choice, competition and public service reform julian le grand london school of economics australia...
TRANSCRIPT
Choice, Competition and Public Service Reform
Julian Le GrandLondon School of Economics
Australia 2014
Central Problem of Public Service Delivery
• How to drive up quality in public services (school education, higher education, health care, social care – and others)
• Do poor providers (hospitals, schools, children’s homes, social work offices) need incentives to improve? Is the provision of incentives irrelevant – or damaging?
Models of Public Service Delivery
• Trust
• Mistrust
Models of Public Service Delivery (4)
• Voice
• Choice
Models and Motivation
Each model incorporates one or more assumptions concerning the motivation of employees working in human services. They are either assumed to be largely motivated by altruism and professional values (trust and voice models), by self-interest (mistrust model) or some combination (choice). That is, they are assumed to be knights, knaves or a mixture of the two.
Of Knaves and Knights
’In contriving any system of government, and fixing the several checks and controls of the constitution, every man ought to be supposed a knave and to have no other end, in all his actions, than private interest. By this interest, we must govern him and, by means of it, notwithstanding his insatiable avarice and ambition, co-operate to the public good’ David Hume
Trust Model
• Problem is identified as the constraints: resources/silos. ‘Give us the money and we will finish the job’.
• Problem is unawareness. ‘Tell us what’s wrong and we’ll put it right’.
Motivational assumption: No incentives necessary. Resolve the central problem, and intrinsic motivation sufficient: providers are professional knights not knaves.
Trust model: advantages & disadvantages
• Advantages– Liked by producers & professionals– No gaming– No monitoring costs & low transaction costs
• Disadvantages– Rewarding failure resentment from those do
deliver.– Knights may have their own agenda– Doesn’t work…….
Mistrust Model
• Mistrust (1): Ministerial command and control. UK version: targets and performance management.
• Mistrust (2): Regulation.Motivational assumption: primarily knaves. Employees need incentives:• Promotion/dismissal• Autonomy/restriction
Mistrust model: advantages and disadvantages
Advantages:• It works…….
% patients waiting for hospital admission > 12 months
Source: Are improvements in targeted performance in the English NHS undermined by gaming: A case for new kinds of audit of performance data? Gwyn Bevan and Christopher Hood, British Medical Journal (forthcoming)
0%
5%
10%
15%
20%
25%
30%
2000 2001 2002 2003 2004 2005
% p
atie
nts
wa
itin
g >
12
mo
nth
s
England
Northern Ireland
% patients waiting for hospital admission > 12 months
Source: Are improvements in targeted performance in the English NHS undermined by gaming: A case for new kinds of audit of performance data? Gwyn Bevan and Christopher Hood, British Medical Journal (forthcoming)
0%
5%
10%
15%
20%
25%
30%
2000 2001 2002 2003 2004 2005
% p
atie
nts
wa
itin
g >
12
mo
nth
s
England Northern IrelandScotlandWales
% patients waiting for hospital admission > 12 months
Source: Are improvements in targeted performance in the English NHS undermined by gaming: A case for new kinds of audit of performance data? Gwyn Bevan and Christopher Hood, British Medical Journal (forthcoming)
0%
5%
10%
15%
20%
25%
30%
2000 2001 2002 2003 2004 2005
% p
atie
nts
wa
itin
g >
12
mo
nth
s
England
Northern Ireland
Scotland
Wales
% patients waiting for hospital admission > 12 months
Source: Are improvements in targeted performance in the English NHS undermined by gaming: A case for new kinds of audit of performance data? Gwyn Bevan and Christopher Hood, British Medical Journal (forthcoming)
0%
5%
10%
15%
20%
25%
30%
2000 2001 2002 2003 2004 2005
% p
atie
nts
wa
itin
g >
12
mo
nth
s
England
Northern Ireland
Scotland
Wales
% Patients spending less than 4 hours in A +E
0
20
40
60
80
100
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2002/03 2003/04 2004/05 2005/06
%
Source: Chief Executive's Report on the NHS - Statistical Supplement (December 2005)
+ 24% increase in A+E admittances
Mistrust model: disadvantages
• Targets set centrally.• Distortion: ‘hit the target and miss the point’• Gaming.• Demotivating and demoralising – especially
for professionals. Tums knights into knaves.
Voice
• Mechanisms: Complaints, petitions, public meetings, community councils. No direct incentives
• Advantages: gives information, personal relationship.
• Disadvantages: clumsy, relies upon knightly motivations – and inequity. Favours the confident, the articulate: the better off.
Choice: types
• Choice of Provider (where?)– Hospital, GPs, Schools
• Choice of Treatment (what?)– Treatment, procedures, curriculum, teaching styles
• Choice of Time (when?)– Appointment time, opening hours
• Choice of Access Channel (how?)– Face to face, phone, web
Choice of Provider
• Providers are independent. Non-profit or for-profit. Keep any surplus they make on their budget
• Users choose provider. Money follows the choice. So hospitals, schools etc get more resources through the number of users (patients, pupils) they attract.
• Funding formula or individual budgets
Choice and competition: advantages
• Choice is intrinsically desirable• Choice is instrumental: leads to greater autonomy
and welfare
Intrinsic desirability of choice and self-determination theory
• Autonomy desirable (important basic value, promotes greater well-being, life-expectancy etc)
• Greater choice greater autonomy.
But does it lead to greater welfare? Too much choice can lead to confusion and regret
Choice and competition: advantages
• Choice is intrinsically desirable• Choice is instrumental: leads to greater autonomy
and welfare• It works. Provides strong incentives for
responsiveness and efficiency. Evidence (from US and UK) suggests that fixed price systems in health care lower costs and increase quality. Education evidence more mixed.
• Promotes equity through diminishing the power of voice.
Competition in health care: Evidence from UK.
• Following roll out of choice in UK, AMI mortality dropped faster in more competitive areas (Zack Cooper, Carol Propper).
• Introduction of ISTCs (Independent Sector specialist treatment centres) led to technical efficiency improvements in NHS competitors (Cooper)
• Expansion of market since 2008 to inclide any willing provider: no further improvement?
Waiting times: an equity problem
145
150
155
160
165
170
175
180
185
190
195
200
I II III IV V
Level of Deprivation (V = Most Deprived Quintile)
Days
Wait
ed
The poor waited up to 30-days longer than the wealthy
Hip replacement broken down by deprivation
0
50
100
150
200
250
300
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Year
Days W
ait
ed I
II
III
IV
V
Choice and competition: advantages
• Choice is intrinsically desirable• Choice is instrumental: leads to greater autonomy
and welfare• It works. Provides strong incentives for
responsiveness and efficiency. Evidence (from US and UK) suggests that fixed price systems in health care lower costs and increase quality. Education evidence more mixed.
• Promotes equity through diminishing the power of voice.
• Can appeal to both the altruist (knight) and the self-interested (knave).
Choice and Competition:Non-problems/fallacies
• ‘People don’t want choice; they want a good local school’. False alternative.
• Only middle classes want choice.• Choice and competition don’t belong in
‘the public realm’.
Parental Choice in New Zealand• 96% of parents indicated they would like to select the
school their child goes to• 80% of parents agreed that education should be
funded such that parents can afford to send their children to the school of their choice.
• A higher proportion of parents with annual income of $30,000 or less strongly agreed with the statement than parents with an annual income of over $30,000.
• Source: Steven Thomas and Ruth Oates The Parent Factor Report Four: Access to Education. Auckland: the Maxim Institute, 2005
Minorities and Choice in the US
• 52 per cent of parents, and 59 per cent of public school parents, supported school choice.
• 60 per cent of minorities supported vouchers. • 87 per cent of black parents aged 26-35 and
66.4 per cent of blacks aged 18-25 supported vouchers.
Who wants choice UK: Gender
56%
69%
0%
20%
40%
60%
80%
100%
Men Women
% saying peopleshould have a greatdeal or quite a lot ofsay over which hospitalto go to if they needtreatment
62%
64%
64%
59%
67%
55% 60% 65% 70%
semi routineand routine
Lowersupervisory& technical
Self-employed
Intermediateoccupations
Managerialand
professional
soci
al c
lass
% saying peopleshould have a greatdeal or quite a lot ofsay over which hospitalto go to if they needtreatment
Who wants choice UK: Social Class
59%
57%
65%
70%
0% 20% 40% 60% 80% 100%
>£50,000
£32,000 -£50,000
£10,000 -£32,000
< £10,000
inc
om
e
% saying peopleshould have agreat deal or quitea lot of say overwhich hospital togo to if they needtreatment
Who wants choice UK: Income
56%
59%
67%
69%
0% 20% 40% 60% 80% 100%
Highereducation
A Level
GCSE/OLevel
None
Hig
hest
edu
catio
nal q
ualif
icat
ion
% saying peopleshould have a greatdeal or quite a lot ofsay over whichhospital to go to ifthey need treatment
Who wants choice UK: Educational Achievement
London Choice Pilot: % opting for an alternative hospital
Source: Evaluation of the London Patient Choice Scheme, Picker Institute (July 2005)
69%65% 65% 67% 68% 67% 66% 67%
63%
73%
0%
20%
40%
60%
80%
100%
Fe
ma
le
Ma
le
Ba
sic
Hig
he
r
Be
low
ave
rag
e
Ab
ove
ave
rag
e
No
n-w
hite
Wh
ite
No
te
mp
loye
d
Em
plo
yed
Sex Educationalstatus
Householdincome
Ethnic Group EmploymentStatus
Choice and Competition:Problems
• Natural or geographical monopoly. Possibility of franchising.
• Information. For choice to work, users must be informed, or have informed agent.
• Transactions costs high.• Opportunities for cream-skimming. Cream-
skimming: selecting easiest, least costly pupils, clients, patients. Favours less needy.
• Cover for privatisation
Choice and Competition: problems (cont)
• Failure. Need mechanism by which poor providers can ‘exit’ the market. Politically difficult.
• Fragmentation. Loss of benefits of economies of scale (If they exist)
• Need excess capacity (though not very much)
Avoiding problems of choice: cream-skimming
• Stop-loss insurance
• No discretion over admissions
• Incentives. Risk adjustment
• Pupil premium in school education
Avoiding problems of choice: Reputation Competition
Incentiveso Individuals’ esteem (spotlight effect)o Publicity of good / poor performance
Mechanismso ‘Naming & shaming’ organisationo Rankingo Publication: widely disseminated
Reputation Competition Advantages & Disadvantages
• Advantages– Can work– Low transaction costs
• Disadvantages– Problems of selection– Can result in gaming– Damage to morale from ‘naming &
shaming’. Unpopular.– No direct incentives to improve
% pupils achieving > 5 good grades GCSE A* to C
Note: data are missing for 1998, 2001 & 2005 & these have been estimated as the mean values from adjacent years
Wales stops publication league tables
1999 2001 2003 2005 200745
55
65
75
85
England Wales
Star ratings published
Target
Source: Bevan & Hamblin (2009)
% Ambulance response times to life-threatening emergencies < 8 minutes
Problems of choice and competition: privatisation?
• Is drive for competition just a cover for privatisation?
• The for-profit question. Motivation of shareholders knavish; non-profits/social enterprises mixture of knight and knave.
• The Public Service Mutual
The Public Service Mutual
• The Public Service Mutual (PSM) is an employee-led (and owned) organisation, often spun out of the public sector, delivering a public service.
• Mutuals across sectors and countries deliver:– High user satisfaction– Greater productivity– High employee morale (especially professionals)