“Can anyone tell me, if I’m claiming back money and interest, what would be the interest rate I should be claiming?”
Thank you Dawn for raising this topical question on our Facebook recently.
If you have made a retrospective claim against your local Clinical and ‘won’ – ie you have been found eligible for NHS Continuing Healthcare Funding (CHC) – you are entitled to be repaid the care home fees for the period awarded PLUS interest by way of reimbursement.
Your entitlement to interest is set out in the NHS Continuing Healthcare Refreshed Redress Guidance which is designed to help Clinical Commissioning Groups (CCGs) to pay appropriate redress when settling claims where individuals have retrospectively been found eligible for CHC Funding.
The Refreshed Redress Guidance maintains the long-established principle that “where maladministration has resulted in financial injustice, the principle of redress should generally be to return individuals to the position they would have been in but for the maladministration which occurred.”
Each matter is case specific. The Redress Guidance state that the CCG should consider the specific circumstances and merits of each case, individually, when determining the appropriate level of redress.
The Refreshed Redress Guidance recommends that the Retail Price Index (RPI) is the appropriate interest rate to apply to redress in relation to eligibility decisions which are made with effect from 1st April 2015.
Redress is about placing individuals in the position they would have been in had NHS Continuing Healthcare been awarded at the appropriate time. For example, instead of paying care fees, those funds could have been invested elsewhere and earned interest. The Redress payment therefore seeks to put the individual back to that position, but for the CCG’s maladministration.
‘Maladministration’ is not defined, but generally includes things like: inordinate delays by CCGs in processing retrospective claims; poor or wrong decision making – perhaps erroneously closing a claim prematurely based on misconceptions or rejecting an application for CHC on incorrect grounds; rejecting a claim as a result of applying the assessment or appeal criteria incorrectly; unsound, unfair or improper decision-making; mis-application of the National Framework for NHS Continuing Healthcare Funding; incompetence or abuse of process.
The Refreshed Redress Guidance, updated in 2015, presumably intended to reflect current interest rates – potentially saving CCGs millions of pounds in wasted interest – and reducing their exposure for previous maladministration – spanning back over many years prior. The new Guidance provided that any outcome decisions made after 1st April 2015 are to be paid at RPI rates.
For outcome decisions made prior to 31st March 2015, interest was payable at the far higher County Court statutory rate of 8% per annum (even though no court proceedings were in contemplation).
On some older cases, whether due to CCG delays, the need to appeal flawed decisions or other ‘maladministration’, it was not uncommon for the amount of interest to be almost as much as the actual sum to be reimbursed! This could be eye-watering sums in larger cases, which to the CCG’s shame, could have been saved purely by carrying out fairer, quicker and more robust assessments in the first place.
You can access the Refreshed Redress Guidance here to see how the CCGs deal with restitution and interest: https://www.england.nhs.uk/wp-content/uploads/2015/04/nhs-cont-hlthcr-rdress-guid-fin.pdf
Methodology applied for calculating interest
Most CCGs will prepare their restitution calculation (including interest payable) for your agreement and approval prior to making payment. However, some CCGs just prepare all their workings and send out confirmation of their interest calculation with notification that payment is being processed – fait accompli – and without the need for prior approval.
Not all CCGs use exactly the same methodology when preparing their RPI interest calculations and much depends on their particular financial model. Some CCGs work out the RPI increase percentages on a month-by-month basis for a more precise and detailed calculation – our preference for shorter periods of restitution. This can involve lots of smaller calculations to derive the cumulative sum repayable each month. Others may take a more broad-brush approach in accordance with the Refreshed Redress Guidance, and simply take the average annual RPI figure for each year of restitution – which is far simpler and quicker and involves far fewer calculations.
Generally, whichever method or computerised formulae a CCG adopts, the overall outcome may not be significantly different and worth the hassle of challenging it. It could work to your detriment in some cases and, of course, there is the possible risk that it gives the CCG an excuse to delay payment whilst they investigate your challenge and respond.
So, unless the CCGs calculation is manifestly flawed or obviously incorrect, it is unlikely that you will persuade the CCG to change their tried and tested ‘in-house’ methodology if they have a set way of calculating RPI. But we would still strongly recommend that, at the very least, you should check their figures to ensure that they are correct mathematically and no obvious accounting error has crept in. For example, the CCG has calculated restitution on the wrong period of eligibility, or their mathematical additions are wrong.
How to calculate RPI interest post 1st April 2015
This is the complicated bit for the mathematically challenged!
Your starting point is the Retail Price Index available from the Office of National Statistics http://www.ons.gov.uk/ where you can access the monthly RPI rates each year.
In simple terms, calculating RPI is done by taking the applicable RPI rate at your chosen start date (A) and deducting it from the end date of your calculation (B) and multiplying that percentage increase by the amount of restitution payable.
Here’s a fictitious example to show you how RPI works:
Mr D’s assessed period of CHC eligibility say: 1st January 2013 to 31st December 2013
Mr D paid £5,000 per month care fees, therefore total restitution sum payable is: £60,000
(A). Average RPI rate for 2013 is: 250.1
(B). RPI rate November 2020 is: 294.3
Percentage increase over this period: (B) 294.3 – (A) 250.1 = 44.2, divided by (A) 250.1 x 100) = 17.67%
Total interest payable therefore is: 17.67% x £60,000 = £10,602
Total restitution payable; £70,602
By comparison, so that you can appreciate the difference, if interest was calculated at 8% per annum under the old Redress Guidance (pre 1st April 2015), the interest figure would be £32,612.60 as at today’s date, making a total restitution sum of £92,612. 60. A significant difference of £22,010 when compared to the RPI figure of £70,602! That’s why CCGs are so keen to impose interest at RPI rates on older cases pre 1st April 2015, regardless of whatever maladministration and perverse outcomes they may have decided.
Can I still argue for 8% interest for Pre 1st April 2015 outcomes?
No, not if your retrospective case started after 1st April 2015 and the outcome decision is also made after this date.
If your retrospective claim started just before this date – say within a year or two, it is highly unlikely that you will succeed with your argument. The CCGs must be allowed a reasonable time to investigate and then adjudicate on retrospective reviews. In our opinion, any claim started in 2013/14 is unlikely to find favour with the CCG – unless you can prove gross maladministration (e.g. inordinate delay and incompetence).
But what can you do if you have a much older retrospective claim that started well before 1st April 2015, say in 2011/12 and have now been found eligible for retrospective funding in 2020? Yes, there are some very old cases still being decided even now! You should argue that, had the CCG carried out a fair and proper assessment at the time, your relative would have been found eligible for CHC Funding and had all their care fees paid by the NHS. Therefore, interest should rightly be paid at the rate applicable at the time ie 8% per annum.
The CCG will inevitably argue strenuously against this. They will always contend that, because the ultimate outcome decision was made after this date (in our example 2020), interest is payable in accordance with the current Refreshed Redress Guidance at RPI rates. As far as we know, CCGs will simply not entertain any arguments over 8% – even on very old retrospective claims – as it’s clearly not in their interests to do so. There is an obvious risk that the ‘floodgates’ will open, and their resources will be exposed to multiple claims and large pay-outs. So, despite delays, errors and flawed decisions etc – often forcing claimants to use life savings or sell their home to pay for care – CCGs can hide behind their trump card – the Redress Guidance – and effectively get away with paying lower interest. Families may well feel aggrieved that RPI is inadequate compensation for the years of stress, anxiety, frustration, anger and misery caused fighting for their relative’s entitlement for CHC and ultimately succeeding in their mission.
If you remain dissatisfied with the CCG’s refusal to entertain interest at 8% on claims launched pre 1st April 2015, you can complain to the CCG. Ask for the complaints email and contact details if you cannot find them online.
Making your complaint
- Set out a concise chronology of events (with dates) as evidence of maladministration.
- Specifically refer to any outcome decision from an appeal panel (eg NHS England) which criticises the CCG’s rationale to refuse CHC Funding as being unsound or not robust.
- Don’t forget to point out that, had the CCG correctly assessed your relative in a robust manner at the outset, the decision would have been made before 1st April 2015, and that entitles you to interest at the previous rate of 8%.
However, don’t be surprised if the CCG hold their ground and reject your complaint out of hand. They have too much to lose by agreeing with you. Unfortunately, your chances of success are very slim to non-existent! There will be no further discussion to be had with the CCG and they will simply suggest that you complain to the Parliamentary and Health Service Ombudsman (PHSO). You can download the complain form online: https://www.ombudsman.org.uk/making-complaint/complain-us-getting-started/complaint-forms
Can I sue the CCG for 8% interest?
CCGs are not obliged to pay 8% under the Refresh Redress Guidance, post 1st April 2015 and the best you will get is RPI – so don’t waste your time even trying.
As far as we are aware, there is no legal basis either for suing the CCG for 8% under the previous Guidance in force pre 1st April 2015. The Redress Guidance is designed to put the individual back to the position they would have been in but for maladministration, but this is at the CCG’s discretion, and although expected, is not law. So, there is no legal entitlement to bring a claim.
Can the CCG withhold tax from my interest?
At present CCGs are mandated by HM Inland Revenue and Customs to withhold tax at 20% on the interest element payable (e.g. 20% x £10,602 in our example above). CCGs are holding this money to the claimant’s order, pending the outcome of this ongoing dispute with HMRC. CCGs rightly say that the full amount of interest belongs to the individual, whereas HMRC argue that, pursuant to the Income Taxes Act 2007, basic rate income tax is payable on the interest received. We take the firm view that interest is for compensation and not income, and therefore, like all other forms of compensation, should not be taxable. The dispute continues, but in the meantime, CCGs are obliged to hold back the taxable element in case it has to be paid to HMRC. If, however, CCGs are successful in their appeal, they will pay individuals the balance of their restitution monies.
How long should it take to get paid?
How often do we hear of CCGs doing their restitution calculations slowly, and then delaying payment once the figures are agreed? This is scandalous! Once the calculation is agreed, payment should be made within a reasonably short time. We would consider a maximum of 30 days to be an acceptable timeframe. Some organised CCGs are paying promptly within 7 to 14 days; yet others are taking 3 to 6 months – which is manifestly frustrating and unfair! First the CCG incorrectly assesses your relative for CHC Funding, then take their time processing payment. If this happens to you, we recommend that you complain and press for prompt payment.
Quote the Refreshed Redress Guidance which states: “It is important that once an eligibility decision for NHS Continuing Healthcare is reached, CCGs should promptly pay any redress sums owed to individuals or their representatives. Disputes about aspects of the redress payment or other aspects of a case should be dealt with subsequently.”
So, if there is any dispute over 8%, make sure the CCG pay you first what they say they owe at RPI rates, whilst you continue to argue for the higher rate. Don’t let the CCG fob you off and delay making payment whilst they deal with the whole argument and drag things out even longer!
Here are some useful links:
Retail Price Index are available from the Office of National Statistics at: http://www.ons.gov.uk/
The contact details for the Office of National Statistics at: http://www.ons.gov.uk/ons/site-information.
Refreshed Redress Guidance: https://www.england.nhs.uk/wp-content/uploads/2015/04/nhs-cont-hlthcr-rdress-guid-fin.pdf