Private-Public health partnerships

If I ever get homesick for Canada, a five-minute conversation with a Canadian government official's usually an excellent cure. It always reminds me why I left.

On Friday, I met with a few visiting Canadians to give a bit of a state of play on policy. One of them asked about the Pharmac system. I noted it seems the best part of the overall health system, but that I can't imagine that a larger country could get away with it - and especially not a country right next door to the US.

But as part of the background, I'd noted that we have a fairly standard mixed private-public health system: a public health system combined with a private system that seems to work rather well. The public health system can contract in expertise and capacity when it needs it; having that available makes the public system better.

And I got to hear the ever-so-Canadian phrase two-tier. It's the phrase that Canadians use to give themselves an excuse for not thinking. Somehow, Canada got its national identity wrapped up in being not-American, and the public health system is a big part of that. Canada's version of a public health system is not like New Zealand's - there isn't a complementary private system in the same way. Anybody suggesting one gets accused basically of treason. Because any private provision would be two-tier, and result in outrage on the CBC and claims that the system was becoming Americanised, rather than just being like most other public health systems.

So stories like these would never happen in Canada. Instead, the queues would just get longer.

Capacity constraints see Canterbury DHB spend $143m on private surgeries

Thousands of hip, knee and other elective procedures have been outsourced to private providers in Canterbury over the past five years at a cost of about $143 million.

Canterbury District Health Board (CDHB) members say increased outsourcing has been necessary to meet demand, especially given post-earthquake capacity constraints.

"There's no point having a philosophical objection to using the private sector, because if we weren't able to access it thousands of people would have missed out on publicly-funded elective surgery," Andy Dickerson said.
...
CDHB member Aaron Keown said the health board had been closely monitoring the volume and cost of outsourcing. The CDHB could be penalised for not meeting Ministry elective surgery targets, he said, and people needed to realise bringing operations back in-house did not necessarily result in large savings.
...

The CDHB spent the most on outsourcing procedures to private providers including Canterbury Orthopaedic Services, which trades as Leinster Orthopaedic Centre, Southern Cross Hospitals and St George's Hospital.

NZ Private Surgical Hospitals Association president Richard Whitney said the private sector was already the dominant provider of elective surgeries in New Zealand,.

It could perform many procedures "for the same price that the public sector would be credited with" and would play an increasingly important role as demand for surgeries increased, driven by an ageing and growing population.

Private health insurance here remains cheap. We have a high-deductible plan basically as catastrophic coverage. I cannot be bothered saving receipts for reimbursement for any of the routine stuff - and why bother? We don't have car insurance to protect against the costs of an oil change.

The mixed system just works.

But boy did hearing the term two-tier in that Canadian accent bring back terrible memories of how stupid public policy debates are back in the Asylum. So glad to be out.

Zombie alcohol stats

We thought we'd killed it with fire a decade ago. But BERL's social cost of alcohol has shambled out of the grave. I hit it anew over at Newsroom:

Zombies are hard to kill. Since the classical zombie only really occurs in fiction, accounts vary. But it never seems easy. Things that would kill or at least stop any normal living creature barely seem to faze the undead.

Zombie statistics are at least as hard to kill. These statistics, despite being horribly unsound, insinuate themselves into public debate and stay there. Tim Harford’s excellent BBC series More or Less makes a running feature of the statistics that, no matter how often you think you’ve cut them down, pick themselves up and lumber on.

I was very surprised to see one of New Zealand’s worst zombie statistics come back to life a couple of weeks ago. Put to the grave almost a decade ago, it returned at Alcohol Action New Zealand’s conference in August. BERL’s Ganesh Nana was reported to have claimed that alcohol-related harm costs every New Zealander $1,635 per year, for an annual total of $7.8 billion.

The figure seems to be an inflation and population-growth update of BERL’s 2009 estimate of the social costs of harmful alcohol use. The figure was nonsense at the time; an inflation adjustment to nonsense is hardly an improvement.

Let’s go through just what went wrong in that prior study, and why I was surprised to see its resurrection.

Satisfaction (Treasury stakeholders can't get no)

So Treasury sat on its 2017 external stakeholder survey for a year. In February, it told itself that it would release the results of the survey when it had achieved sufficient progress in improving things. It provided me the survey this week in response to an OIA request, but who knows when they would have otherwise gotten it up on their website.* 

The 2015 version of the survey was up within a couple of months.

The survey results aren't all bad. But on the key area I've been worried about around Treasury's economic capabilities, they aren't good. We can apply our usual bit of skepticism where a lot of the respondents to these surveys would be other Wellington types who might have their own unreasonable reasons for being mad at Treasury, but that should be in the fixed effect.

I go through it in this week's Insights newsletter.

Among those people interacting with Treasury about its core business of economics, macroeconomics, and fiscal projection, satisfaction dropped from 70% in 2015 to 47% in 2017. The proportion of stakeholders viewing Treasury staff as well-informed dropped significantly, as did overall confidence that staff do a good job, that Treasury challenges thinking on critical issues, and that Treasury can offer insights.

One highlighted survey response noted that “Treasury staff are personally a pleasure to work with, but they don’t have a strong background in economic analysis.” It is no particular surprise that lifting the quality of staff was near the top of the list of things stakeholders wanted Treasury to focus on.

The August survey results were reported to the Executive Leadership Team in November 2017 and discussed in February 2018. This week’s letter from Treasury says they are working on building economic capabilities through measures like training existing staff and through recruitment.

When Treasury would have released the Stakeholder survey, barring being prodded, is anyone’s guess. Only four of fifteen hired by Treasury in the 2019 graduate recruitment round had at least Honours-level training in economics and finance; I doubt that counts as addressing the concerns raised in the survey.

The consequences of Treasury’s failed experiment in de-emphasising economics will be felt for a long time. Treasury needs again to be the place where top economics graduates want to work.

The OIA materials are all available at the link above as well.

I have another couple of requests now in; the OIA due date will be 4 October.

Treasury said that they're working on building economic capabilities through training and recruitment.

So I have asked for details on their in-house training programme, including any syllabus and curriculum, and any assessment or review that Treasury might have undertaken benchmarking knowledge provided through that programme against university training in economics.

On building capabilities through recruitment, I have asked for detail on the qualifications and fields of analysts, senior analysts, principal advisors and senior managers hired for each of the past several years, as well as the same detail on people leaving Treasury for the past several years. I know of a couple of great senior people who have joined Treasury recently, but I also know of other great people who have left. It would be nice to have a sense of that flow.

Finally, I've asked for more detail on Treasury's award-winning blinded recruitment programme.

I understand that the process also blinded the applicant's field of study, or at least that it did so for some recent years. I want to know more about that. 

I'd like to know:

• at what levels of recruitment it applied;
• over which years' recruitment it ran;
• what evaluation framework was set up when they implemented the thing and any evaluation that was subsequently undertaken;
• whether it really did scrub out the applicant's field of study
• and, if so, over what period;
• and, if so, what analysis formed the basis for deciding to do that, and what analysis was undertaken in assessing the effects of doing that;
• on what basis Treasury was able to choose among applicants if they knew nothing about the applicant's grades, degree level, or university; 
• what the applicant pool looked like in each of the last few years, what the pool of applicants extended interview invitations looked like, and what the pool of extended offers looked like (degree and majoring field). Basically, I want to know if economists stopped applying to work at Treasury or whether the blinding knocked econ applicants out, and what the time path there looks like. 

Stay tuned. Maybe they'll tell me.

* Update: the thing's on their website, but only listed as 2017. They don't say when it was undertaken in 2017. Colmar Brunton ran the survey in early August; responses were received by respondents from about 31 July, with a four-week response window. So all responses would have been in by late August. This was in the email I'd received from Treasury as a respondent, so you can see the timeline here:

What happens to the results?Colmar Brunton will analyse the results and provide a report to the Treasury in September.  The report will be published later on the Treasury’s website. Previous research has provided valuable information on what the Treasury needs to do to better engage our stakeholders.

Maybe they've only sat on it for 11 months if they received it late September. It's well out from 2015's 2-month turnaround.  

Sentence first, verdict after

It isn't crazy to think that maybe information problems have people are consuming a less healthy diet than they'd otherwise eat. If people had an underlying desire to eat healthier foods, you'd expect that providing more information might change their choices. 

But if provision of information didn't change their choices, that tells us something too. I'd interpret it as saying that people had basically been making the choices that were right for them all along and that information problems hadn't been affecting decisions.

Public health people conclude differently:

University of Auckland researchers looked at the way in which shoppers used Traffic Light Labels and Health Star Ratings on various food products and were surprised to find the labels made little difference to which foods were purchased.

The study's lead author, Professor Cliona Ni Mhurchu, said people who were interested in healthier choices used the labels more than the majority of survey participants, but overall none of the labels significantly changed what people bought.

There were other ways people could be encouraged to eat more healthily, including making healthier food available in different settings such as schools, workplaces and hospitals, she said.

"But what we also know is unhealthy food is readily available and heavily marketed so we really also need to be looking at marketing regulations."

Professor Ni Mhurchu said the government needed to become more involved in setting standards around how food was marketed, rather than leaving that to the Advertising Standards Authority.

"[Advertising is] not being monitored, [it's] not being evaluated, it's not the government setting the standard."

If you have really strong priors that nobody would choose to eat potato chips if they had full information, then showing that people don't stop buying potato chips when there's a health star rating on them only shows that people are too dumb to interpret the ratings. In that view, maybe we need plain packaging and big graphic health warnings. 

The same data always has multiple possible interpretations I guess. But the health people never seem to weigh the chances that a lot of people have different preferences and goals than the health people would like them to have, and that those preferences are also worthy of respect.

Easterlin?

I'm glad that Thomas Coughlan and Richard Harman went to the Wellbeing Revival this week so I didn't have to.

Coughlin highlights the Easterlin paradox:

The case for assessing the welfare implications of Budget bids rests on what is known as the Easterlin paradox.

Developed by economist Richard Easterlin in the mid-1970s, the Easterlin paradox describes the point at which rising GDP ceases to translate into greater happiness.

Examples can be found at both ends of the scale. Countries riven by war and poverty would be markedly happier if they could add to their wealth, but the world’s wealthiest country, the United States, faces an epidemic of suicide and opioid addiction — clear symptoms of rising unhappiness.

The obvious question, then, is how will a Wellbeing Budget fix these problems? 

If that formed much of the basis for what was going on at the meetings, that's a bit of a worry. The Easterlin paradox was resolved a decade ago. 

Stevenson and Wolfers show that there is a link between economic development and happiness and between economic growth and happiness - at least across Europe and Japan. When they take another indicator, net affect (positive experience less negative experiences), they find strong correlation with log household income and log GDP per capita. 

They conclude:

The time-series part of our analysis is necessarily only suggestive: repeated (and comparable) surveys of subjective well-being data are both noisy and scarce, and hence they speak less clearly. In many cases we find happiness within a country rising during periods of economic growth and rising most rapidly when economic growth is more rapid. The United States stands out as a notable exception: Americans have experienced no discernable increase in happiness over the past thirty-five years (and indeed, happiness among U.S. women has declined). In contrast, Japan stands out as a remarkable success story, recording rising happiness during its period of rapid economic growth. So, too, life satisfaction has trended upward in Europe, and this trend has been most evident in those countries in which economic growth has been most robust. All told, our time-series comparisons, as well as evidence from repeated international cross-sections, appear to point to an important relationship between economic growth and growth in subjective well-being. Quantitatively, the time-series well-being–GDP gradient yields a role for income similar to that seen in our within- and between-country
contrasts. Taken as a whole, the time-series evidence is difficult to reconcile with earlier claims that economic growth yields no boost to happiness. 

It would be stupid to say that income is the only thing in a utility function. There are lots of things in a utility function. But it's also odd to be hanging much on the Easterlin Paradox. 

The Equalizer

My column in last week's National Business Review ($) went through a new StatsNZ series on government spending on health and education by income quintile. 

A snippet:

Statistics New Zealand’s latest figures show that while households in the highest income quintile spend about $150 (or about 38%) more on education services than households in the poorest quintile, government spending on education services is about $1100 higher for households in the poorest quintile. Central government education spending in 2015-16 averaged just under $1500 for households in the highest income quintile and just over $2600 for households in the poorest quintile – despite tertiary education spending that skews toward richer households.

A more thorough analysis would and should adjust for age differences across households in different income quintiles; that work is impossible from the data released.

Government service effects

We can look, though, at the effect of government spending on in-kind transfers like health and education on one measure of inequality: the ratio between the highest and lowest quartile, or the Q5:Q1 Ratio. That ratio has a lot of problems as well, not least of which being that it takes annual snapshots of household incomes and misses how household income moves over an individual’s life cycle. But it does let us get a handle on the effects of government services.

Gross disposable income, which includes taxes and cash transfers, is about six times higher in the top 20% of households than in the bottom 20% of households. Adjusted disposable income adds in government spending on in-kind transfers like health and education. Once we adjust for those in-kind services, the ratio drops by a third.

Vacancy rates

Sitting at my desk in Wellington, it's easier for me to tell you the housing rental market vacancy rate for any city in Canada than it is for me to tell you the rental market vacancy rate anywhere in New Zealand, Wellington included.

The Canada Mortgage and Housing Corporation (CMHC - a government outfit) has stats on the vacancy rate in every metropolitan region from 1992 through 2016. I don't know if they've stopped producing the series - the last update was March 2017.

In New Zealand, the best I'm aware of is disjointed stats from the different real estate companies about vacancy rates for the properties they handle.

Why does it matter to know? In Canada's stats, we can see that the 2016 vacancy rate in Saskatoon, Saskatchewan was 10.3% while it was less than 1% in every part of British Columbia. My old home town of Winnipeg had a vacancy rate of 2.8%.

In last week's Insights newsletter, I argued that one plausible explanation of poor tenant experiences is lack of competition among landlords in markets where vacancy rates are low. That's a testable hypothesis. If tenancy outcomes are no better in places in New Zealand with high vacancy rates, then that's a different problem. We'd also hope that, were land use rules fixed, low vacancy rates would be a leading indicator for new construction. But it isn't easy to find anything reliable for New Zealand. When I'd checked, I could find news stories written on the back of one property company or another's release on vacancy rates on the properties they handle, but nothing systematic.

It doesn't seem like the kind of figure that would be hard for the new Ministry of Housing to put together out of tenancy bond data and the number of properties for rent by town or city on TradeMe.