The government has outlined plans to reform clinical negligence claims, including no-fault compensation for babies brain-damaged at birth.
The bill for medical errors has soared in recent years
A new body would administer an NHS Redress Scheme, and would be asked to speed up the claims process.
In some cases, it could also offer up to £30,000 compensation without cases going to court.
Where babies are severely brain-damaged at birth, the scheme would offer families no-fault compensation of up to £100,000 a year.
This would mean they would be given compensation and support without the need to establish whether healthcare staff had been negligent.
For many, it is not the size of any compensation that matters so much as an apology
Professor Sir Liam Donaldson, Chief Medical Officer
But the report by Professor Sir Liam Donaldson, Chief Medical Officer for England, which details the plans, has ruled out a universal no-fault scheme, a position which was criticised by doctors meeting for their annual conference this week.
The British Medical Association (BMA) called for a no-fault scheme to end "the blame culture within the NHS".
The publication of the CMO's report follows a sharp rise in the cost of compensating patients for clinical errors in recent years.
The NHS Redress Scheme would investigate when something went wrong, offer explanations and apologies, and financial compensation in certain circumstances.
Accepting a compensation package from the scheme would prevent claimants taking their cases to court, the proposals say.
Official figures show the NHS paid out £446m in 2001 to 2002, up £31m from the previous year.
In 2002, there were £5.25bn worth of outstanding claims, which will be settled over around 10 years.
This represents a sizeable proportion of the total NHS budget. In 2001, for instance, almost 8% of the money earmarked for health was needed to fund compensation claims.
Sir Liam has been examining the way clinical negligence claims are dealt with for the last two years.
His report outlines 19 recommendations to change the system including assigning one person in each NHS Trust to take overall responsibility for investigating complaints and better training for all NHS staff in how to handle complaints.
Sir Liam is also recommending staff who report incidents should be exempt from disciplinary action.
There will now be a period of consultation for interested parties to submit their views of the proposals to the CMO.
He said: "Patients deserve to be told what has happened when things go wrong, and to be compensated if appropriate.
This is an incomplete reform to which the government will need to return
Dr Evan Harris, Lib Dem health spokesman
"However, we know that cases take too long to settle, that more is spent on legal costs than in compensation in many cases and that many complainants are left fundamentally dissatisfied for what are really very simple reasons.
"For many, it is not the size of any compensation that matters so much as an apology, an explanation and, vitally, evidence that something is being done to minimise the risk of a similar problem happening in the future."
Sir Liam said he did not want clinical negligence claims to spiral as they have done in the US.
"The climate of blame and retribution and acrimony that exists there, we don't want it to come here."
He added: "Where mistakes are made we must learn from them and use them as a driver for change."
Dr Michael Wilks, chairman of the BMA's medico-legal committee said: "The CMO report represents a much needed review of clinical negligence, but in our view will do little to address the blame culture within the NHS that discourages doctors from reporting accidents."
Peter Walsh, chief executive of the Action for Victims of Medical Accidents said: "The danger is that justice will be eroded because there will be an arbitrary
amount, £100,000, set for brain damaged children.
"Some people would not receive the amount of compensation they have been
found to need and deserve in recent years."
Richard Parnell, Head of Research and Public Policy at Scope, the charity for people with cerebral palsy said only between 3% and 14% of cerebral palsy cases were caused by birth trauma.
"So in practice, this scheme will create a very clear two-tiered system of care for disabled children and adults, regardless of need."
Dr Evan Harris MP, Liberal Democrat health spokesman, said: "This is an incomplete reform to which the government will need to return."