Retrospective continuing care funding and redress...1. In February 2003 I presented to Parliament my...

HC 386

Retrospective continuingcare funding and redress

Retrospective continuing care funding and redress | March 2007 | 1

Retrospectivecontinuing carefunding and redress

3rd ReportSession 2006-2007

Presented to Parliament pursuant to Section 10(4) of the ParliamentaryCommissioner Act 1967 and Section 14(4) of the HealthService Commissioners Act 1993

Ordered byThe House of Commonsto be printed on13 March 2007

HC 386London: The Stationery Office£7.50

2 | Retrospective continuing care funding and redress | March 2007


Foreword

In February 2003 and December 2004 in my role as Health ServiceOmbudsman for England, I laid before Parliament two reportsabout my investigations into complaints about funding for thecontinuing care of elderly and disabled people. The first of those,NHS funding for long term care (HC 399) made a number ofrecommendations to strategic health authorities (SHAs) andprimary care trusts (PCTs). They included the recommendationsthat SHAs and PCTs should:

review the continuing care eligibility criteria used by theirpredecessor bodies, and the way those criteria had been applied,since 1996, taking into account the Coughlan judgment, guidanceissued by the Department of Health and my findings; and

make efforts to remedy any consequent financial injustice topatients, where the criteria, or the way they were applied, werenot clearly appropriate or fair. This would include attempting toidentify any patients in their area who may wrongly have beenmade to pay for their care in a home and making appropriaterecompense to them or their estates.

As a consequence of the retrospective review of continuing carecases undertaken by the NHS when following theserecommendations, some people have now been grantedretrospective NHS funding for continuing care. While I am pleasedthat some people who had been wrongfully denied funding havenow received redress for the maladministration I identified, I havereceived a number of complaints about the amount of redresspaid by primary care trusts.

The complainants have alleged that the redress they receivedfailed to compensate them or their relatives fully for all thefinancial losses they suffered while having to fund essential longterm care.

Primary care trusts have said that, in deciding on the amount ofcompensation for those who had been wrongly denied funding fortheir continuing care, they were following Department of Healthguidance.

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One of the complaints to me was made by Ms T following therefusal of Greenwich Teaching PCT to provide financial redress forthe premature sale of her uncle’s property. Ms T also complainedto me, via her MP, about the role of the Department’s guidance inthe PCT’s decision.

PCTs are within my jurisdiction as Health Service Ombudsman forEngland and the Department of Health is within my jurisdiction asParliamentary Ombudsman. Therefore, unusually, I issued a singleinvestigation report in relation to Ms T’s complaint. As I considerthat the issues raised will be of interest to Members generally, aswell as to professionals working in the fields of health and socialcare, voluntary organisations and advisers, I am laying this reportbefore Parliament under section 10(4) of the ParliamentaryCommissioner Act 1967 and section 14(4) of the Health ServiceCommissioners Act 1993.

Ann Abraham

Parliamentary and Health Service Ombudsman

March 2007


Summary

The Parliamentary Ombudsman found that there wasmaladministration in the Department of Health's decision makingand communication of its approach to recompense for wronglydenied continuing care funding. The Department had advised theNHS to pay recompense based on the principle of restitution foronly those monies paid out in care fees. Their approachdiscouraged PCTs from considering full redress, including, forexample, redress for claimed financial loss for premature sale of aproperty or inconvenience and distress that individuals hadsuffered in making unnecessary difficult decisions about how tofund care. The Health Service Ombudsman concluded thatGreenwich Teaching Primary Care Trust had not acted withmaladministration and it was not responsible for theconsequences of its attempts to implement the Department'sunclear and inconsistent guidance to the NHS.

The Department's maladministration resulted in inconsistency inpayments. However, for most people this is unlikely to haveresulted in significant unremedied injustice.

The Parliamentary Ombudsman recommended that theDepartment should develop and distribute properly considerednational guidance for the NHS on continuing care redress whichaims to return individuals to the position they would have been inbut for the maladministration which wrongly denied themcontinuing care funding. The guidance should:

a) include a reminder to the NHS that PCTs can make compensation payments for:

• financial loss, including interest, which is demonstrably attributable to the wrongful denial of continuing care funding and is aimed at returning the individual to the financial position he or she would have been in but for the maladministration; and,

• inconvenience and distress caused by having to make difficult financial decisions at a challenging time which were unnecessary because continuing care should have been funded. Such payments should recognise the degree of inconvenience and

Joint report by the Parliamentary Commissioner forAdministration (Parliamentary Ombudsman) and the HealthService Ombudsman for England


distress that was suffered by complainants. In somecases this may be a significant sum of money, in others a smaller sum. There will be cases where anysuch payments will be accounted for by the financial gain from unreclaimed state benefits and/or state pension payments;

b) give clear guidance to the NHS about how to calculate interest payments;

and make it clear that, where inconsistencies in using the Retail Price Index have resulted in significant financial injustice, adequate remedy should be made;

c) include information for PCTs about the responsibilities of local authorities to offer deferred payment agreements from October 2001, so that complaints can be promptly considered by all the relevant bodies;.

d) where, in the light of this guidance on continuing care redress, PCTs identify systemic unremedied injustice, the Department should support them in taking action to remedy the injustice.

The Department accepted the recommendation and agreed topublish such guidance.


Introduction

1. In February 2003 I presented to Parliament my first report onNHS funding for long term care (HC399). This reporthighlighted my concerns that individuals had suffered injusticeas a result of over-restrictive eligibility criteria for continuingcare funding. I concluded that weaknesses in the Department'sguidance on continuing care had contributed to the localdifficulties that I had identified. In response to one of myrecommendations the Department asked the NHS toinvestigate complaints of wrongful denial of continuing carefunding and remedy any identified injustice.

2. Since February 2004 my Office has received and considered anumber of complaints about the redress paid by Primary CareTrusts (PCTs) as recognition of their maladministration inwrongfully denying NHS funding for the long term care ofsome elderly and dependent people. The complainants allegedthat the financial redress they had received from PCTs did notadequately compensate them for all the financial losses tothem or their relatives' estates, nor for the inconvenience anddistress they and their relatives had suffered. In the course ofmy enquiries and investigations, PCTs told me that incompensating those who had been wrongly denied funding fortheir continuing care, they were following guidancedisseminated by the Department.

3. One of these complaints was made by Ms T. Ms T complainedabout the role of the Department's guidance to the NHS in therefusal by Greenwich Teaching PCT to provide financial redressfor the premature sale of her uncle's property. The backgroundto Ms T's complaint is set out in Annex A.

4. In considering Ms T's complaint, I therefore took into accountthe actions of the Department in deciding on an approach toproviding recompense and in issuing guidance on that approachto the NHS. I have assessed the impact of this on GreenwichTeaching PCT as well as the impact on other PCTs across thecountry. Finally I considered whether the injustice arising fromthe continuing care funding maladministration I had identifiedwas adequately remedied.

5. The matters raised by Ms T, and others, are within my remit asboth Parliamentary Ombudsman and Health Service


Ombudsman for England and there has been consultationwithin my Office on these points. In reaching a decision in myinvestigation of the Department as Parliamentary OmbudsmanI have taken account of relevant information obtained duringmy investigation of Ms T's complaint, which includes relevantinformation emerging from similar complaints about redressfor continuing care funding maladministration made to me asHealth Service Ombudsman. Similarly, the findings of myinvestigation of the Department were relevant information forthe purposes of my investigation of and decision in Ms T'scomplaint about Greenwich Teaching PCT, and in other similarcomplaints made to me as Health Service Ombudsman aboutthe actions of PCTs.

6. During the course of this investigation relevant documentswere obtained from a variety of sources and further evidencewas taken at interviews. This included a meeting between myinvestigators and Department officials in February 2005 todiscuss the question of redress for maladministration inconnection with continuing care funding. I have not included inthis report every detail investigated, but I am satisfied that nomatter of significance has been overlooked.


The investigation of theDepartment by theParliamentary Ombudsman

The basis for the Department's approach onrecompense7. By late April 2003, in response to my firstreport as Health Service Ombudsman for Englandon NHS funding of long term care (HC399), theDepartment had agreed that the NHS shouldmake recompense to those wrongly deniedcontinuing care funding. The Department haddecided that the basis of this recompense shouldbe restitution. In this instance the Departmentdecided that restitution meant reversing the'false enrichment' of the NHS; that is, that theNHS would pay back the money it had gained bynot paying care fees which should have fallen tothe NHS's budget.

8. The Department's explanation for theirapproach of restitution was that the relevantpolicy team1 considered it would be:

• what an individual would get if they tookcourt action against the NHS and won;

• consistently applied by the NHS and,therefore, fair and equitable;

• relatively quick and easy to administer;

• in keeping with the need for proper care anduse of public funds; and

• in line with Ministers opinions.

9. The Department said that they felt undersignificant pressure from my Office to rectify thesituation quickly and get the retrospective reviewprocess under way. In coming to a decision about

restitution, precise details of the basis ofindividual payments had not been discussed withthe NHS; at that stage the NHS was simply toldthat recompense would be due if it was acceptedthat someone had been wrongly deniedcontinuing care funding.

10. The Department decided that an alternativeapproach to restitution, such as compensationfor financial loss other than fees, would be tootime-consuming and potentially too intrusive forcomplainants. This was because they thought itmight involve the NHS in making detailed andcomplex assessments of individual financialcircumstances and they were aware that the NHSwas not used to making such assessments. Also,they said they wanted to avoid making judgmentsabout the decisions people had made about howto raise the money to pay for fees. They believedthat in most cases there would be no strongcausal link between the NHS's denial ofcontinuing care funding and the individualdecisions people had made. They considered thatthe principle of restitution would achieveconsistency for all complainants, whereas analternative system based on those personaldecisions and the ability of individuals to prove acausal link would not.

11. The Department's policy team haveacknowledged that when they made the decisionon restitution they were unaware of HM TreasuryGuidance in 'Government Accounting 2000' (GA2000), which includes the guidance for centralgovernment departments on financial redress toremedy the consequences of maladministration.They were, therefore, unaware that GA 2000includes principles about redress; to aim to returnindividuals to the financial position they wouldhave been in but for the maladministration onthe part of the public body. However, in

1. Continuing Care and Delayed Transfers of Care

response to my investigation, the Departmentsaid that, in their opinion, the principle on whichtheir restitution policy was based could beconsidered to be in line with GA 2000, whenconsidered in hindsight. The Department alsotold my staff that the GA 2000 section onredress, although applicable to the Departmentitself, was not applicable to the NHS, which wasneither a central government department nor anon departmental public body.

The Department's provision of guidance to the NHS12. In April 2003 the Department issued adviceto Strategic Health Authorities (SHAs) oncalculating potential recompense costs: the'national methodology on estimating continuingcare provisions'. This was the first formal writtencommunication to the NHS with respect tofinancial calculations for recompense. During myinvestigation, the Department said that thisguidance was intended for NHS financemanagers; it advised them how to prepareestimates of the anticipated total cost ofrecompense. This document also provided advicethat the NHS should not adjust recompensepayments to take account of an individual's levelof benefit income or any social services' meanstesting, even when these had arisen because ofthe decision not to award NHS funding forcontinuing care. The basis for this advice wasthat: 'The payments are restitutionary claimsbased on the fact that the NHS body has beenunjustly enriched. The NHS pays what it wouldhave paid (i.e. the full costs).' The Departmentsuggested in this guidance to SHAs that provisionbe made for payments of interest on recompenseat the Bank of England base rate in operation foreach relevant financial year, given that theDepartment's legal advice had indicated that theNHS may be expected to pay interest oncontinuing care recompense. SHAs were alsoadvised through this document that furtherguidance on whether and how much interest


should be paid on claims was being developed bythe Department. The Department have sinceclarified to my staff that the use of the Bank ofEngland base rate for interest calculations whenestimating the anticipated cost of recompensewas to ensure that these estimates providedflexibility for calculating individual payments inthe future.

13. From then on, the principle of correcting thefalse enrichment of the NHS was alsocommunicated at regular meetings between theDepartment and SHA Older People's Serviceleads and in response to specific queries from theNHS by telephone and email. For example, in May2004 the Department's Continuing Care Leademailed a SHA Finance Director in response to aquery about restitution, advising 'reimbursement(restitution) is for unjust enrichment ie of theNHS for the cost of care denied. So we pay outfor care costs (+ interest) but not anything else'.

14. No further written guidance on theprinciples of restitution was issued, nor was thereany reference to the existing powers of PCTs tomake compensation payments in respect ofactual financial loss, inconvenience and distress.When my staff raised this with the Departmentthey maintained that PCTs knew about theirexisting powers and there had been no need toremind them. However, investigation of thecomplaints I have received shows that this wasinitially not clear to all PCTs. Also, PCTs werereluctant to exercise these powers, which theyinterpreted as being against the Department'sguidance. In response to complainants, PCTsindicated that they did not have the power to actin contravention of the Department's guidance.

15. Furthermore, the provision of additionalresources for recompense had been calculated onthe basis of restitution payments only. During myinvestigation, the Department explained that atthe end of the financial year 2002/2003, £250


million was added to the NHS's nationalallocation in recognition of the additionalfinancial pressure that would be created byrecompense for retrospective continuing carefunding. Each PCT was asked to estimate thetotal costs of recompense in their area, using theDepartment's guidance issued in April 2003.These estimates were refined during the financialyear 2003/2004; resulting in an estimate ofapproximately £187 million when PCTs' end ofyear financial accounts were finalised in April2004. The additional funding was not ring-fencedsolely for continuing care funding - this is notunusual for the allocation of funding to the NHS- it was for each PCT to manage its own spend oncontinuing care recompense within its agreedallocation of funding. The Department made itclear to the NHS that all recompense paymentswere to be managed within the agreed provisionand any additional payments would need to befound from existing PCT budgets.

Final guidance on interest rates 16. In November 2003, the Department issued'Continuing Care guidance on interest payments'to the NHS. They advised that, subject to locallegal advice, the NHS should include interestbased on the Retail Price Index (RPI) when payingrecompense. This developed their earlier adviceof April 2003 to NHS finance managers: 'the NHSmay be expected to pay interest on claims.Further advice is being developed…..it may beappropriate for NHS bodies to make provisionfor interest based on the base rate in operationfor each financial year affected.' TheDepartment have since clarified to my staff thatthe April 2003 guidance on estimating provisionswas not intended to give advice to the NHSabout interest for individual payments. In thecourse of my investigation, the Departmentprovided the formula that they had expected theNHS would use to calculate RPI as a simple rateof interest. The Department clarified that they

expected that PCTs should satisfy themselvesthat their method of calculation had a minimalfinancial impact on the final value ofrecompense and that if the impact wassignificant PCTs might use the more complexformulas to calculate compound interest.

17. The November 2003 guidance on interestrates did not include the Department's rationalefor advising the NHS to use the RPI and I haveseen no evidence that this was provided in anysubsequent communication with SHAs and PCTs.Further, in the complaints put to me, therationale for, and in some case an explanation ofhow, the RPI had been applied was notcommunicated by PCTs to individuals when itwas used to uplift restitution payments.

18. In January 2004 a SHA queried theDepartment's November 2003 guidance oninterest payments. They asked whether a higherrate than the RPI might be appropriate and howto respond to complainants on this point. Inresponse, the Department's Continuing Care Leadwrote 'The answer is don't draw attention to itand say Department has issued guidance oninterest…The explanation is that recompensemeans restitution of the actual cost of NHScontinuing care that should have beenprovided…so recompense is of the funds notproperly provided, not what the individual mighthave paid….The recompense therefore covers thecost of services not provided. This is the systembeing used across the country, and money hasbeen made available to the NHS to support this'(by email dated 16 January 2004). This responsedid not explain why the Department decided toadvise the use of the RPI, or that this decisionshould be subject to local legal advice.

19. In the course of my investigation, theDepartment subsequently provided to my stafftwo explanations for the use of the RPI. The firstreason the Department gave was that the RPI was

widely used by the NHS to measure increases inthe cost of care. They said that they hadreasoned that the NHS's experience in makingsuch calculations based on a RPI formula wouldmake it the most straightforward method forthem to use when calculating interest forcontinuing care recompense payments. A secondreason given by the Department was that theywished to avoid overcompensating individualsbecause some individuals, when they werewrongly denied continuing care funding, receivedbenefits they would not otherwise have beenentitled to. The Department, therefore, contendthat the retention of these benefits, combinedwith the use of the RPI, was equivalent to the useof a higher rate of interest.

Status of the Department's guidance20. The Department's initial response to myenquiries was that the guidance they gave to theNHS was 'general advice'. They added that 'thiswas, however, a framework and did not preventother solutions in exceptional cases. PCTsretained the power to exercise discretion inindividual cases'. During my investigation, theDepartment added that they had beenconstrained in the amount of formal guidancethat they could give the NHS by the principlesoutlined in 'Shifting the Balance of Power withinthe NHS' (Department of Health, July 2001).

21. The Department explained that before'Shifting the Balance of Power', the prevailingculture in the Department and in the NHScreated an expectation that the Departmentwould provide prescriptive guidance in all areasof policy. The subsequent devolution of powerand decision making to local NHS organisationsmeant that it was no longer the Department'srole to give that same level of direction. TheDepartment considered that they could not beprescriptive in their guidance to the NHS aboutcontinuing care recompense. The Departmentfelt that the shift in culture and the redefinition


of their relationship with the NHS may havecreated some uncertainty amongst health servicebodies as to the status of their guidance andadvice. The Department told my staff that theguidance documents they had provided to theNHS in April and November 2003 were inresponse to queries they had received from SHAsand PCTs by email and at meetings about how tocalculate recompense.

22. The Department reached a nationalagreement with the Department for Work andPensions that social security benefits would notbe reclaimed from individuals whereoverpayments had been made. In their April 2003guidance, the Department told the NHS not toadjust for these payments in estimating totalrecompense. In November 2003, in response toqueries about whether to take benefits intoaccount when making recompense, theDepartment told SHA Older People's leads attheir regular meeting that 'social security benefitsshould not under any circumstances be deductedfrom the total amount of compensation'. This wastherefore a prescriptive approach in relation tothe treatment of social security benefits. TheDepartment went on to clarify at this meetingthat interest could be paid to individuals at SHAs'discretion. The document issued by theDepartment that month stated that it gave'guidance as to the suggested methodology forthe application of interest', adding that PCTsshould take their own legal advice about this andpayment of interest was discretionary.


Findings of the ParliamentaryOmbudsman

23. I will now consider in turn whethermaladministration occurred and the impact ofany maladministration. When deciding if therewas maladministration I considered what was therecognised approach to redress at the time of theDepartment's decision about recompense. TheDepartment did not have principles of redress forthe NHS but, as a central governmentdepartment, were themselves subject to GA2000, which includes that: 'the general principleshould be to provide redress which is fair andreasonable in the light of all the facts andcircumstances of the case. Where thecomplainant has suffered actual financial loss asa result of the maladministration, or faced costswhich would otherwise not have been incurred(and which are reasonable in the circumstances),the general approach should be to restore thecomplainant to the position he or she wouldhave enjoyed had the maladministration notoccurred. Where there is not an actual financialloss or cost, careful judgement will be needed todecide whether financial redress is appropriateand, if so, what constitutes fair and reasonablefinancial redress. ...Payment for non-financial lossshould be exceptional; in all cases, the normalrequirements for the proper care and use ofpublic funds apply.' GA 2000 was revisedTreasury Guidance produced subsequent to theSelect Committee on the ParliamentaryCommissioner for Administration December 1994report 'Maladministration and Redress'. Thisreport identified the need for a clear principle toinform government consideration of redress andthat this should be the principle of aiming toreturn individuals to the position they wouldhave been in but for the maladministration whichoccurred. This report also highlighted the need to

consider whether further compensation for'worry, distress or botheration' is due in the caseof justified complaints.

(a) Maladministration in the Department's decisionmaking24. The issue of recompense formaladministration in continuing care fundingdecisions was a national problem which,therefore, required a national approach. TheDepartment have said that their policy team feltunder pressure to act quickly when deciding ontheir approach to recompense. I understand this.However, the policy team lacked experience infinancial recompense and were aware that theNHS also lacked experience in this area. Unawareof GA 2000 and its underlying principles inrelation to redress, the Department adopted anapproach that was inconsistent with theprevailing government practice set out in GA2000. Neither did the Department have sufficientinformation on the scale of the work involved,the financial resources needed or the types ofpossible injustice that might have been caused toindividuals in addition to the financial loss of theunnecessarily paid fees. The Department'sapproach to recompense for the NHS's wrongfuldenial of continuing care funding focused onremedying the impact on the NHS, that is, theNHS's 'false enrichment'. It did not focus on theimpact on the individuals who had been deniedfunding, that is, the injustice they hadexperienced.

25. The sum of money allocated to the NHS forcontinuing care recompense was based on theDepartment's flawed decision to use restitutionas the approach to recompense. PCTs hadreceived allocations based on making restitutionfor the cost of care plus some form of interestonly and they were aware that any further costsover their estimate would need to be found fromtheir own budgets. Furthermore, PCTs madeestimates of the total future cost of recompense

at a time when there was little understanding ofthe magnitude of retrospective claims forcontinuing care. The Department have told methat by April 2004, when there was furtherinformation about this likely cost, theDepartment had allocated more funds to theNHS than they subsequently estimated would bespent. However, in keeping with standard NHSpractice, these funds were not ring-fenced foruse only on continuing care recompense. Iconsider that these factors would havediscouraged PCTs from considering or makingfurther payments outside of the restitutionframework.

26. The Department failed to take into accountall relevant factors when formulating theirapproach of restitution as the basis forrecompense. That approach did not meet theprevailing government principles forconsideration of redress for maladministrationand the Department did not have adequatereason not to meet these. I have concluded thatthese flaws in the Department's decision makingconstituted maladministration.

b) Maladministration in the Department'scommunication with the NHS27. The decision to pay restitution was poorlycommunicated to the NHS by the Departmentand conveyed contradictory messages. TheDepartment failed to explain the rationalebehind their restitution policy and their guidancecontained insufficient information to enableSHAs and PCTs to make a decision about whetherthe policy would achieve appropriate redress.The Department failed to remind PCTs of theirpowers, for example to make compensationpayments where the circumstances warrantedsuch payments in recognition of inconvenienceand distress. The principles underpinning thedecision to pay interest using the RPI were notexplained and neither was the reason for theearlier advice given to the NHS that it should


include interest at the Bank of England base ratewhen estimating provisions for continuing carerecompense. The guidance was prescriptive aboutnot taking any social security benefits orcontributions to the cost of care from socialservice departments into account whencalculating the amount of recompense payable,yet the decision to pay interest remaineddiscretionary.

28. I accept that the process of devolving powerand decision making from the Department toNHS organisations introduced by 'Shifting theBalance of Power' influenced the way in whichthe Department approached theircommunication of their restitution policy to theNHS. There was a desire not to be prescriptiveand to allow the NHS to make discretionarydecisions to suit its local arrangements. TheDepartment received queries from the NHSabout how to approach continuing carerecompense, which culminated in the writtenguidance I have described in this report. However,I have seen no evidence that the Departmenteffectively monitored queries from the NHSabout recompense to inform decisions aboutwhether any clarification was needed on thatwritten guidance. Instead they held the line thatthe approach should be restitution. Monitoringthe appropriateness and effectiveness of theirguidance was confined to checking that therestitution approach was legally sound in March2004.

29. The inconsistency in the Department'sapproach and a lack of clear guidance to the NHSdid not enable health service bodies to take anequitable and consistent approach torecompense. I have concluded that these failuresin communication amounted tomaladministration.


The impact of the Department'smaladministration

Inconsistency in payments30. The Department's patterns ofcommunication did not support consistency andequity across the NHS in the way in whichrecompense payments were calculated.Furthermore, although the intention ofrestitution was to 'pay what the NHS should havepaid', the evidence shows that, in practice, theNHS was often reimbursing the individual whathe or she had paid with some uprating to today'smoney by means of 'interest' payments using theRPI. In some cases social services means-testedcontributions paid direct to the care providerwere taken into account when calculating theamount payable.

31. As Health Service Ombudsman I haveconsidered a number of complaints aboutcontinuing care recompense where I haveidentified differences in the way the RPI isapplied. In these cases it has been difficult forcomplainants to identify how interest has beencalculated and whether it was accurate, and,therefore, to identify any resulting financial loss.Also, my staff have seen cases where interest atthe RPI has been calculated to the date of theindividual's death rather than the date thepayment of redress was made. As well asdifferences in the amount of interest paid, PCTshave acted differently and the desiredconsistency has been lost in the context of otherissues where the Department's guidance wasrelatively clear, such as the non-reclamation ofbenefits. For example, my staff have seen a casewhere benefits have been repaid to theDepartment for Work and Pensions and nointerest was paid.

32. There are individuals who complain that, had

their relatives' continuing care been correctlyfunded, they would have received a higher rate ofinterest on the money used to fund care in abank or building society savings account orthrough other financial investment. On the issueof interest payments on financial redress, Iconsider that normally interest should be paid atthe rate applied to County Court judgment debt.However, I also consider that payments madefrom the public purse should be considered inthe round. Therefore, in the example of redressfor the wrongful denial of continuing carefunding, I would also take account of socialsecurity benefits and state pension paymentsreceived by care home residents which theywould not have been entitled to had their carebeen correctly funded by the NHS. Manyindividuals retained benefits and state pensionpayments, as a result of the incorrect decisionabout continuing care funding. Having consideredsome specific cases it appears that, in the round,some individuals have been financiallyadvantaged by the combination of retainingbenefits and state pension payments, receivingrecompense for the amount of fees paid and, inaddition, receiving interest using the RPI. This iswhen compared to receiving interest at the rateapplied to County Court judgment debt andtaking account of benefits retained. Thebackground to Ms T's complaint at Annex Aillustrates this.

33. Furthermore, in most cases, due to thepassage of time, the full records on benefits orstate pension payments that were made havebeen destroyed. Therefore, it is generally notpossible to calculate exactly what theseoverpayments might have been. Given thesecircumstances, I do not consider that it would bereasonable for PCTs to spend the considerabletime and effort required to calculate retainedbenefits or state pension payments.

34. I would not consider the use of the RPI to bereasonable as a rate of interest unless a clear casewas made that it was appropriate. In thecircumstances of continuing care retrospectiverecompense, considering financial recompenseindividuals have received in the round, includingtheir retained benefits (arising from the nationalagreement between the Department of Healthand the Department for Work and Pensions), Ihave concluded that this has not resulted in anunremedied injustice for most people.

35. I do consider, however, that differencesamongst PCTs in the amount of interest paidtogether with variations in whether or notbenefits have been repaid to the Department forWork and Pensions, provide clear evidence thatthe consistent approach by the NHS, which theDepartment aimed for by deciding on restitution,was not achieved.

Unremedied injustice

Additional financial loss36. Many people have complained to me thatthey have experienced financial loss in additionto the loss of care home fees and interest. Themajority of these complainants claim that thiswas due to the premature sale of property,although there are other types of complaints. Anexample is the claimed loss of money on anunnecessary insurance plan for future care fees.

37. The Department have told my staff they didnot consider that financial loss due to thepremature sale of property would be an issuebecause it would be unlikely that individualscould demonstrate a causal link between theNHS's failure to fund their care and a decision tosell a property, or take other financial decisions,to enable care home costs to be met.


38. This may be true. I recognise that there arecircumstances where the financial loss claimed byindividuals cannot simply be attributed to thedenial of continuing care funding withoutconsiderable speculation. Similarly, it is difficultto establish exactly what their financial positionwould have been, given the passage of time sincethe events took place. Many individuals can onlyspeculate as to what they would otherwise havedone with property at the time, and are often,understandably, not able to provide any writtenevidence to support their claim. Furthermore, it isarguable that it would be unreasonable to makethe NHS financially liable for the vagaries of theproperty market.

39. The Department have said that the deferredpayment agreement scheme was introduced inOctober 2001 to prevent the premature sale ofproperty when individuals entered long termcare. A deferred payment agreement allows thelocal authority to place a legal charge on anindividual's property instead. Under a deferredpayment scheme the individual's full payment ofthe costs of care is made at the end of thedeferred payment period. This allows individualsto keep their homes whilst in a care home for theduration of the deferred payment agreement.However, not everyone is eligible for a deferredpayment agreement as an individual's assets aretaken into account and some property will havebeen sold prior to the introduction of thescheme. Annex A gives the example of Ms T, whoreferred her complaint to the Local GovernmentOmbudsman (LGO) to consider the actions of theLondon Borough of Greenwich (GreenwichCouncil) in not offering a deferred paymentagreement to her uncle to prevent the sale of hishome in 2002. The LGO discontinued hisinvestigation following Greenwich Council's offerto pay £20,000 to Ms T in redress. There may beinstances where the financial loss claimed isattributable to the actions, or inaction, of the


local authority, rather than the NHS. There is noevidence to suggest that the implications of thedeferred payment scheme on claims for redressfollowing continuing care maladministration weremade clear to PCTs - an omission whichcontributed to a delay in the resolution of Ms T'scomplaint.

40. Taking into account all these factors I donot consider that payments for claimed financialloss should be made in the absence of clearevidence that the denial of continuing carefunding has led to that loss. However, I am clearthat there should be appropriate recompense fordemonstrable financial loss which can beevidenced by the complainant. Not to do sowould result in unremedied injustice.

41. The lack of consistency in the way differentPCTs calculated recompense payments meansthat geographical location was one factoraffecting the total amount of financialrecompense an individual received. This wasunfair to individuals as geographical location isnot relevant in the context of redress due forbeing wrongly denied continuing care funding. I have seen cases where the inconsistency hasbeen so great that, during the course of myinvestigations, PCTs have made furtherrecompense payments. For example, becausesocial security benefit payments have beendeducted or because interest has been appliedonly to the date of an individual's death, ratherthan the date of settlement of recompense.When deciding if further payment is due from aPCT as a consequence of their provision of alower level of recompense to individuals relativeto that made by other PCTs, it is important tobalance the aim of equity with the aim of notwasting resources on reviews of calculations,especially where some information, such asbenefit records, is no longer available. Where theamount of money involved is small, where theamount of money is small relative to the total

amount of recompense due or where theamount of money is accounted for by the valueof benefits retained by an individual, I would notexpect a PCT to make additional payments.However, where a PCT's approach to calculatingrecompense may have resulted in payments toindividuals which are significantly lower thanintended by the Department's guidance, I wouldconsider this to be unremedied injustice.

Inconvenience and distress42. It is clear from the cases I have consideredthat individuals were forced to make difficultdecisions about how to fund care. But for themaladministration which denied continuing carefunding, these individuals would not have beenmaking those difficult decisions. Furthermore,these decisions had to be made at an alreadydistressing time when usually elderly relativeswere experiencing ill health and traumatic, andoften unwelcome, admission to long term carehomes was necessary. That people had to makeunnecessary difficult financial decisions resultedin inconvenience and distress. I consider thatfinancial redress is appropriate in recognition ofthis inconvenience and distress. For some people,including Ms T, the amount of financial redressthat I would recommend is due is accounted forby the financial gain from unreclaimed benefits. Ihave set out my findings with respect to theinconvenience and distress that Ms T suffered atAnnex A.

Summary of findings of theParliamentary Ombudsman

43. There was maladministration in theDepartment's decision making andcommunication of their approach to recompensefor wrongly denied continuing care funding. Thisresulted in inconsistency in payments and thepotential for significant unremedied injustice. TheDepartment's actions did not support the NHS toreturn individuals to the position they wouldhave been in, but for the maladministration whichwrongly denied them continuing care funding.

44. Some individuals received additional benefitpayments that they would not have received ifthey had been provided with continuing carefunding. They have not had to return this moneyand have now also received financial redressequivalent to the continuing care fees paymentsthey made. I have seen examples where the totalamount of money provided appears to beequivalent, or exceeds, appropriate levels offinancial redress I would expect for acombination of both the inconvenience anddistress they experienced and an appropriatelevel of interest on recompense payments.Therefore, when taken in the round, there isunlikely to be significant unremedied injustice formost people.


Recommendation

45. I have one recommendation: that theDepartment should develop and distributeproperly considered national guidance for theNHS on continuing care redress which aims toreturn individuals to the position they wouldhave been in but for the maladministration whichwrongly denied them continuing care funding.This guidance should:

a) include a reminder to the NHS that PCTs can make compensation payments for:

• financial loss, including interest, which isdemonstrably attributable to the wrongful denial of continuing care fundingand is aimed at returning the individual to the financial position he or she would have been in but for the maladministration; and,

• inconvenience and distress caused by having to make difficult financial decisionsat a challenging time which were unnecessary because continuing care should have been funded. Such payments should recognise the degree of inconvenience and distress that was suffered by complainants. In some cases this may be a significant sum of money, in others a smaller sum. There will be cases where any such payments will be accounted for by the financial gain from unreclaimed state benefits and/or state pension payments;

b) give clear guidance to the NHS about how tocalculate interest payments; and make it clearthat, where inconsistencies in using the RetailPrice Index have resulted in significant financialinjustice, adequate remedy should be made;


c) include information for PCTs about theresponsibilities of local authorities to offerdeferred payment agreements from October2001, so that complaints can be promptlyconsidered by all the relevant bodies;

d) where, in the light of this guidance oncontinuing care redress, PCTs identify systemicunremedied injustice, the Department shouldsupport them in taking action to remedy theinjustice.

Response from the Department of Health46. In response to a draft of this report the(then Acting) Permanent Secretary said:

'In responding to your 2003 Report, theDepartment was guided by the need to do whatwas fair and reasonable in the circumstances.Departmental officials were, in particular,mindful of the impact of continuing caredecisions on individuals and their families, aswell as the position of the NHS. I am, inevitably,disappointed that you found elements ofmaladministration in our response; and I amgrateful for this opportunity to comment onsome of the important issues you have raised.

I note that you identified two factors whichcontributed to the lack of clarity identified in theDepartment's communications with SHAs andPCTS: the pressure to start the review as quicklyas possible which meant that we developedadvice to the NHS in parallel with starting thereview process; and the renewed emphasis ondevolution to the NHS which influenced the waywe communicated it.

The impact of these factors could have beenminimised by better monitoring of the reviewprocess and better interaction between SHAs,PCTs and the Department. To this end, theDepartment intends to establish a much closerrelationship with the Healthcare Commission,which will enable us to receive updates about

cases arising, to monitor trends and to remedyinjustice more quickly. It should also be notedthat the White Paper, "Our Health, Our Care, OurSay: a new direction for community services"contained a commitment to establish acomprehensive single complaints system acrosshealth and social care. The Department publishedinterim guidance on a revised complaintsprocedure on 1 September 2006, in preparationfor the implementation of a consolidated systemin 2009.

The approach chosen for recompense wasrestitution, that is payments were based on thefunding the NHS would have provided had it metthe cost of the patient's care, together withinterest, with allowance for PCTs to makedecisions according to individual circumstances.The Retail Price Index was chosen to calculateinterest as this is commonly used to calculatethe increasing costs of services. Together withretention of benefits, it was equivalent to ahigher rate of interest. Overall, over 12,000 caseshave been reviewed. I therefore welcome yourcomment that "there is unlikely to be significantunremedied injustice for most people." I alsowelcome the comments, made in the letter fromyour office on 18 January 2006, that you are "notproposing to seek interest payments above RPIbecause in most cases restitution payment andthe unreclaimed benefits will more than coverthe cost of the enhanced interest rate".

In response to your recommendation, we willpublish guidance reminding PCTs of theirobligations and powers regarding redress toclarify issues arising from this report.'

Investigation of GreenwichTeaching PCT by the HealthService Ombudsman

47. PCTs across England have made recompensepayments to individuals, or their estates, incircumstances where the NHS had wronglydenied continuing care funding. My Office hasreceived many complaints about the level ofrecompense paid by PCTs. Some of thesecomplainants, including Ms T, allege that, amongother consequences of being wrongly deniedcontinuing care funding, their relatives' homeshad to be sold prematurely to meet care homefees. Annex A sets out the circumstances of MsT's complaint.


Finding of the Health ServiceOmbudsman

I have found no maladministration in theapproach to recompense by GreenwichTeaching PCT

48. The Department did not give clear guidanceto the NHS or remind PCTs that they could makecompensation payments. When asked for advice,the Department advised quite clearly thatnothing more than restitution should be paid. Itis therefore difficult to see how GreenwichTeaching PCT, or indeed any PCT, could beexpected to exercise their discretion to makecompensation payments aimed at returningindividuals to the financial position that theywould have been in but for maladministration onthe part of the NHS. The Department's decisionto base the allocation of funds to PCTs onrestitution of fees only would also havediscouraged PCTs from using other approaches.

49. Therefore, I do not consider that PCTs wereresponsible for the consequences of theirattempts to implement the Department's unclearand inconsistent guidance to the NHS. I haveconcluded that Greenwich Teaching PCT was notmaladministrative in its approach to providingrecompense to Ms T. Furthermore, I do notconsider that other PCTs acting on the sameguidance were likely to have actedmaladministratively. However, PCTS should beaware that there may be individuals who have notbeen provided redress for the injustice they havesuffered.

Response from Greenwich Teaching PCT 50. I provided Greenwich Teaching PCT with adraft version of this report. They made nocomments on it.


Conclusion

51. I have upheld the complaint against theDepartment. The Permanent Secretary of theDepartment has accepted my recommendationto remedy the injustice resulting from themaladministration I have found. The Departmentwill publish national guidance for PCTs oncontinuing care redress in the near future. Iconsider this to be welcome and appropriateremedy for the maladministration.

52. I have not upheld the complaint againstGreenwich PCT.

Ann Abraham

Parliamentary Ombudsman

Health Service Ombudsman for England

February 2007

HS-2400 and JW-3141 TMs T complained that she would not haveneeded to sell her uncle, Mr R's, house until afterhis death had the NHS assessed him correctly asbeing eligible for NHS continuing care funding.

1. Ms T's uncle was admitted to a nursing homefrom hospital in July 2002. Before he wasdischarged, Greenwich Council had advised Ms Tthat she would need to sell her uncle's propertyto fund his care costs. Ms T delayed GreenwichCouncil's financial assessment for several monthswhilst she pursued an appeal against the decisionof Greenwich Teaching Primary Care Trust (thePCT) that her uncle was not eligible for NHScontinuing care. Despite several reviews by thePCT and South East London Strategic HealthAuthority, the PCT declined to fund his carecosts. Ms T sold her uncle's home shortly after histransfer to the nursing home.

2. Following a retrospective review in March2004, the PCT agreed to reimburse the care coststhat Ms T's uncle had paid. Ms T claimed that shewould have retained her uncle's property until hedied in August 2003, and benefited from theresulting increase in value of £20,000. Her unclehad made it clear to her when he was admittedto nursing home care that he did not want hishouse to be sold and they both found it verydistressing to have had to do so. Ms T soughtfinancial redress from the PCT.

3. I agreed to investigate Ms T's complaintagainst the PCT and the Department inNovember 2004. In June 2005 Ms T referred hercomplaint to the Local Government Ombudsman(LGO) to consider the actions of the LondonBorough of Greenwich (Greenwich Council) innot offering a deferred payment agreementwhich would have prevented the sale of heruncle's home in 2002. The LGO discontinued hisinvestigation following Greenwich Council's offerto pay £20,000 to Ms T in redress.


4. Whilst the financial loss Ms T claims has beenremedied, I consider that it is still the case thatMs T and her uncle experienced theinconvenience and distress of prematurely sellingher uncle's home as a result of having to decidehow to fund his care.

5. The settlement of £27,651 paid to Ms T by thePCT in March 2004 included a sum of £26,822 forthe care home fees that had been paid and £829'in respect of inflation by reference to the RetailPrice Index' (RPI). The PCT did not provide abreakdown of its calculation to Ms T.

6. Based on information provided to my staff bythe Department for Work and Pensions, Ms T'suncle retained £4,531 in benefits (attendanceallowance and state pension).

An alternative approach to calculatingthe recompense due to Ms T is basedon the principle of applying interest atthe County Court judgment debt rateto the care costs paid but takingaccount of the benefits retained(referred to in paragraph 32).

The cost of care paid by Mr R (£26,822)is multiplied by the time between thestart of care and the date the paymentwas made (20 months) and the interestrate (8%) to give a value of interest of£3,576.

The total sum of care fees plus interestis £30,398. The £4,531 in benefitsretained is deducted from this.

I would therefore expect Ms T to havereceived £25,867.

Annex


7. Conclusion

Ms T has been paid £27,651 by the PCT for carecosts and interest and retained £4,531 in benefitsoverpayments; a total sum of £32,182. Therefore,in light of the benefits retained by Ms T's uncle'sestate, I consider that further financial redress inrecognition of the unnecessary distress andinconvenience caused by having to decide howto fund her uncle's care is not required.

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