Friday, 24 April 2015

All your health is belong to us

If the one paying the piper calls the tune, be careful who you let pay for dinner.

Britain's NHS is considering rationing healthcare by a measure of deservingness. Here's The Guardian:
The NHS plans to dramatically increase rationing of patients’ access to care and treatment in an effort to balance its books, a new survey of health bosses reveals.

Almost two in five of England’s 211 clinical commissioning groups (CCGs) are considering imposing new limits this year on eligibility for services such as IVF, footcare and hip and knee replacements.

Smokers and those who are obese will be among those denied surgery and other treatment, according to a survey of 80 CCG leaders conducted by the Health Service Journal, in an extension of the controversial policy of “lifestyle rationing”.
So. We get tobacco excise taxes to defray the health costs of the public health system. You cannot opt out of the NHS but through the costly route of paying for NHS through your income taxes and excise taxes and then paying separately for private health care. Then smokers could be denied service because of the smoking.

Meanwhile, more paternalism's being rolled into welfare services. There are pretty reasonable justifications for targeting paternalism towards those who've demonstrated a need for extra help in financial planning. Plus, a strongly paternalistic approach could have similar effect to the kind of separating equilibrium that Mill talked about. But it's still not a nice call. If you've been stuck in a crappy school and then disemployed by minimum wages above your marginal product, you then get choice taken away from you on more of the remaining margins.

Now think about Guaranteed Income Proposals. I wonder what private behaviours would become of public regulatory interest when we all reckon not only that the neighbour is doing something we don't like, but that we're helping subsidise him to do it.


  1. The evolution of socialism. Ultimately all compelled to be his brother's keeper, in a totally non-Christian sense however.

  2. Almost every one of these cost benefit analyses (CBA) that I've seen (and I've seen a few) is deliberately biased towards finding a positive result for the project proponent. Usually the authors of the CBA have the good sense to keep their cost benefit ratio down to something vaguely reasonable, like less than 2 times. But not always.

    This is a field which does require a lot of understanding about the marginal costs of infrastructure and the existing network of connection and augmentation charges which exist (or don't exist but they should) for all types of public infrastructure. I would point out here that the Suzuki Alto benchmark is very, very valid - but the exception is that benchmark doesn't cover the marginal costs of the roads to carry those Suzukis which might be generated by peak congestion.

    I've always thought with something like this the better benchmark is to price it. Take the NPV of the costs of the cycleway, and then divide it by the expected trips taken to arrive at an estimated per passenger cost (ie; a toll). If the project is close to a reasonable use of public funds, then the toll should be close to an amount which users might be willing to pay. The difference between the tolled amount (the private benefits of the asset) and the actual project value is the externality portion of it (ie; reduced congestion to other road users, delayed roads capex, improved amenity, etc).

    The primary problem here though is that the road users aren't charged for their costs to the network. So given the option between a tolled bike path and an untolled road, people will obviously choose the road. If they were both tolled according to their costs then you should get closer to the actual preferred mode of transport after costs of provision.

  3. The idea that the Government collects tax revenue from tobacco to offset the cost of providing health care to smokers is cute but false. The Government taxes tobacco opportunistically, because it can and because it knows the political risk in doing so is very low. The revenue goes into the consolidated fund, both here and in the UK, as far as I know. The health service doesn't see a cent of it, unless indirectly. Moreover, it is a simple truism that health policy in a publicly funded health service is about rationing. There is never enough funding to treat everyone who needs treatment. So how then to ration? Why is this not a rational solution?

  4. In this case, the total number of new trips (i.e., those that wouldn't have occurred without the cycleway network) through to 2041 is estimated by the CCC to be (roughly) 120 million. So PV costs/trips = $1.25.

  5. The big problem that's specific to Chch is that we were vastly under-insured for the quake (for which nobody's head seems to have rolled), and so as a city have ended up a lot poorer than we were before, and yet some people seem to think we can have more stuff than we had before.

  6. Reading the comments section on the on-line Press article, it would seem that the solution is to close down the ideological University of Canterbury Economics Department. Watch out Glenn!

  7. I guess each big Council's path of hubris takes a different form: Dunedin, the stadium; Christchurch, the seeming unwillingness to live with a diminished wealth and a desire to gold-plate what is new (see Paul Walker's comment on the stadium); Wellington, the airport runway (probably the least chance of going ahead), and Auckland the delusions of rail.

  8. I agree that that is why the Ministries of Health lobby to see tobacco banned - while the consolidated fund sees more than enough money to cover the cost, it isn't hypothecated so MoH won't be able to tell what parts actually flow through to them.

    But how is the following scenario rational?
    1) I will force you to pay for health insurance through the state even if you don't want it.
    2) I will tax you for some of your consumption behaviours, blaming the cost to the health system.
    3) I will then ban you from accessing the public health service for which I am forcing you to pay, despite your having paid for it both through your general taxes and also through special levies justified by the costs of your consumption on the health system.

  9. Egads. Hope Sonia doesn't read comments sections.

  10. We'll have to wait and see how it affects outcomes. Probably not much, although there will be more complaints and more of a market for any private health care chain that can get costs down.

  11. Because rationing. If you were designing a system from scratch it wouldn't look like this. But we are not, and it does. The people who need medical treatment for smoking related illnesses are invariably poor and lower class. Discriminating against them is basically cost-free. Always has been, always will be.

  12. It worries me a bit that quake-strengthening the stock of heritage buildings is down around 22nd on a list of 25 there...

  13. Good paper, Glenn and James. It is right and proper that you have picked holes in this business case. Had this project been conducted in the standard way a roading project is run in local government a peer review of the whole project would have been conducted as a matter of course. And, of course, the point of the peer review would be to highlight the engineering and economic weaknesses of the plan.

    But there does not appear to be any part of this project that is orthodox.

    As a matter of background it is worth recalling that since the reorganisation of local government in 1989 decision-making in councils tends to be bottom-up. The normal dynamic is that staff prepare detailed expenditure proposals and then seek elected member approval. Broadly speaking the agenda of any council tends to be set by staff not politicians. So, it is almost certain that this whole project is the longstanding brainchild of staff in the planning and/or roading functions of the council that has had to be "sold" to the councilliors at budget time. Given there was a wholesale change of council members late in 2013 it looks as though the sell job got a a bit harder.

    The easiest way to sell any project is to make sure funding via rates is minimised (at least in the initial proposal). This means funding via subsidy, grant, charges or other contributions. As the report mentions the main reason for calculating the BC is to support an application to NZTA for subsidy (NZTA has had a formal program of supporting walking and cycling strategies for some 10+ years). The NZTA subsidy would only ever cover a percentage of the cost so other sources would also have to be found. In this case I believe CCC are looking to fund the project through development contributions as well.

    I had a quick look through CCC's DC policy a while ago and I noticed a number of cycleway projects were included for funding via DC's. CCC had to put together their current policy in a bit of a hurry because they accidentally let their DC Policy lapse in 2012 (meaning they didn't have a valid policy for a year) and presumably had a bit of a rush to put together the one passed in 2013. So we get approval of the initial project in April 2013, the draft DC Policy is released almost simultaneously containing some or all of the proposed cycleway projects. 18 months later they are doing the proper numbers and finding they are doubkle what they thought. But they are already committed to the project because they have already collected lots of DC's to be spent on the cycleway project.

    Now not only have they already collect these contributions that would be almost impossible to return if the project didn't proceed but those contributions were only ever legal if the cycleways were required to accommodate population growth. The law is absolutely clear that development contributions can only be collected for works that mitigate the cumulative effects of growth.

    Enter a wildly over-optimistic ex-post business case.

  14. the incentives would make it more rational to quit smoking