Stephen Knafler QC's King's Fund Talk

Wednesday 10 November 2010

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Who pays: the NHS or the tortfeasor/insurance company?

I’d like to start off by telling you about a case I was involved in very recently, on behalf of NHS Oldham: In R (Booker) v NHS Oldham, Direct Line Insurance plc [2010] EWHC 2593 Admin. We lost, I’m sorry to say, and NHS Oldham is currently deciding whether to appeal. The case was in essence a dispute between NHS Oldham and Direct Line insurance company over who should pay for the health care of Ms Alyson Booker, a young woman who had been catastrophically injured in a RTA. In the personal injury proceedings it had been agreed formally that the driver of the other vehicle involved, who was insured by Direct Line, was 100% liable for Alyson Booker’s injuries.

During the many years that the PI case dragged on NHS Oldham provided Ms Booker with 24 hour care, at her home, including ventilation and a team of training HCA, lead by an NHS nurse. NHS Oldham never sought to recover any of those costs – on the present state of the law, it couldn’t – but as the day of the trial drew nearer the question arose as to how Ms Booker’s future care would be paid for: by the NHS, or Direct Line.

As is very common in this type of case, Ms Booker wanted to have a privately arranged and paid for care package and in the PI action she claimed damages from Direct Line on that basis: it has now been established that a tort victim is entitled to choose to have their future care paid for privately, out of an award funded by the tortfeasor – see Peters v East Midlands SHA [2000] EWCA Civ 145, [2010] QB 48. That was the choice that Ms Booker made. At this stage, therefore, it seemed that nothing could go wrong. However, it did. When Ms Booker and Direct Line entered into the Consent Order settling the personal injury action, it provided that Direct Line’s payments towards establishing a private care package would not start for 2 years, although, in the meanwhile, Direct Line provided an indemnity, whereby it was liable to pay for Ms Booker’s health care, to the extent that NHS Oldham reduced or withdrew NHS services, within that 2-year period.

That was the course that NHS Oldham took, for a number of reasons:

The annual cost of Ms Booker’s health care package was equal to the entirety of its annual district nursing budget: it was a very expensive package and NHS Oldham wanted to use the funds elsewhere, for other pressing cases it was having difficulty funding. On the other hand, Ms Booker was legally entitled, under the indemnity in the consent order, to have her health care costs paid for by the tortfeasor, funded by Direct Line and she was agreeable in principle to privately funded care. There was a lot to be said for the "tortfeasor pays" principle;

NHS Oldham had been asked by the parties and the court, before the Consent Order, to explain what it proposed to do, in particular because Direct Line was worried about double recovery. Having taken legal advice, NHS Oldham, having been led to believe that Ms Booker was claiming all her health care costs from the date of the order, stated that after the order was entered into they would provide transitional services for about 6 months but nothing after that, beyond GP services, acute services, outpatients, consultant supervision and being available as a safety net;

The 2-year deferral was entered into without any consultation with NHS Oldham and the reasons for it were never explained. The suspicion was that it could have been on the basis that Ms Booker’s damages were to be increased, but there was no evidence about that. There could have been any number of reasons. However, NHS Oldham were certain, there was no rational explanation for the deferral and it certainly did not represent a reasonable estimate of how long it would take to transfer Ms Booker to a private care package.

Ms Booker, funded by Direct Line, brought judicial review proceedings. NHS Oldham’s decision was then quashed by HHJ Pelling QC, sitting as a Deputy High Court Judge.

The legal basis of the PCT’s case was, in essence simple. It accepted that it aimed to provide comprehensive services and was not entitled to charge patients for the services that it provided. However, not providing Ms Booker with health care would actually help the PCT to provide more comprehensive services and it was not attempting to charge her. The PCT argued that whilst it aimed to provide comprehensive services, and acknowledged the existence of statutory bars to means-testing or charging, it had a broad discretion under section 3 of the NHSA 2006 not to provide services unless it was “necessary” to do so to meet “reasonable requirements” and that in this case it was not “necessary” because, inter alia, the Claimant was entitled to comprehensive and optimal quality health care funded and arranged by Direct Line and for the other reasons I mentioned a little while ago: the PCT had made its position clear before the order was entered into.

HHJ Pelling QC rejected these arguments, principally on the ground that the PCT had assessed the Claimant as being eligible for NHS Continuing Healthcare. There had been a Continuing Healthcare assessment in the past and it was common ground that Ms Booker was eligible for NHS CHC. He took into account the National Framework for NHS Continuing Healthcare and NHS-funded nursing care (July 2009), as follows:

24. The Secretary of State's policy for the provision of NHS continuing healthcare is set out in the National Framework Document dated July 2009. There is nothing within that document that supports the conclusion that the PCT was entitled to refuse continuing healthcare provision on the basis adopted here. Whilst the availability of privately funded healthcare is nowhere specifically mentioned, in paragraph 46 it is stated that:

"Eligibility for NHS continuing healthcare is based on an individual's assessed health needs. The diagnosis of a particular disease or condition is not in itself a determinant of eligibility for NHS continuing healthcare."

and at paragraph 47 it is said that:

"... the decision-making rationale should not marginalise a need just because it is successfully managed: well-managed needs are still needs. Only where the successful management of the healthcare need has permanently reduced or removed an ongoing need will this have a bearing on NHS continuing healthcare eligibility."

At paragraph 49 of the National Framework Document it is said that the reasons given for a decision on eligibility should not be based on either the fact that the need is well-managed or on any other "input - related (rather than needs - related) rationale". At paragraph 100 of the policy document, under the heading "Provision" it is said that:

"Where a person qualifies for NHS continuing healthcare, the package to be provided is that which the PCT assesses is appropriate for the individual's needs".

The Judge held:

27. …………Thirdly in my judgment in reaching a decision in a case such as this, the PCT is bound to have regard to and indeed to carry into effect the policy set out in the national framework document. This document established the national policy to be applied in deciding on eligibility for future healthcare. Paragraph 47 and 49 of the framework document in particular cannot support the notion that a person should not be treated as eligible by reference to the ability of the person concerned to access funding for such care from another source. Indeed, paragraph 49 of the framework document plainly contradicts such an approach. The reality is that this Claimant's need for continuing healthcare will only be removed for so long as a private package has been successfully established and implemented. Unless and until that has occurred, the principle set out in paragraph 47 of the framework document cannot apply.

But is that right? It may not be right:

As was pointed out to the Judge, the further that the 2009 Directions go is to say, at paragraph 2(6) that “If the PCT decides that the person has a primary health need, it must also decide that the person is eligible for NHS CHC”. The purpose of The NHS Continuing Healthcare (Responsibilities) Directions 2009 (“the Directions”) is to distinguish between persons eligible for NHS care and persons eligible for LA social care, in the light of the decision in R v North and East Devon HA ex p Coughlan [2001] QB 213 . As to whether the person concerned will ever become entitled to NHS care, and if so what level of care, or LA social services care, that will depend on how the PCT, or the LA, apply the statutory criteria relating to the provision of care services, in the individual case. That it recognised by para 2(1) of the Directions, which states that PCTs must comply with the Directions “In exercising their functions under sections 2 and 3 of the 2006 Act”: i.e. ultimately, the function that is to be exercised is a function under s 2 or s 3 and not a function under the Directions. Thus, although the PCT in the Booker case accepted that the Claimant was eligible NHS Continuing Healthcare, it surely remained entitled to decide that it was not “necessary” to meet the Claimant’s “reasonable requirements” to provide it. There are other reasons why I don’t think it can be right, that an assessment that finds that a person is “eligible” for NHS CHC creates a duty to provide NHS services. For example it may be discovered, after the assessment has been completed, that the person concerned is not ordinarily resident in the UK and may only be provided with health care services if they pay charges, under section 175 of the Act. If they fail to pay charges, it is difficult to see any court deciding that, nonetheless, the PCT is required to provide health care because of the CHC assessment. Equally, the person concerned may require a number of services that the NHS is entitled to charge everyone for – there is a range of charging provisions in Part 9 of the 2006 Act: impossible to see why a CHC assessment would nullify that entitlement and require the NHS to make free provision.

The passages in the National Framework document, relied on by the Judge, (i) are no more than (statutory) guidance, (ii) are not directed at advising PCTs on how to reach decisions under section 3 of the NHSA 2006 as to whether any health care services should be provided at all, (iii) have the limited function of advising PCTs not to ignore or downgrade needs because they are currently being well-managed, for example, by relatives caring for an individual at home, or by social workers/nurses caring for an individual at home or in a care home. True it is that a PCT must not become distracted from the task of assessing whether a person is eligible for CHC by the setting in which care is currently being provided, or by the fact that it is currently well-managed, or by reference to any other “input-related” factor, as set out in para 49 of the Framework document. But that seems to me to be as far as the Framework document goes. The Judge seems to have read the guidance in a different context and in a way that it was not intended to be read.

One might think that the whole point of Coughlan was to establish that NHS bodies are entitled to take into account the level of care available from other persons (in that case, SSA) when deciding whether they ought to provide health care services and, if so, to what extent. One might think that the whole point of Coughlan was that NHS bodies are entitled to reduce their level of health care provision, in cases where another person (in that case an SSA) was under, or could be placed under, a legal obligation to provide such services itself.

The judgment was handed down last Wednesday, the 28thOctober 2010. NHS Oldham is considering an appeal but whether, in the current climate, they do decide to appeal, remains to be seen. However, the stakes may be quite high. The thrust of HHJ Pelling QC’s judgment is that PCTs cannot take into account the availability of tortfeasor-provided funds, even where those funds are available specifically for the provision of health care services. The consequences of that appear to be that (i) NHS bodies cannot prevent double recovery by successful claimants e.g. who recover damages for health care for period A, but still request NHS services for period A, (ii) NHS bodies cannot prevent claimants and defendants agreeing, for whatever reasons, good or bad, to defer the start date of privately funded care packages. More broadly, the effect of HHJ Pelling’s judgment is to convert an NHS CHC assessment into a decision that creates a duty to provide NHS services, irrespective of the existence of other circumstances that would otherwise entitle the NHS not to provide services at all, or to charge. Important though it is that the NHS aims to provide a comprehensive service free at the point of delivery, it is not at all clear that the Judge has got this one right, or that the decision is a very politic one, given the current period of public sector austerity, where bodies like PCTs need as much money as they can get. [NB since this talk was delivered, NHS Oldham decided not to appeal].

Dowry payments

Over the last 20 years or so, the view in the DoH, and more widely, appears to have been that it is more appropriate for social services authorities to undertake responsibility for some groups “traditionally” cared for by the NHS, including adults with learning disabilities and elderly, frail and mentally infirm groups: see HSG (92) 43, especially at Annex A, paragraphs 1 to 3. A variety of mechanisms have been introduced to facilitate these transfers and to soften the financial blow to SSAbudgets. Dowry payments – made under section 28A of the NHSA 1977 and section 256 of the NHSA 2006 - are one such mechanism.

It does not appear likely that dowry payments were intended to continue to be made for ever. On the other hand, in the absence of guidance from the DoH, a number of disputes are arising between PCTs and SSA, as to how and in what circumstances such payments should reduce or cease. A comprehensive review of this fairly complex field is beyond the scope of this paper. However, of note in the present context is that PCTs and SSAare often in dispute as to the significance, or otherwise, of the NHS Continuing Healthcare scheme. Put very crudely, some PCTs tend to support the line that the existence of the NHS Continuing Healthcare scheme detracts from any ongoing responsibility on their part to make dowry payments, on the basis that the scheme supersedes dowry payment agreements, so that PCTs are responsible in CHC cases, but not otherwise. SSAtend to take the opposite view. The writer leans towards the opinion that the existence of the NHS Continuing Healthcare scheme is not a “magic bullet”.

Section 256 of the NHSA Act authorises PCTs to make payments to SSA in respect of the provision of services that the Secretary of State has decided are not appropriate to be provided as part of the health service, specifically:

Towards expenditure incurred or to be incurred by SSA in connection with any social services functions (section 256(1));

Towards expenditure incurred or to be incurred by SSA in connection with the performance of any of its functions which in the opinion of the PCT have an effect on the health of any individuals, or have an effect on, or are affected by, any NHS functions or are connected with any NHS functions (section 256(3)).

The fact that a person is assessed as not meeting the criteria for NHS Continuing Healthcare would appear to trigger, rather than defeat, this power to provide financial support. I.e. the power to provide financial support, or dowry payments, seems actually designed to cover cases where there PCT has decided that there is not any CHC need. Further, the distinction between primary health needs and other needs is a very long-standing one. Although it has recently been the subject of considerably more focus, in and after Coughlan, its difficult to say that the essentials of the statutory scheme have changed significantly.

Further, the power that PCTs have, under sections 1 to 3 of the NHSA 2006, to provide health care services is very broad and allows provision to be made in any case of illness (defined at section 275 of the NHSA 2006 as including disorder or disability of the mind and any injury or disability requiring medical or dental treatment or nursing). It would be surprising if the NHS Continuing Healthcare scheme was intended to, or had the effect of, reducing the scope of this statutory power. The view of the DoH, which this speaker respectfully inclines to follow, is that it does not. In its practice guidance, published on the 26thJune 2007, called The National Framework for NHS Continuing Healthcare and NHS-funded Nursing Care, the DoH stated, at paragraph 69:

Other existing commitments to NHS funded care

69. There may be other circumstances, aside from a PCT’s responsibilities for NHS Continuing Healthcare and under the Mental Health Act 1983, when the NHS will be expected to take responsibility for a person’s long-term care. An example might be people with learning disabilities, where there may be an existing commitment to fund ongoing care to individuals following the closure of long stay hospitals or campuses. These responsibilities arise independently of the PCT’s responsibility to provide continuing care and there should not be any assumption that these responsibilities equate to eligibility for continuing care or vice versa.

This seems to indicate that the NHS Continuing Healthcare scheme imposes obligations but does not curtail the power that PCTs continue to have to make provision outside the scheme.

The revised 2009 guidance (with the same title), seems to go even further and provides, at paragraph 110:

other existing commitments to NHS-funded care

110. Apart from a PCT’s responsibilities for NHS continuing healthcare and its responsibilities under the Mental Health Act 1983, there may be other circumstances when the NHS is expected to take responsibility for a person’s long-term care. One example might be people with learning disabilities, where there may be an existing agreement to fund ongoing care for individuals following the closure of long-stay hospitals or campuses. These responsibilities arise independently of the PCT’s responsibility to provide NHS continuing healthcare, and there should be no assumption that these responsibilities equate to eligibility for NHS continuing healthcare or vice versa. Such agreements vary in terms of the commitments they make to fund needs that subsequently arise. Where additional needs do arise, it will be important for the PCT to first check whether there is clarity in such agreements on whether or not they cover responsibilities to meet such needs. If the additional needs fall outside the agreement, PCTs must consider their responsibilities to meet them, in terms both of a PCT’s general responsibilities and potential eligibility for NHS continuing healthcare. PCTs should also have arrangements in place for the transfer to the relevant LA of commissioning and funding responsibilities for social care services for people with learning disabilities.

It seems fairly clear from this that the DoH guidance is that the NHS can provide health care services in cases where a person is not assessed as being eligible for CHC, or for services under the MHA 1983. This strongly suggests to me that the existence of the CHC framework is not in itself a reasonable basis for terminating dowry payments; albeit that there may be many other grounds on which it could be proper to do so. Incidentally, this Guidance from the DoH also seems to be inconsistent with the approach of HHJ Pelling QC in the Booker case because it shows that the existence of a duty under s 3 of the 2006 and the presence of eligibility under a CHC assessment are not synonymous: you can have one without the other. Although in this context, it is a duty under s 3 without any CHC eligibility, rather than the other way around, the point would seem to be a good one.

That last reference, in the passage from the Guidance set out above, seems to be to the DoH’s letter with annexures of August 2008 called Valuing People Now: Transfer of Responsibility for the Commissioning of Social Care for Adults with a Learning Disability from the NHS to Local Government and Transfer of the Appropriate Funding. This reminds the reader that the Secretary of State has continued to fund PCTs to commission social care services in respect of persons with a learning disability i.e. persons who are not entitled to NHS continuing healthcare. It sets out a framework for the transfer of such budgets and commissioning responsibility to social services authorities and makes it clear that such transfer arrangements “do not alter existing, or proposed arrangements in respect of health care services under section 256 ….. of the National Health Service Act 2006….” (paragraph 11).

Further, there is no explicit suggestion, anywhere in HSG (92) 43 or HSC 2000/011 – guidance dealing specifically with dowry payments - that PCTs are limited to making payments to cases where individuals would be entitled to NHS continuing healthcare. Indeed, if the guidance imposed such a limitation, there might be very few occasions on which it would be lawful to make payments under section 28A.

More widely, whilst there are few hard and fast obligations to make dowry payments, and whilst there could not be any reasonable expectation that such payments will last indefinitely, neither do there appear to be any sharp cut-off dates, unless of course that has been agreed in the documents arranging the dowry payments. A broader analysis of dowry payments is outside the scope of a paper intended to focus on NHS Continuing Healthcare. There is, however, a practice note on dowry payments, that might be of some interest, on the Garden Court Chambers’ social welfare law website, at

After-care services under section 117 of the Mental Health Act 1983

DoH guidance Who pays? Establishing the responsible commissioner has this to say:

84. If a person is detained for treatment under the Mental Health Act 1983, the responsible commissioner will be subject to the same principles set out in paragraphs 6-8. Every effort should be made to determine GP practice registration or establish a resident address, but if this is not possible, the responsible commissioner should be determined by the location of the unit providing treatment. Therefore, in this context, the PCT in which the facility is located becomes the responsible commissioner for these purposes. The responsible commissioner for the provision of ‘after-care’ services under Section 117 of the Mental Health Act 1983 is determined according to Section 117 (see HSC 2000/003) and not under the arrangements explained in paragraphs 6-8.

85. Under section 117 case law (R v Mental Health Review Tribunal ex parte Hall) [1999] a patient who was resident in an area before admission to hospital does not cease to be resident there because of his/her detention under the Act. If a patient with ordinary residence in one area is discharged to another area, it is the responsibility of the health and social services authorities in the area where the patient was resident before admission to make the necessary arrangements under section 117. This will continue to be the case even if the patient registers with a GP in the new area. However, where a patient does not have a current residence, the responsibility for providing after-care under section 117 falls to the health and social services authorities covering the area to which the person is sent on discharge.

86. Where a patient is discharged to their area of residence prior to detention for treatment, the arrangements outlined in paragraphs 6-8 would apply in most cases. The only variation would be if the patient were registered with a GP in another area. Under the relevant case law, responsibility for provision of after care under section 117 is determined solely by the area of residence of the patient, not the location of the GP.

87. Section 117 does not apply to patients detained for assessment under section 2 of the Mental Health Act. For these patients, and for patients treated voluntarily for mental health problems the arrangements set out in paragraphs 6-8 for identifying the responsible commissioner apply.

Thus, whilst PCT responsibility normally turns on GP registration, and so on, in section 117 cases, it turns exclusively on the operation of section 117 itself. Recent guidance from the DoH and case-law confirm that in the context of section 117 aftercare services, the question is where the patient resided in fact, irrespective of the existence of deeming provisions under the National Assistance Act 1948, that require the patient to be treated as residing elsewhere, for the purposes of the 1948 Act. So the PCT and SSA responsible under section 117 are those for the area where the patient was resident in fact immediately prior to his compulsory admission (where an area of prior residence can be identified at all), notwithstanding that the person concerned was:

Living in care home accommodation arranged under sections 21 and 26 of the National Assistance Act 1948 (“the 1948 Act”) arranged by SSAB and, therefore, deemed for the purposes of the 1948 Act to be ordinarily resident in the area of SSAB, by virtue of section 24(5) of the 1948 Act;

In “NHS accommodation”[1]and, therefore, deemed for the purposes of the provision of residential accommodation under the 1948 Act to be ordinarily resident in the area, if any, in which he was ordinarily resident immediately before he went into NHS accommodation, by virtue of section 24(6) of the 1948 Act.

There are 3 reasons why that is the case:

As indicated in Who pays?, in R v Mental Health Review Tribunal ex p Hall (1999) MHLR 49, Mr Justice Scott Baker held that section 117(3) of the Act meant that the authority responsible was the authority for the area in which the person concerned was resident at the time he was detained; the authority for the area where the person was sent on discharge only became responsible in a case where it was impossible to ascertain the area in which the person had been resident at the time of detention (see paragraph 40, where Mr Justice Scott Baker also said “One or the other authority is responsible but not both ………… The words “or to whom he is sent on discharge by the Tribunal” are simply to cater for the situation where a patient does not have a current place of residence”).

In Ordinary Residence: Guidance on the identification of the ordinary residence of people in need of community care services, England (March 2010), the Department of Health provides statutory guidance about responsibility for after-care services under section 117 of the Act, at paragraphs 182 to 189. The guidance is aimed at SSA, but in this respect is of equal relevance to PCTs. Paragraph 184 states in bold font “The term “resident” in the 1983 Act is not the same as “ordinarily resident” in the 1948 Act and therefore the deeming provisions (and other rules about ordinary residence explained in this guidance) do not apply”. Paragraphs 185 and 188 state that “………….. responsibility for the provision of such services falls to the local authority and the PCT for the area in which the person was resident before being detained in hospital, even if the person does not return to that area on discharge …………. The duty to provide after-care services remains with the same local authority even if the person subsequently becomes resident in another area, unless they are then re-detained under a provision of the 1983 Act which again entitles them to section 117 after-care. In this situation, the rules would need to be applied again from scratch, to decide which authority has responsibility for any after-care once the person leaves hospital again”;

Section 117(3) of the Act requires one to focus, quite simply, on where the person concerned was resident in fact at the time of the compulsory admission. That was the conclusion reached by Mr Justice Mitting in R (M) v Hammersmith & Fulham LBC and others [2010] EWHC 562 Admin, see paragraphs 25 – 28. Even in a case where the person concerned was deemed to be ordinarily resident in the area of local authority A, by virtue of section 24(5) of the National Assistance Act 1948, despite being physically resident in the area of local authority B, the person concerned was still resident in the area of local authority B for the purposes of section 117(3) of the Act.

Cases on the NHS/SSA divide post Coughlan and Grogan

There have been 2 cases of particular relevance, which are simply noted here, it being understood that other speakers will cover these:

R (St Helens BC) v Manchester PCT[2008] EWCA Civ 931: a PCT, as the delegate of the Secretary of State, was a primary decision maker. In the circumstances its decision that it was not responsible to pay for the carein her home of a woman requiring constant care, under the NHS Continuing Healthcare scheme, was amenable to orthodox judicial review, but not to a fully fledged substantive challenge which the court itself must decide. Of course, as the Court indicated, PCTs and SSAs should do everything possible to reach agreement and should not deplete public funds by resorting to litigation. Ultimately, however, the Court held that the determinative decisions are made by the PCT. So, in my view, whilst the PCT should do everything it can to be reasonable and reach agreement with the SSA – and there are now of course more dispute resolution procedures than there were at the time of the St Helens case – it is ultimately, the SSA that has to accept the PCT decision, in anything but the most exceptional case.

R (Green) v South West SHA and others[2008] EWHC 2576 Admin: a health authority had correctly decided that an individual was not eligible for continuing NHS care. In reaching its decision it had relied on its published eligibility criteriafor continuing healthcare, which accorded with the relevant government policy, legislation and case-law.


5th November 2010

[1]Defined in section 24 as follows:

24(6A) In subsection (6) “NHS accommodation” means—

(a) accommodation (at a hospital or elsewhere) provided under the National Health Service Act 2006 or the National Health Service (Wales) Act 2006, or

(b) accommodation provided under section 117 of the Mental Health Act 1983 by a Primary Care Trust or Local Health Board, other than accommodation so provided jointly with a local authority.]

[(6B) The reference in subsection (6A)(b) to accommodation provided by a Primary Care Trust includes a reference to accommodation—

(a) in respect of which direct payments are made under regulations under section 12A(4) of the National Health Service Act 2006, and

(b) which would be provided under section 117 of the Mental Health Act 1983 apart from the regulations.]

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