July 2011

Issues in International Health Policy

Administrative Compensation for
Medical Injuries: Lessons from
Three Foreign Systems
Michelle M. Mello, Allen Kachalia, and David M. Studdert
The mission of The Commonwealth
Fund is to promote a high performance
health care system. The Fund carries
out this mandate by supporting
independent research on health care
issues and making grants to improve
health care practice and policy. Support
for this research was provided by The
Commonwealth Fund and The Robert
Wood Johnson Foundation. The views
presented here are those of the authors
and should not be attributed to The
Commonwealth Fund, The Robert
Wood Johnson Foundation, or their
directors, officers, or staff.

Abstract: The United States requires patients injured by medical negligence to seek compensation through lawsuits, an approach that has drawbacks related to fairness, cost, and impact on
medical care. Several countries, including New Zealand, Sweden, and Denmark, have replaced
litigation with administrative compensation systems for patients who experience an avoidable medical injury. Sometimes called “no-fault” systems, such schemes enable patients to file
claims for compensation without using an attorney. A governmental or private adjudicating
organization uses neutral medical experts to evaluate claims of injury and does not require
patients to prove that health care providers were negligent in order to receive compensation.
Information from claims is used to analyze opportunities for patient safety improvement.
The systems have successfully limited liability costs while improving injured patients’ access
to compensation. American policymakers may find many of the elements of these countries’
systems to be transferable to demonstration projects in the U.S.
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For more information about this study,
please contact:
Michelle M. Mello, J.D., Ph.D., M.Phil.
Professor of Law and Public Health
Harvard School of Public Health
mmello@hsph.harvard.edu

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Commonwealth Fund pub. 1517
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INTRODUCTION
Medical malpractice reform is a perennial issue for state legislatures and, more
recently, for the U.S. Congress. The American medical liability system is widely
acknowledged to perform poorly in several important respects.1,2 Few patients with
injuries due to negligence file claims, in part because of the difficulty of obtaining
attorney representation and the arduousness of the litigation process. Many meritorious cases do not result in compensation to the patient, while many non-meritorious
cases do lead to settlements or jury awards. The amounts awarded are highly variable
across similar injuries, inadequate in some cases and excessive in others. The highly
adversarial litigation process destroys physician–patient relationships and involves
considerable emotional strain for both plaintiffs and defendants. Fear of litigation
chills open discussion about medical errors, resulting in missed opportunities for
learning and patient safety improvement, and leads physicians to order extra tests,

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referrals, and other services primarily for the purpose of
reducing their liability exposure. Such defensive medicine, together with the high cost of malpractice insurance
premiums that increases providers’ overhead costs and
the prices they charge, contributes to the upward growth
of health care expenditures. It is estimated that defensive
medicine alone accounts for more than $45 billion in
health care spending in the United States annually.3
Conversations about medical liability reform in
the U.S. increasingly reflect an acknowledgment that
traditional tort reform measures, such as caps on noneconomic damages, have limited effectiveness in solving the
system’s fundamental problems.4 There is also increasing recognition that such reforms do little or nothing to
make care safer.
Among the liability reform options that have
recently received attention is administrative compensation of medical injuries. Under an administrative model,
claims for medical injuries would be referred through a
simplified process to an administrative body, sometimes
called a “health court,” rather than to the regular judicial
courts. Proposals for such a model typically suggest that
the process be simple enough that claimants would not
need the assistance of legal counsel; that cases be reviewed
by claims handlers and neutral adjudicators who specialize in the evaluation of such claims; that the adjudicators
be assisted by neutral medical experts; that compensation
be awarded to patients without regard to whether the
physician was negligent; and finally that noneconomic,
or “pain and suffering,” damages be awarded according
to a predetermined schedule based on the severity of
the injury. Administrative compensation proposals are
often labeled “no-fault” proposals, but in fact, they rarely
suggest that compensation should be awarded on a true
no-fault basis (meaning that the claimant need only show
that the injury was causally related to medical care). Most
would require that the injury also have been avoidable—
a standard that is easier to meet than the negligence standard but still requires an evaluation of the quality of care
that was provided.
Policymakers in the U.S. have raised many questions about how an administrative compensation system
would operate here. The American experience with

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administrative compensation for medical injuries is
quite limited. The federal Vaccine Injury Compensation
Program provides compensation on a no-fault basis for a
defined set of injuries related to vaccine administration,
and Florida and Virginia have long operated no-fault
compensation funds for serious birth-related neurological injuries.5 There are no precedents, however, for the
types of broader schemes operated by Denmark, Finland,
Norway, and New Zealand.
Policymakers considering how such schemes
might work in the U.S. have raised several questions.
How difficult is it to evaluate cases using a compensation standard other than negligence? How does a no-fault
system deal with the problem of the doctor who should
be sanctioned for gross or repeated deviations from the
standard of care? What would such a system cost and
how would it be financed? Do no-fault systems have the
support of patients and doctors? Real-world experience
from several countries that have implemented administrative compensation systems for medical injuries sheds light
on the answers to these questions. New Zealand and the
Scandinavian countries (Sweden, Denmark, Norway, and
Finland) have operated such systems for decades. In this
issue brief, we discuss the experiences of New Zealand,
Sweden, and Denmark, and consider lessons for reform
of medical injury compensation systems in the United
States.

ADMINISTRATIVE COMPENSATION
SYSTEMS ABROAD
New Zealand
In 1974, New Zealand introduced a comprehensive accidental injury compensation scheme that was not limited
to medical injuries. The system, which is managed by the
Accident Compensation Corporation (ACC), replaced
injured individuals’ right to file personal injury lawsuits
with an entitlement to rehabilitation and compensation
via an administrative process. The change was motivated
by a 1967 Report by the Woodhouse Commission that
strongly criticized the tort system as an ineffective mechanism for compensating and deterring injuries. There was
also a perception that the concept of compensation based
on individual fault no longer enjoyed broad support and

 Administrative Compensation for Medical Injuries: Lessons from Three Foreign Systems 

should be replaced by a principle of community responsibility for accidental injuries.6
The ACC is tax funded, government operated,
and accountable to a parliamentary minister (Table 1).
It functions alongside a national health care system that
provides care to all New Zealanders. Most hospital care is
provided through public sector hospitals, although there
are many smaller, private facilities as well. Most specialist
physicians are employed by hospitals, while general practitioners operate private practices and are merely paid by
the government. Hospital care is provided free of charge,
while primary care is available with small copayments.
About a third of New Zealanders have supplementary
private health insurance.7 New Zealand maintains a web
of other, tax-funded social insurance programs, including
sickness and disability benefits, unemployment benefits,
and retirement benefits.

Sweden
In 1975, Sweden established a voluntary scheme in which
public and private health care providers assumed responsibility for compensating injured patients through a consortium of insurers. The impetus for reform was a perception that compensation was too difficult for patients
to obtain in the tort system, which required plaintiffs to
meet a higher standard of proof than the “preponderance
of the evidence” standard used in personal injury litigation in the U.S. The process was protracted and expensive. As a result, very few claims were brought and even
fewer resulted in compensation.
The objective of the new system was to channel compensation more efficiently to injured patients.
Disciplining health care providers and deterring medical errors were not among its missions. On the contrary,
system designers eschewed these goals because they were
regarded as potentially corrosive to the compensation
objective.
In 1995, the voluntary system was restructured and a mutual insurance company (Landstingens
Ömsesidiga Försäkringsbolag, or LOF) owned by the
regional hospital authorities began insuring all public
hospitals and physicians, as well as private providers
who have a contract with the government. From 1995

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to 2009, LOF delegated responsibility for investigating
and evaluating injury claims to a private claims handling
company (Personskadereglering AB, or PSR), but these
functions were integrated into LOF’s operations in 2010.
Legislation in 1997 made it mandatory for all
health care providers to carry liability insurance, with
most insuring through the LOF as described above.
A provider’s insurer pays for claims that arise out of
the provider’s care and meet the criteria for compensation. Because some providers do not comply with
the requirement to carry insurance, the insurance
companies formed the Patient Insurance Association
(Patientförsäkringsföreningen, or PFF) for the purpose
of making compensation available to patients injured by
uninsured providers. The PFF also finances and operates a Patient Claims Panel to which patients can appeal
compensation decisions regardless of whether or not the
provider was insured.
As in New Zealand, the compensation system in
Sweden is part of a larger, tax-funded system of social
insurance, including a national health care system with
universal access. The National Insurance Act of 1962 set
up a system that covers basic medical expenses and wage
loss due to illness of injury, regardless of cause, as well
as disability and old age pensions. Sweden’s single-payer
health care system provides comprehensive medical coverage, with modest cost-sharing by patients. About 5 percent of Swedes carry supplemental private health insurance.8 Nearly all hospital care is provided through public
sector hospitals and specialist physicians are generally
salaried employees of the national health system. Primary
care physicians may be either government employees
working in public clinics or private practitioners.9

Denmark
Denmark’s medical injury compensation system, adopted
in the Patient Insurance Act of 1992, is very similar to
Sweden’s. It was modeled after Sweden’s 1975 voluntary
scheme and motivated by similar concerns about patient
access to compensation.10
By law, Danish regional hospital authorities are
required to pay the costs of malpractice claims. Although
they have the option to purchase insurance through a

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private insurance company, in practice, it has been more
cost-effective to self-insure. The insurance companies
and self-insuring authorities formed a joint association,
the Patient Insurance Association (Patientforsikringen,
or PIA) to evaluate all claims in accordance with the law.
The PIA is an independent association governed by a
board of directors made up primarily of regional council
members. Compensation payments to patients are made
by the self-insured county councils.
Denmark has a tax-funded national health care
system with universal, free access. The counties are legally
and financially responsible for all treatment, from primary to tertiary care. There is no cost-sharing by patients
for hospital or primary care services, but there is modest
cost-sharing for prescription drugs and certain other services. About 30 percent of Danes carry supplemental private health insurance to cover these costs.11 Most hospitals are publicly operated, while most health professionals
are self-employed and reimbursed by the government.12
Denmark also maintains social insurance schemes for
sickness and disability, unemployment, and retirement
income.

FINDINGS
1.  The systems have rejected the notion that compensation should be available only to patients who
are injured by negligence.
New Zealand has experimented with several alternatives
to a negligence standard. Originally, it compensated all
medical “misadventures,” a term that was interpreted
by claims handlers, the courts, and eventually a statute
to include two kinds of injuries: “medical error” and
“medical mishap.” A medical error was an injury due to

negligence, defined as it is in tort law. A medical mishap
was a rare and severe adverse consequence of treatment
given properly by a registered health professional.
Legislation enacted in 2005 eliminated fault-based
negligence determinations from the system, adopting a
single “treatment injury” standard. Under this standard,
there must be a physical injury causally related to treatment by a registered health professional that is not a
necessary part or ordinary consequence of the treatment.
This standard comes closest to a true no-fault standard
in any of the foreign schemes, although questions of
appropriateness still arise in determining the eligibility
for compensation of claims relating to failures to provide
timely treatment or failures to obtain informed consent.
The 2005 change was motivated by several concerns: the sense that the medical error standard adversely
affected physician–patient relationships and reduced physicians’ willingness to participate in the claims process;
a desire to put medical injuries on equal footing with
other kinds of accidental injuries, which were eligible for
ACC compensation without regard to fault; the sense
that learning opportunities were lost by focusing on individual error rather than systems of care; and a dissatisfaction with the cost of investigating medical injury cases to
determine whether an error occurred.13
In Sweden and Denmark, a standard of “avoidability” is applied. Injuries are compensable if they would
not have occurred in the hands of a highly skilled and
experienced physician in the relevant specialty—a standard quite different from negligence, which compensates
only those injuries resulting from care that fell below
the customary standard of care that would be rendered
by a reasonable practitioner. The avoidability inquiry

Methods
In 2005, we made site visits to Stockholm, Copenhagen, and Wellington to interview administrators and stakeholders of the Swedish, Danish, and New Zealand medical injury compensation systems. We conducted semistructured interviews with a total of 44 key informants, including heads of the systems, frontline claims handlers,
medical expert consultants, legal advisors, judges, and medical professional organization leaders. In addition to
interview findings, this issue brief incorporates data and informational materials provided by the system administrators, including updated data from 2009 to 2010, as well as a review of relevant scholarship concerning the
systems’ history and operation.

 Administrative Compensation for Medical Injuries: Lessons from Three Foreign Systems 

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examines not only the skill and conscientiousness of the
physician in rendering the treatment but also whether
an alternative technique or treatment would have met
the patient’s needs and been less dangerous. The Danes
evaluate avoidability based on what was known at the
time care decisions were made, while the Swedes evaluate
it retrospectively, incorporating all information available at the time the question of compensation is decided
(which is a more permissive standard for patients than
Denmark’s known-at-the-time standard). Although
the avoidability standard governs the payment of most
claims, the Swedish and Danish schemes also apply other
criteria to compensate certain unavoidable injuries. For
example, a wide range of treatment-related injuries that
are more rare and severe in nature than what a patient
should reasonably be expected to endure are compensated in Denmark; Sweden covers a narrower group of
unavoidable injuries caused by equipment failures or
severe hospital-acquired infections.
These compensation criteria tend to lead to
similar compensation outcomes for the same injury, but
through different reasoning. (See Table 2 for an example.)
All are more likely to result in compensation to injured
patients than is the U.S. standard of negligence. System
administrators in each of the three countries reported
that their compensation criteria were workable in practice
and, in their opinion, were preferable to a negligence
standard.

physician involved in the incident, and sometimes by a
primary care physician.14 In Denmark, physicians file
about 15 percent of claims and assist in most other cases.
In New Zealand, 46 percent of treatment injury claims
are lodged by patients’ primary care providers, who
receive reimbursement for the time they spent filing the
claim if the claim is accepted. Of the remaining claims,
44 percent are filed by public or private hospital staff,
and 10 percent by other providers, on behalf of patients.
All of the systems report that jettisoning negligence determinations has been effective in enabling
clinicians and patients to maintain their therapeutic
relationship and cooperate in the pursuit of compensation. Moreover, although the easier claiming process has
resulted in higher rates of claims than are seen in the
U.S., as seen in Table 3, it has not opened the floodgates
to an unmanageable number of claims. System administrators estimate that about 10 percent of injured patients
file claims, as compared with 2 percent to 3 percent in
the U.S. Finally, the systems are able to process claims
expeditiously. Whereas in the U.S., the average time from
injury to disposition of a malpractice claim is five years,
in Sweden and Denmark it is eight months. In New
Zealand it is 16 days, although where there are allegations of failure to treat or delayed treatment, claims may
take longer to investigate. Patients infrequently appeal
the initial decision and, when they do, generally are not
successful.

2.  The systems have been able to provide a simple,
fast, accessible process for obtaining compensation
that preserves physician–patient relationships.

3.  The systems have been able to effectively use
neutral medical experts as well as information on
previous, similar cases to help render consistent
compensation decisions.

In all three systems, claims can be filed free of charge
without the need for assistance of legal counsel, although
lawyers do participate in filing about 10 percent of claims
in Denmark (Exhibit 1). Sweden allows only patients to
submit claims, while Denmark also permits hospitals to
file claims on behalf of patients. New Zealand requires
that patients initiate a claim through a physician or other
recognized health care provider, who need not be the clinician involved in the injury. In Sweden, an estimated 60
percent to 80 percent of claims are facilitated by health
care providers on behalf of patients—sometimes by the

In Sweden and Denmark, the frontline claims handlers
in the systems typically do not have clinical backgrounds,
but are in all cases assisted by a panel of senior physicians
in a range of specialties. These physicians are retained by
the compensation system through standing contracts,
with most serving for an extended period of time and
accumulating substantial experience and institutional
memory. For decisions that are not clear-cut, the claims
handlers and medical experts may also examine past decisions in similar cases, which are available in a searchable

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Exhibit 1. The Medical Injury Compensation Process in Four Countries
United States

Sweden

Denmark

New Zealand

Injury is
identified

Patient typically has 3
years from discovery to file
a claim, but varies by state

Patient has 3 years
from discovery or 10
years from treatment
date to file a claim

Patient has 5 years
from discovery or 10
years from treatment
date to file a claim

No time limitation on
filing a claim

Claim is filed

Patient files, usually
with attorney

Patient files

Patient or
physician files

Physician files for
patient

Claim is
reviewed

Insurer investigates;
lay jury decides if no
settlement reached

Claims handler
investigates and
decides

Claims handler
investigates and
decides

Claims handler
investigates and
decides

On average, 3 years
from filing date

70% decided within 8
months of filing date

On average, 7 months
from filing date

On average, 7 months
from filing date (16 days
for “treatment injury”)

To appellate court

To district court

To district court

To district court

Initial decision

Appeal

Adapted from: A. B. Kachalia, M. M. Mello, T. A. Brennan et al., “Beyond Negligence: Avoidability and Medical Injury Compensation,” Social Science &
Medicine, Jan. 2008 66(2):387–402.

database. In addition to fostering consistency in decisionmaking, review of prior decisions has proved effective in
reducing the time and labor necessary to decide cases, as
reviewers are not reinventing the appropriate methodology with each new case.
In New Zealand, the claims assessors have clinical
backgrounds (often in nursing) and do not necessarily
consult specialist clinicians in every case. Approximately
two-thirds of claims are decided in house by a peerreview panel comprising these assessors and team managers. Advice may also be sought from one of the in-house
medical advisors. Independent experts with the relevant
scope of practice are, however, typically consulted in
complex cases or where the claim alleges failure to treat
or delayed treatment. In such cases, the causal connection between the medical management and the injury
tends to be less clear, necessitating greater investigation
and expertise to reach a judgment about eligibility for
compensation.

4.  Although they compensate a broader range of
injuries than the U.S. tort system, the foreign systems’ costs have not been exorbitant.
Based on medical injury studies conducted in the U.S.,
about twice as many injuries are eligible for compensation under an avoidability standard than under a negligence standard, and three to four times as many are
eligible under a true no-fault standard.15 However, several
factors have kept costs manageable in the systems that
employ these alternative standards.16 First, the availability of other social insurance programs obviates the need
for some injured individuals to file injury compensation
claims, keeping claiming rates relatively low in comparison to the estimated prevalence of medical injuries.
For example, a New Zealand patient who sustained a
disabling injury could receive free or very low-cost care
through the national health care system as well as disability and unemployment benefits that are generous
by U.S. standards. The availability of other sources of
support also keeps average claims costs lower because

 Administrative Compensation for Medical Injuries: Lessons from Three Foreign Systems 

“collateral-source offset” rules stipulate that the medical injury systems need not pay for lost wages, medical
expenses, and other expenses that are covered by the
national insurance system.17
Second, these systems have low overhead costs—
around 17 percent of the total cost of the system, compared to an estimated 55 percent to 60 percent in the
U.S. Third, Sweden and Denmark impose a cap on
the total compensation a patient may receive (Table 1).
Fourth, payments for noneconomic losses are much
smaller than is typically the case in the U.S.
Because of these features, the average total award
size in these systems is much lower than in the U.S.
In 2009, the average compensation per paid claim was
approximately US$20,000 in Sweden and US$40,000
in Denmark, compared to approximately $324,000 in
the U.S.18 In New Zealand, it was even lower, around
US$4,450.
5.  The systems use fixed award amounts, schedules,
and caps to make payments for noneconomic
loss, provoking controversy about the adequacy
of awards.
New Zealand provides lump sum payments for noneconomic loss associated with permanent impairment (the
loss, or loss of use, of a bodily part, system, or function).
However, the payments historically have generated some
controversy because they are relatively modest (currently
capped at US$85,500), have been adjusted only infrequently, and are conditional on permanent impairment,
meaning that individuals whose impairment is temporary
or whose injuries involve pain but not impairment do
not have their noneconomic loss compensated.19 Sweden
and Denmark calculate noneconomic damages in accordance with pre-established tables, or schedules, which
are adjusted annually for inflation. In these systems, pain
and disfigurement is compensated even if not disabling,
but there are sometimes complaints of inadequate compensation for severe injuries, particularly in Denmark,
where maximum total awards are capped at about
US$1.7 million.

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6.  The systems are complemented by strong, independent, parallel systems of physician discipline.
Each of the countries has chosen to delink its patient
compensation system from its system of policing physician competence to assure health care quality. Since
1994, New Zealand’s Office of the Health and Disability
Commissioner has provided a mechanism for patients to
complain about the quality of health care and disability
services. By law, all patients who file a compensation
claim with ACC must be informed of the availability of
the complaints process. The commissioner investigates
patient complaints and may pursue a variety of remedies where complaints are found to have merit. These
remedies range from facilitating mediation and apology to referring the case to a prosecutorial authority for
disciplinary action to recommending that a health care
organization improve its care processes.20 Sweden and
Denmark also operate separate systems of physician discipline, with boards for patients’ complaints empowered
to investigate complaints and refer cases to disciplinary
authorities.
None of these countries currently permits routine information sharing between the discipline system
and the compensation system, although this has only
been the case in New Zealand since 2005. New Zealand
also requires the ACC to make a report to the Director
General of Health if, based on a pattern of claims, conditions in a facility appear to pose a threat to the public. In
rare cases, ACC may make a similar report regarding an
individual health professional to the relevant registration
authority.
A perceived advantage of the information firewall
is that it encourages physicians to make patients aware
of their right to seek compensation and to assist them in
claiming, which physicians might be reluctant to do if
they feared a compensation claim could trigger or facilitate disciplinary action. On the other hand, operating
completely separate systems of discipline and compensation has some disadvantages: health care providers may
feel besieged by multiple investigations and the lack
of information sharing contributes to inefficiency and
redundancy in the investigation process.21 Some have also
criticized the New Zealand and Scandinavian systems

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for eliminating any possible deterrent effect of the injury
compensation system on medical negligence, while others
argue that there is little evidence that deterrence occurs in
the U.S. system.
7.  The systems utilize claims data for purposes of
learning about opportunities for patient safety
improvement.
The centralized nature of the compensation schemes
confers a huge informational advantage. In contrast, in
the U.S., data about medical injuries are fragmented
across hundreds of insurance companies that usually do
not share or pool the information they control (Table 4).
With larger databases, the possibilities for detecting and
analyzing patterns of medical injuries are much greater.
The country approaches described above make good use
of the information at their disposal, although administrators from all three systems believe more could be done.
Within the last five years, New Zealand’s ACC has integrated treatment injury claim data with its overall claims
management database. It shares data obtained from
claims analysis with hospitals, health professionals, and
professional organizations through presentations, profiling, and publication of injury case studies.
The Danish and Swedish systems also maintain
comprehensive databases of injury information. Rather
than assign an in-house team to analyze the data, as
the ACC does, the Danish PIA partners with external
researchers using data-sharing agreements. The Swedish
LOF collaborates with external researchers and also
conducts descriptive analyses of its own data. Both the
Danish and Swedish systems disseminate findings to hospitals through briefs and presentations, provide hospitals
with benchmarking information, and encourage hospitals
to perform root-cause analyses on serious incidents.

CONCLUSIONS
There is broad agreement within the countries we studied
that the medical injury compensation schemes have met
their primary objective of improving injured patients’
access to compensation. Although controversies have
arisen over time about the appropriate compensation
standard and the adequacy of compensation awards, the

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systems have become firmly entrenched. There has been
no discussion of returning to a fault-based system of tort
liability for medical injuries. Strong, separate systems of
complaints investigation and physician discipline appear
to have allayed any concern that injury deterrence may
be undermined by a move to a compensation system that
does not involve judgments of fault or economic penalties for clinicians. Available data are inadequate to answer
the question of whether health care in New Zealand,
Denmark and Sweden is safer than in the U.S., but the
medical injury compensation schemes do create an environment that is more conducive to transparency and
safety improvement.

Lessons for the U.S. from Denmark,
New Zealand, and Sweden
In looking at the administrative compensation systems
for medical injury in Denmark, New Zealand, and
Sweden, one needs to recognize that the context within
which these systems operate is very different from that in
the United States. These countries are smaller and more
sociodemographically homogeneous, their health care
systems are government-run and universally accessible,
and they maintain a much stronger social insurance safety
net. Culturally, there is less of a tradition of litigiousness
and of challenging physicians’ authority. Given these differences, could an administrative compensation model
work in the U.S.?
The available research indicates that, despite differences in health care systems and cultures, most features of these country models are readily applicable to
the U.S. system. A private financing scheme, similar to
the Swedish model, is likely to be the most feasible for
the U.S. The responsibility for initial investigation of an
incident would presumably remain where it currently
lies, with private insurers, although it should be expedited and take a much less defensive approach—similar
to the approach taken in the U.S. in the emerging “disclosure-and-offer” model of early settlement.22 Because
of insurers’ financial interest in cost control, it would be
important to provide a neutral, external panel to investigate and adjudicate claims in the event that the insurer
and patient do not reach a satisfactory agreement about

 Administrative Compensation for Medical Injuries: Lessons from Three Foreign Systems 

compensation. In some states, constitutional barriers may
make it difficult to make an administrative compensation
system the exclusive remedy available to injured patients,
but there are still possibilities for voluntary systems even
in those jurisdictions.23
Cost control in an injury compensation system
would be more of a challenge in the U.S. than in foreign countries. It would be feasible to cap awards, as
half of U.S. states currently do. However, it is unlikely
that Americans would accept a system that awarded the
relatively modest compensation amounts provided in the
foreign systems. Average awards would likely be much
higher in the U.S. because of public expectations and
because private insurance would likely cover a smaller
share of medical expenses than the single-payer health
systems abroad. The proportion of injured patients who
file claims may also be higher in the U.S. There is a
strong tradition of seeking compensation for injuries in
the U.S., and the skimpier social insurance safety net
in the U.S. creates a greater financial necessity for filing
claims.
Two factors may serve as countervailing forces to
these cost drivers in the U.S. One is the increased prevalence of health insurance coverage that will accompany
federal health reform. This should leave fewer patients
with unmet medical needs thus driving down the rate of
claims in the compensation system, and create greater
potential for collateral source offsets by limiting the size
of awards from the compensation system. The second is
the enormous potential for reducing administrative overhead costs in the U.S. Some analyses suggest that these
savings alone would offset the effects of having more
claims filed.24
Because many Americans continue to believe
that the tort system creates valuable incentives for safe,
high-quality care, it would be politically advantageous to
improve systems of physician discipline in the U.S. prior
to pursuing implementation of an administrative compensation system. Although there is scant evidence that
tort liability has had a positive deterrent effect, key stakeholders are more likely to accept a no-fault system if there
are other means of identifying incompetent providers
and holding clinicians accountable for poor-quality care.

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Physician discipline systems in the U.S. are not viewed
as robust mechanisms for policing physician quality, and
stronger professional regulation and oversight will likely
be required to make an alternative injury compensation
system palatable. The international experience attests
fairly strongly that the injury compensation system itself
need not—and probably should not—play a disciplinary
role with physicians.
Perhaps the strongest lesson to be learned from the
international examples is that replacing the negligence
standard with a more liberal, less stigmatizing compensation standard such as avoidability reaps multiple
benefits. In addition to easing injured patients’ access to
compensation for preventable injuries, it preserves physician–patient relationships, encourages transparency about
adverse events, and fosters physician participation in the
claims process. In this way, an administrative compensation system can help move American health care toward
the culture of safety necessary to prevent medical injuries.

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Further Reading
P. J. Barringer, D. M. Studdert, A. Kachalia et al., “Administrative Compensation of Medical Injuries: A Hardy Perennial
Blooms Again,” Journal of Health Politics, Policy & Law, Aug. 2008 33(4):725–60.
A. B. Kachalia, M. M. Mello, T. A. Brennan et al., “Beyond Negligence: Avoidability and Medical Injury Compensation,”
Social Science & Medicine, Jan. 2008 66(2):387–402.
M. M. Mello, D. M. Studdert, A. B. Kachalia et al., “‘Health Courts’ and Accountability for Patient Safety,” Milbank
Quarterly, 2006 84(3):459–92.
D. M. Studdert and T. A. Brennan, “No-Fault Compensation for Medical Injuries: The Prospect for Error Prevention,”
Journal of the American Medical Association, July 2001 286(2):217–23.

 Administrative Compensation for Medical Injuries: Lessons from Three Foreign Systems 

Notes
1 

2 

3 

4 
5 

D. M. Studdert, M. M. Mello, and T. A. Brennan,
“Medical Malpractice,” New England Journal of
Medicine, Jan. 2004 350(3):283–92.
A. Kachalia and M. M. Mello, “New Directions in
Medical Liability Reform,” New England Journal of
Medicine, April 21, 2011 364(16):1564–72.

14 

C. Espersson, The Swedish Patient Insurance—A
Pragmatic Solution (Stockholm, Sweden: Swedish
Patient Insurance Association, 2000).

15 

D. M. Studdert and T. A. Brennan, “No-Fault
Compensation for Medical Injuries: The Prospect for
Error Prevention,” Journal of the American Medical
Association, July 2001 286(2):217–23.

16 

M. B. Bismark and R. Paterson, “No-Fault
Compensation in New Zealand: Harmonizing Injury
Compensation, Provider Accountability, and Patient
Safety,” Health Affairs, Jan./Feb. 2006 25(1):278–83.

17 

P. Danzon, “Liability Reform: Traditional and Radical
Alternatives,” in American Health Care: Government,
Market Processes, and the Public Interest, ed. M. V.
Pauly (New Brunswick, N.J.: Transaction, 2000).

18 

Public Citizen, “Medical Malpractice Payments Fall
Again in 2009.” See: http://www.citizen.org/documents/NPDBFinal.pdf, April 14, 2011.

M. M. Mello, A. Chandra, A. A. Gawande et al.,
“National Costs of the Medical Liability System, “
Health Affairs, Sept. 2010 29(9):1569–77.
Kachalia and Mello, “New Directions,” 2011.
G. Siegal, M. M. Mello, and D. M. Studdert,
“Adjudicating Severe Birth Injury Claims in Florida
and Virginia: The Experience of a Landmark
Experiment in Personal Injury Compensation,”
American Journal of Law and Medicine, 2008 34(4):
489–533.

11

6 

J. Manning, “Treatment Injury and Medical
Misadventure,” in Medical Law in New Zealand, ed.
P. Skegg & R. Paterson (Wellington, N.Z.: Thomson
Brookers, 2006).

19 

P. D. G. Skegg, “Compensation in the New Zealand
Health Sector,” in No-Fault Compensation in the
Health Care Sector, ed. J. Dute, M. G. Faure, and H.
Koziol (Vienna, Austria: Springer-Verlag, 2004).

7 

The Commonwealth Fund, International Profiles of
Health Care Systems (New York: The Commonwealth
Fund, June 2010).

20 

8 

Ibid.

9 

M. B. Bismark, E. A. Dauer, R. Paterson et al.,
“Accountability Sought by Patients Following
Adverse Events from Medical Care: the New Zealand
Experience,” Canadian Medical Association Journal,
Oct. 2006 175(8):889–94.

A. H. Glenngard, F. Hjalte, M. Svensson et al., Health
Systems in Transition: Sweden (Copenhagen, Denmark:
WHO Regional Office for Europe on Behalf of
the European Observatory on Health Systems and
Policies, 2005).

21 

R. Paterson and M. van Wyk, “Patients’ Rights in
New Zealand: Complaints Resolution and Quality
Improvement,” Medicine and Law, 2004 23(1):
29–37.

22 

M. M. Mello and T. H. Gallagher, “Malpractice
Reform—Opportunities for Leadership by Healthcare
Institutions and Liability Insurers,” New England
Journal of Medicine, April 2010 362(15):1353–56.

23 

M. M. Mello, D. M. Studdert, P. Moran et al., “Policy
Experimentation with Administrative Compensation
for Medical Injury: Issues Under State Constitutional
Law,” Harvard Journal on Legislation, 2008
45(1):59–106.

24 

Studdert and Brennan, “No-Fault Compensation,”
2001.

10 

B. von Eyben, “Danish Report,” in Alternative
Compensation Mechanisms for Damages, ed. B. von
Eyben (Copenhagen, Denmark: International
Association for Insurance Law, 2002).

11 

Commonwealth Fund, International Profiles, 2010.

12 

M. Strandberg-Larsen, M. B. Nielsen, S. Vallgarda
et al., Health Systems in Transition: Denmark
(Copenhagen, Denmark: WHO Regional Office for
Europe on Behalf of the European Observatory on
Health Systems and Policies, 2007).

13 

K. Oliphant, “Beyond Misadventure: Compensation
for Medical Injuries in New Zealand,” Medical Law
Review, Autumn 2007 15(3):357–91.

 12 

The Commonwealth Fund

Table 1. Medical Injury Compensation System Overview
United States

Sweden

Denmark

New Zealand

Administering
body

State and federal
courts

Insurance companies, Public company
primarily the public
(“PIA”)
company (“LOF”)

Government agency
(“ACC”)

Who pays for
awards?

Private insurance
companies, using
premiums collected
from health care
providers

Insurance companies. Self-insured regional
Compensation from
hospital authorities,
LOF is financed by
using tax revenue
county councils

ACC, using revenue
from general and
employer taxes

Compensation
standard

Injury was caused
by negligent medical
management

Injury was an
avoidable outcome
of medical
management‡

Injury was an
avoidable outcome
of medical
management‡

Injury was an
unexpected outcome
of treatment by a
registered health
professional

Limits on
compensation§

Varies from state to
statet

Total awards capped
at US$1.2 million

Total awards capped
at US$1.7 million

No cap on economic
loss compensation;
noneconomic loss
compensation capped
at US$85,500

Sources: A. B. Kachalia, M. M. Mello, T. A. Brennan et al., “Beyond Negligence: Avoidability and Medical Injury Compensation,” Social Science & Medicine, Jan. 2008 66(2):387–402;
and personal communications with program administrators.
§ In the foreign schemes, medical care would be provided by the national health care system above and beyond these compensation limits. In the U.S., some states deduct the
value of benefits received from other sources, including health insurance coverage, from malpractice awards, while others do not.
t State tort reform laws create variation in available compensation. Six states limit total damages, while about half limit noneconomic damages, to amounts ranging from $250,000
to over $1 million.
‡ In addition to avoidable injuries, the system also compensates certain kinds of severe, unavoidable injuries. In evaluating avoidability, Sweden examines all information available
at the time of the compensation review, while Denmark examines only the information available at the time of the incident.

 Administrative Compensation for Medical Injuries: Lessons from Three Foreign Systems 

13

Table 2. Case Example: A Surgical Patient Injured by an Allergic Reaction to Latex Gloves
Case Summary

An unconscious patient is admitted for emergency surgery after being seen in a hospital’s
emergency department. The patient has not previously been seen at the hospital and is
unaccompanied by friends or family, so hospital staff do not realize that the patient is allergic
to latex. The prevalence of latex allergies in the population is less than 1 percent. The surgical
team wears latex gloves during the operation, causing a severe anaphylactic reaction in the
patient. The patient spends 7 days in the intensive care unit on a ventilator before recovering.
Is this injury eligible for compensation?

United States

No. Because latex allergy is rare and the hospital staff had no reason to suspect that the
patent had an allergy, and because the use of latex gloves during surgery is the customary
standard of care, there is no negligence.

Sweden

Yes. Although the staff did not know about the latex allergy at the time care was rendered,
it would be apparent at the time the case was considered for compensation. Applying a
“retrospective” analysis, the injury is avoidable in light of all the information available at the
time of review. It could have been avoided by not using latex products in the operating room.

Denmark

Yes. Although the staff did not know about the latex allergy at the time care was rendered and
no retrospective analysis would be applied, it qualifies for compensation as an unavoidable but
rare event that is severe beyond what a patient should reasonably be expected to endure.

New Zealand

Yes. The injury was an unexpected outcome of the treatment received.

Source: A. B. Kachalia, M. M. Mello, T. A. Brennan et al., “Beyond Negligence: Avoidability and Medical Injury Compensation,” Social Science & Medicine, Jan. 2008 66(2):387–402.

 14 

The Commonwealth Fund

Table 3. Claims Rates and System Overhead Costs
United States

Sweden

Denmark

New Zealand

Annual claims rate
(per million persons)

200

1,000

1,330

2,000

Initial claim success rate

56%

45%

34%

63%

Average amount paid

US$323,816

US$20,000

US$40,000

US$4,450

Claimant appeal rate

Not available

10%

12%

4%

Appeal success rate

Not available

10%

2%

14%

Overall claim success rate

Not available

45%

34%

68%

54%

16%

17%

Unknown

Overhead costs

Sources: A. B. Kachalia, M. M. Mello, T. A. Brennan et al., “Beyond Negligence: Avoidability and Medical Injury Compensation,” Social Science & Medicine, Jan. 2008
66(2):387–402; K. Oliphant, “Beyond Misadventure: Compensation for Medical Injuries in New Zealand,” Medical Law Review, Autumn 2007 15(3):357–91; Public Citizen,
“Medical Malpractice Payments Fall Again in 2009,” http://www.citizen.org/documents/NPDBFinal.pdf, April 14, 2011; H. Johansson, “The Swedish System for Compensation of
Patient Injuries,” Upsala Journal of Medical Sciences, May 2010 115(2): 88–90; D. M. Studdert, M. M. Mello, A. A. Gawande et al., “Claims, Errors, and Compensation Payments
in Medical Malpractice Litigation,” New England Journal of Medicine, May 2006 354(19): 2024–33; Patienforsikringen, “Figures for 2009,” http://www.patientforsikringen.dk/da/
Nyheder/Nyhedsarkiv/statistik-2009.aspx (Sept. 3, 2010); and J. Downie, W. Lahey, D. Ford et al., Patient Safety Law: From Silos to Systems, Appendix 2: Country Reports—
Denmark (Health Canada, March 2006), http://www.energyk.com/healthlaw/documents/Appendix_2_Denmark.pdf.

 Administrative Compensation for Medical Injuries: Lessons from Three Foreign Systems 

15

Table 4. Relationship of Compensation Systems to Patient Safety Initiatives
United States

Sweden

Denmark

New Zealand

Use of
compensation
decisions as
data for safety
research

No centralized
repository for
information on all
filed claims. Closedclaim databases
have limited scope
and information.

Details of all claims
are logged in a
database. Data are
available to external
researchers.

Details of all claims
are logged in a
database. Data are
available to external
researchers. PIA
maintains copies of
associated medical
records to support
detailed studies.

Details of all claims are
logged in a database.
Hospitals may request
their own data. Data are
not otherwise externally
accessible.

Safety analyses
performed by
compensation
system

None

LOF analyzes claims
data and prepares
presentations
on safety issues
for hospitals and
regions. LOF sends
hospitals facility-level
comparisons of claims
rates, injury types,
and other information.
LOF does no rootcause analysis,
but gives hospitals
data and economic
incentives to do so.

PIA does no safety
analysis itself
but partners with
external researchers
to conduct and
publish safety
studies. PIA sends
hospitals facilitylevel comparisons
of claims rates,
injury types, and
other information.

ACC performs analyses
using the database.
ACC writes and shares
information with the
health sector.

Information
sharing with
patient safety
regulators

None

None

PIA shares
information about
drug-related claims
with the national
regulatory body.

If ACC believes there
is a risk of harm to the
public, it must report it to
the relevant regulatory
authority.

Source: M. M. Mello, D. M. Studdert, A. B. Kachalia et al., “‘Health Courts’ and Accountability for Patient Safety,” Milbank Quarterly, 2006 84(3):459–92.

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The Commonwealth Fund

About the Authors
Michelle M. Mello, J.D., Ph.D., M.Phil., is a legal scholar and health services researcher who conducts empirical
investigations of issues at the nexus of law, ethics, and health policy. She is the author of more than 100 articles and
book chapters on the medical malpractice system, medical errors and patient safety, research ethics, the obesity epidemic, pharmaceutical regulation, and other topics. Dr. Mello holds graduate degrees from Oxford University, Yale
Law School, and the University of North Carolina at Chapel Hill.
Allen Kachalia, M.D., J.D., is an attorney and internal medicine physician. In his role as medical director for quality
and safety for Brigham and Women’s Hospital in Boston, he leads and oversees hospital efforts aimed at improving the
quality and safety of care. He conducts research in the area of regulation of health care quality. Kachalia trained in law
at the University of Pennsylvania and medicine at Washington University in St. Louis.
David M. Studdert, LL.B., Sc.D., is an attorney and health services researcher at the University of Melbourne, where
he is a professor and ARC Federation Fellow. His research focuses on policy issues at the intersection of the legal and
health care systems, particularly issues of medical liability and patient safety. He holds graduate degrees from the
University of Melbourne and the Harvard School of Public Health.
Acknowledgments
This work is adapted from two published articles: A. B. Kachalia, M. M. Mello, T. A. Brennan et al., “Beyond
Negligence: Avoidability and Medical Injury Compensation,” Social Science & Medicine, Jan. 2008 66(2):387–402;
and M. M. Mello, D. M. Studdert, A. B. Kachalia et al., “‘Health Courts’ and Accountability for Patient Safety,”
Milbank Quarterly, 2006 84(3):459–92.
The authors thank Fiona Colman, Rachel Taylor, Martin Erichsen, Lena Mansnérus, and Carl Espersson for
reviewing the draft brief and providing updated data on their respective compensation schemes. The authors take
responsibility for all errors.

Editorial support was provided by Sarah Klein.

  

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COMMONWEALTH
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