Department for Work and Pensions: Contract management of medical services

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• Public Accounts Committee

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

“The Department for Work and Pensions is getting far too many decisions wrong on claimants’ ability to work. This is at considerable cost to the taxpayer and can create misery and hardship to the claimants themselves. 

This poor decision-making is damaging public confidence and generating a lot of criticism of the Department’s contractor for medical assessments, Atos Healthcare – but most of the problems lie firmly within the DWP.

The Department’s view that appeals against decisions are an inherent part of the process is unduly complacent. Nearly 40 per cent of appeals are successful, with a third of those successful appeals involving no new evidence.  

The Work Capability Assessment process hits the most vulnerable claimants hardest. The one size fits all approach fails to account adequately for mental health conditions or those which are rare or fluctuating. While the Department has started to improve, the process is still too inflexible and too often is so stressful for applicants that their health simply gets worse.

A key problem is that the Department has been unable to create a competitive market for medical assessment providers, leaving Atos in the position of being a near monopoly supplier.

The Department is too often just accepting what Atos tells it. It seems reluctant to challenge the contractor. It has failed to withhold payment for poor performance and rarely checked that it is being correctly charged. The Department also cannot explain how the profits being made by Atos reflect the limited risk that it bears.

There needs to be a substantial shake-up in how the Department manages this contract and in its processes for improving the quality of decision making.”

Margaret Hodge was speaking as the Committee published its 23rd Report of this Session which, on the basis of evidence from Citizens Advice, Disability UK and the Department for Work and Pensions, examined the contract management of medical services.

The Department for Work and Pensions (the Department) relies on medical assessments to help its decision makers reach an appropriate decision on a claimant’s entitlement to a range of benefits. Work Capability Assessments are used to assess new applications for Employment and Support Allowance and to reassess existing recipients of Incapacity Benefit. This is damaging public confidence and generating much criticism of Atos, but most of the problems lie firmly within the DWP. The Department has outsourced this work since 1998 and in 2011-12 paid its contractor, Atos Healthcare, £112.4 million to carry out 738,000 assessments. From April 2013, a new medical assessment will be introduced for the Personal Independence Payment.

The Work Capability Assessment process is designed to support a fair and objective decision by the Department about whether a claimant is fit for work, but in far too many cases the Department is getting these decisions wrong at considerable cost to both the taxpayer and the claimant. The Department’s decisions were overturned in 38% of appeals, casting doubt on the accuracy of its decision-making.

Poor decision-making causes claimants considerable distress, and the position appears to be getting worse, with Citizens Advice reporting an 83% increase in the number of people asking for support on appeals in the last year alone. We found the Department to be unduly complacent about the number of decisions upheld by the tribunal and believe that the Department should ensure that its processes are delivering accurate decision-making and minimising distress to claimants.   

The Work Capability Assessment process has a disproportionate impact on the most vulnerable claimants. The standardised “tick-box” approach fails to adequately account for rare, variable or mental health conditions and this can lead to greater inaccuracies in decision-making for these particular claimant groups. We welcome the efforts made to improve the process and encourage the Department to continue to review the operation of the work capability assessment for vulnerable groups.

The Department does not know the full cost of the overall decision-making process. Its processes have financial effects across government, for example, in the National Health Service, and high levels of appeals increase the Department’s own administrative costs yet it has not assessed the overall cost to the taxpayer. Without this information the Department will be unable to assess the value for money of its decision-making processes.

The Department is currently dependent on one supplier to undertake all medical assessments. In the 14 years since the service was outsourced, the Department has never awarded the contract to a new supplier; it has only ever changed hands due to a company takeover. The inability of the Department to develop a competitive market for medical assessment providers has left it vulnerable, with limited leverage to remedy poor performance.

The Department is not using all the mechanisms it has at its disposal to manage the contract for medical assessments effectively. We saw no evidence that the Department was applying sufficient rigour or challenge to Atos given the vulnerability of many of its clients, the size of the contracts and its role as a near monopoly supplier. We are concerned that the profitability of the contract may be disproportionate to the limited risks which the contractor bears.

The Department’s evidence was not always consistent with the views expressed by our other witnesses. We heard different interpretations of statistics such as the proportion of successful appeals, the accuracy of decision-making and on whether overall contract performance is improving.

As a result the Committee was unable to arrive at a clear conclusion about whether the overall performance is improving and we recommend that the National Audit Office should provide a further report focussing on up-to-date performance data.