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Investigation into penalty charge notices in healthcare

The NHS estimates that it lost around £212 million in 2017-18 from people incorrectly claiming exemption from prescription and dental charges. However rules around entitlement are overly complicated leading to genuine mistakes and confusion for many people, according to the National Audit Office.

Each year, the NHS dispenses around 1.1 billion prescription items in the community, and undertakes around 39 million courses of dental treatment. Around 89% of prescription items dispensed and around 47% of dental treatments are claimed as exempt from charges. NHS Business Services Authority (NHSBSA) administers the distribution of penalty charge notices (PCNs) to those who, either fraudulently or in error, have claimed a free prescription or dental treatment when they were not entitled to do so; or have a valid exemption which cannot be confirmed at the time of checking.

Recently, there has been a significant increase in the exemption checks and total value of PCNs issued. For example, the number of prescription checks has risen from 750,000 in 2014-15 to 24 million by 2018-19. Over the same period while the number and value of prescription PCNs has risen, the proportion of checks resulting in PCNs has been declining. In 2014-15, one in four checks resulted in a PCN, compared with one in 20 checks by 2018-19. Over this period the value of PCNs issued has risen from £12 million to £126 million per year for prescriptions and from £38 million to £72 million per year for dental treatments.

Since 2014, NHSBSA has managed the distribution of 5.6 million PCNs with a total value of £676 million. Of these £133 million (20%) were collected, £297 million (44%) were resolved without a penalty charge being paid; and £246 million (36%) remain outstanding.

Since 2014, around 1.7 million PCNs, 30% of those issued, with a value of £188 million, have been issued but subsequently withdrawn because a valid exemption was confirmed to be in place following a challenge. PCNs might also be cancelled where the claimant cannot be identified and located based on the details provided on the prescription or dental form. The penalty charge element of the PCN might also be removed following communication with the individual concerned, although the cost of the prescription or dental treatment will remain payable.

NHSBSA spent £11.2 million (31 pence per £1 recovered) in 2017-18 on managing the PCN process. This cost, which includes the cost of the Capita service provided to NHSBSA (Capita manages part of the dental checking service), is covered by the income generated by PCNs, with the surplus paid to NHS England. The NHS Counter Fraud Authority has acknowledged that NHSBSA’s work led to a £49 million reduction in prescription fraud from £217 million in 2012-13 to £168 million in 2016-17.

Between September 2014 and March 2019, 114,725 people have received five or more PCNs for prescriptions, indicating a pattern of incorrect claims. However, until recently NHSBSA had taken no action against these people. The NHS Counter Fraud Authority said in 2019 that the focus of NHSBSA’s PCN strategy had been on recovery of losses and charges from penalty notices.

NHS England and NHSBSA are now starting to take a firmer approach to deterring fraud. In early 2018, NHSBSA started trialling an approach with people who have received five or more PCNs in a 12-month period but had made no attempt to pay. Selected repeat offenders are now interviewed under caution at a police station and to date, NHSBSA has submitted five cases to the Crown Prosecution Service to consider for criminal proceedings. NHSBSA began a debt collection process for dental cases in January 2019 and is seeking approval for one for prescriptions.

NHSBSA accepts that the rules around entitlement, which are set by the Department of Health & Social Care, are complicated and recognises that genuine mistakes and confusion happen.

There are a number of factors which may cause mistakes and confusion. These include: Universal Credit where claimants are only eligible for exemptions if their monthly earnings are below a specified level; and prescription forms that do not yet include Universal Credit as an option. Confusion can also arise where people need to understand the difference between benefits. For example, a claimant who receives income-based Jobseeker’s Allowance is automatically eligible for free prescriptions and dental treatment, whereas a claimant who receives new-style Jobseeker’s Allowance or contribution-based Jobseeker’s Allowance is not. Furthermore, a person’s eligibility for exemption may vary between prescriptions and dental treatments. Also in some circumstances, such as pregnancy, the person must apply for an exemption certificate to obtain free prescriptions. The length of time that exemptions apply varies according to the circumstances.

NHSBSA is unable to identify all vulnerable people in advance of issuing a PCN but will try to limit the impact where such people are later identified. This arrangement relies on the vulnerable person challenging the PCN, and not all vulnerable people may feel able to do so.

NHSBSA has only recently undertaken its first national advertising campaign to inform people about PCNs even though it has been significantly increasing its checks since 2014. It also began to develop online support tools to help people determine whether they are eligible for free prescriptions and dental treatment in 2017.

NHSBSA is developing a system to reduce the likelihood of fraud or error occurring in the first place by allowing pharmacists and dentists to check peoples’ eligibility for benefit-related exemptions at the time the transaction occurs. A pilot is underway, in four pharmacies, to check health exemptions in real-time, which if successful, could significantly reduce the amount of fraud and error that occurs, and therefore the number of PCNs NHSBSA needs to issue.

“Free prescriptions and dental treatment are a significant cost to the NHS, so it is reasonable to reclaim funds from people who are not exempt from charges and deter fraud. However, the NHS also needs to have due regard to people who simply fall foul of the confusing eligibility rules.  It is not a good sign that so many penalty charge notices are successfully challenged.”

Amyas Morse, the head of the NAO

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