the amount of periodic payments if an injured person experiences a substantial and unforeseen change in their medical condition.
The commission says the proposed model is also aimed at easing the financial pressure medico-legal claims have placed on provincial health departments.
According to figures cited in the report from the Auditor-General’s 2019-20 PFMA report, claims against provincial health departments, including medical claims, stood at R105.8 billion at the time.
The report says departments generally did not budget for such claims, meaning successful payouts were taken from funds earmarked for other priorities, including service delivery.
A third of departments had claims exceeding 10% of their next year’s operational budget, while in five health departments, unpaid claims at year-end exceeded the entire operational budget for the following year.
Under the proposed Medico-Legal Litigation against State Bill, structured settlements would be compulsory for successful state medical negligence claims exceeding R2 million.
The report says courts may, however, order that compensation be placed in a trust in compelling circumstances, particularly where the beneficiary is a child or a person unable to manage their own affairs.
