Julian Le GrandEquality and Choice in Public Services
People should not forget the current system is a two-tier system
when those who can afford it go private, or those who can move ge
beter schools Choice mechanical enhance equity by exerting pressure
on low quality or incompetent providers. Competitive pressure on
incentives drive up quality, efficiency, and responsiveness in the
public sector. Choice leads to higher standards The overriding
principle is clear. We should give poorer patients the same range
of choices the rich have always enjoyed. In a heterogeneous society
where there is enormous variation in needs and preferences, public
services must be equipped to respond.-Prime Minister Tony Blair,
Speech to South Camden Community College, January 23, 2003
These choices will be there for everybodyNot just for a few that
know their way around the system. Not just for those who know
someone in the loop-but for everybody with every referral. Thats
why our approach to increasing choice and increasing equity go hand
in hand. We can only improve equity by equalizing as far as
possible the information and the capacity to choose.-Jhone Reid, UK
Secretary of State for Health, Speech to the New Health Network,
July 16, 2003
While increased patient choice may put pressure on poorly
performing providers to improve their services, there is no reason
to think, despite the Prime Ministers assertion, that this will
ensure equal treatment for equal need. Hence extending choice puts
at risk a key objective of the NHS [National Health Services]-equal
access for equal need.-Appleby, Devlin, and Harrison (2003)
INTRODUCTIONThe extension of the individuals right to choose the
public services such as health care and education is a major policy
issue in the developed world. As the preceding quotations indicate,
it is a matter of intense political controversy in Britain, where
debates concerning choice in public services figured prominent in
the 2005 general election campaign. In the United States, it is
most prominent in the long running controversies over education
voucher programs and charter schools and it may begin to surface in
health care, as voucher debates begin to develop there as well
(Hoxby, 2003; Emanuel and Fuchs, 2005). New Zealand, Denmark, and
Sweden have all experimented with choice in public education and
health care; Germany, France, Belgium, and the Netherlands have
choice programs, in some cases long established (Le Grand, 2003,
chaps. 7 and 8; Blomqvist, 2004; Van Beusekom et al., 2004)Despite
this experimentation, in most countries the right to exercises
choice in areas such as public education and health care has
historically been limited. Many public education systems required,
and still require, parents to send their children to the
neighborhood school. Under system of public health care, patients
commonly have little or no choice over their physician or hospital.
Further, the case for such restrictions is often made on the
grounds of equity or fairness; if no one has choice, if everyone
has to go to the same school or hospital, then there is equality of
provision or utilization. And, if there is equality of utilization,
there is equity or so the argument goes. Further, it is contended
that this achievement of equity would be threatened if the
restrictions on choice were removed; the well-off are better placed
to make the relevant choices than the poor and therefore are likely
to be advantaged by any system that allocates resources on the
basis of choice.In this paper, I address these arguments. I begin
with an elucidation of the terms involved, including choice,
equity, and public services. The next section asks and tries to
answers the equations: Does extending individual choice in publicly
funded services promote or reduce equity? There is a brief
concluding section. It should be noted that the paper concentrates
only on the equity arguments concerning choice; there are many
other reasons why a policy of extending choice might be desirable,
including the incentives it provides for improving provider
efficiency and responsiveness, but these are not our concern here
(for the arguments-both for and against-see Le Grand, 2003; Lent
and Arend, 2004; Levett et al., 2003; Marquand, 2004; Schwartz,
2004).
THE CONCEPTSMuch of the debate in this area is characterized by
confused terminology, and it is important to be clear what key
concepts mean. In the title of this paper there are three such
concepts that are apparently simple but that in fact require some
explication before we can proceed. They are public services,
choice, and equity. First, public services. By this I mean
primarily publicly funded services. These are services that are no
purchased directly by consumers form their own resources but
financed primarily from taxation (central or local) or from social
insurance. Thus publicly funded health care would include Medicare
and Medicaid in the United States, funded from federal and state
taxation; the British National Health Service, and the Spanish,
Portuguese, and Irish health care systems, all largely funded from
central government taxation; the Danish and Swedish systems, funded
from local taxation; and the social insurance systems of Germany,
France, Netherlands, and Belgium, where themselves funded by social
insurance contributions paid by contributions levied on employers
and employees (Mossialos and Le Grand, 1999, chap. 1). In
education, it would include the public school systems of virtually
every developed country, funded usually by a mixture of central and
local taxation.In many cases of public services, the services is
not only funded publicly, but also provided publicly. That is, the
government owns and operates the institutions that provide the
service concerned (the schools, the hospitals, etc.) and employs
the people working in the services. However, this is not a
necessary feature of all publicly funded services, including those
that are the focus for this paper. Many countries have private or
nonprofit providers of health care and education as well as (or
instead of) publicly owned ones, still financed wholly or largely
from public funds. The methods of funding can take a variety of
forms; block grants directly to the institution concerned; the
adoption of formulae based on activities undertaken (such as number
of operation or of inpatient days for hospitals) or numbers of
people served (such as pupils for schools); or vouchers, under
which the government gives the users a specific amount of resources
that can spent at any provider of the service concerned. But
whatever the method of funding, so long as the principal source of
the funds concerned is government taxation, then services are at
least for the purposes of this paper public services.Or public
services defined in this way, there are a number of dimensions of
choice. These may be summarized n the equations; Where, who, what,
when, and how? First, there is choice of provider, such as hospital
or school (where?) and in some social insurance systems, choice of
social insurer. Then there is choice of professional, such as
doctor or teacher (who?); choice of service, such as medical
treatment or school curriculum (what?); the choice of appointment
time (when?); and the choice of access channel, such as phone, web,
or face-to-face (how?). The principle of choice in publicly funded
services includes decisions on all these dimensions.These decisions
are not necessary independent. In health care, a patient may choose
a particular provider because of its opening hours or shorter
waiting times, or in order to see a particular school for a child
because of the type of curriculum (for example, a specialist
school) or style od pedagogy it offers. However, it is useful to
keep distinctions between these different kinds of choice in mind
because the arguments for and against extending user choice in
public services can vary according to which type of choice is being
considered.It is also important to distinguish who is doing the
choosing. This could be the users themselves (such as patients in
elective surgery), relatives or individuals agents for the actual
users (such as parents for their childrens schools or curricula),
or collective agents choosing on behalf of users (such as
government awarding contracts to suppliers of public services on
behalf of users).Of all these various kinds of choice, this paper
concentrates primarily on choice of provider (such as schools or
hospitals) by users or their families (such as patient, parents, or
pupils). It emphasizes choice in relation to providers because that
is where much of the policy and political debate is centered, and
because, as noted earlier, that decision often incorporates the
other kinds of choice. And it concentrates on users because that is
where most of the major equity issues lie.Finally, the paper
focuses on cases where the money follows the choice; that is, where
providers that are chosen receive extra resources, while those that
are nor receive less. One example of this kind of scheme is the
current policy the United Kingdom for patient choice in secondary
health care, where patients referred for elective surgery by their
general or primary care practitioner (GP) are offered the choice of
variety of hospitals where the procedure may be undertaken; and
where the hospital that is chosen and that undertakes the relevant
surgery is the reimbursed out of public funds on a cost-per-case
basis. The classic example in education voucher, where parents are
given a voucher worth the equivalent of, for example, a years cost
of education a voucher that they can present at any school of their
choice. The school then redeems the voucher from the education
departments in the relevant government, receiving payment from
public resources. Another education example would be the current UK
system, which in theory at least relies on open enrollment (or free
parental choice of school), plus a government-funding formula based
on number of pupils: a system where the financial transactions are
hidden from the users but is nonetheless effectively a form of
voucher in that, as with vouchers, the money follows the
choice.Finally, equity. It will come as no surprise to most that
equity is a contested term. It is frequently confused with, or used
synonymously with, terms such as equality, fairness, and social
justice. I have tried to resolve some of these confusions elsewhere
(Le Grand, 1982, 1984, and 1991) and will not attempt to continue
that debate here. Instead, I shall simply use two common
interpretations of the term: equality of choices and equality of
utilization. I shall try to provide some answers to the questions:
Will extending choice in public services create greater equality of
choices for users of public services? And will it create greater
equality in the use or utilization of these services?
EQUALITY OF CHOICESFirst, will extending choice in public
services move closer to equality of choices for users services? The
principal point to make in this context is that, even in system
that apparently offer little choice, there are nonetheless usually
two possibilities for choice. First, in such systems, there is
always the possibility of opting out (or never entering) the public
system: using the individual or the familys own funds to buy
private education or private health care (Canada, which bans the
use of private health care, is an exception here although there is
always the possibility of crossing the borders).Second, there is
the possibility of moving so as to benefit from the proximity of
good schools or hospitals. That this is a real phenomenon is
illustrated by a number of studies in the United Kingdom. A recent
study by the nations biggest mortgage lender, the Halifax, found
that houses are valued at 12 percent more than the regional average
if they are located in the same areas as the most successful
secondary schools, confirming an earlier, similar report by another
large mortgage lender, Nationwide (Guardian, 2005: 23). Gibbons and
Machin (2003, 2005) found that a 10 percent improvement in league
table performance for primary schools can be expected to add 3
percent to the price of a house located close to the school. This
is a very local effect, one hat halves 600 meters away from the
school gate. In London and the southeast the result can be moving
from an area with weak primary schools to an area with stronger
ones can cost 61,000. (They also found that because of confusion
over admissions and lack of clear information about school
performance, parents exhibited a herd mentality, going for schools
that are difficult to get into, not necessarily those that were tor
performing.)Do proposals to introduce choice within public services
can be viewed as simply extending opportunities for choice that
already existed for the better off (through moving or going
privately) to groups that previously had little or none. In that
sense, it is moving toward a greater equality of choice that, at
least according to that interpretation of the term, is a move
toward greater equity.
EQUALITY OF UTILIZATION As noted in the introduction, often the
first line of argument against extending choice in public services
is that it will create inequality in utilization. Compelling
everyone to go to the same school, use the same insurer, or attend
the same hospital will create equality in services utilization and
therefore, according to that interpretation, of the equity.
Allowing, choice will enable some people to use different amounts
continues, the poor, and disadvantaged are less well placed than
the better off to exercise choice effectively: so this will
disadvantage them even more.The initial presumption behind this
argument is that no-choice systems avoid inequalities in
utilization. However, this is suspects. To take just one nontrivial
case, I have, together with colleagues, reviewed the research
concerning the utilization of the British National Health Service
until recently very much a no-go area for choice-by different
socioeconomic group (Dixon at al., forthcoming). In fact, we found
man significant differences in utilization relative to need. Just
give a few examples:
Affluent achievers had 40 percent higher coronary artery bypass
grafts and angioplasty rates than the have-nots, despite far higher
mortality from coronary heart disease roughly 30 percent higher
need. Hip replacements were 20 percent lower among lower
socioeconomic groups despite roughly 30 percent higher need. Social
classes IV and V (roughly, manual workers and their families) had
10 percent fewer preventive consultations than social classes I and
II (professionals and higher-level mangers) after standardizing for
other determinants. A one-point move down a seven-point deprivation
scale resulted in GPs spending 3.4 percent less time with the
individual concerned.
No-choice systems can thus generate inequalities in utilization.
The question therefore in relation to choice and equity is not
whether extending user choice within a public service that
previously offered little or no choice exacerbates or reduces those
inequalities in utilization that already exist. To answer that, it
is necessary to have some idea of the factors that bring about
these ineaquality in utilization in the first place. These may be
summarized ad unequal costs and resources differences in capacities
and risk-selection.Unequal Costs and ResourcesClearly, if users
face different costs of using a services or have different
resources from which to meet those costs, this will create
different in the utilization of the service. Most of the services
with which we are concerned on this paper are free at the point of
use, or with means-tested copayments, so service changes are no
usually in issue. However, even users of a service that is free at
the opportunity cost of the time taken to use the service. These
will differ between individuals and social groups, creating
differences in the barriers they face from using the service, and
therefore different patterns of utilization.The survey of
inequalities within the British NHS referred to earlier found that,
in particular, transport and travel costs were important in
affecting service utilization by lower socioeconomic groups, even
in a service such as this where there is little or no choice. The
extension of choice in services for which this is little or no
choice. The extension of choice in services for which this is major
concern is likely to exacerbate this problem, since, in all
probability, if choice is to work, patients will have to travel
further. Middle-class patients will generally fin this easier since
they usually have better access to transport, especially cars;
hence, if no or little help with transport costs is offered, the
inequalities in utilization are likely to be exacerbated by
patients choice.So an essential element of any policy aimed at
encouraging user choice in public services is the provision of help
with transports and travel costs. Ideally, this help should cover
the full range of costs associated with an accompanying partner or
carer.
Unequal CapabilitiesA second source of inequality in utilization
in no-choice systems is the difficulties that the less advantaged
face in obtaining a responsive service. The only way in which the
poor can exert pressure if they are receiving a low-equality
services (or even being denied a service) in a no-choice system is
through a variety of other means, such as trying to argue with the
relevant professional or bureaucrat, or putting in a more formal
complaint through some kind of complaints procedure. But these
inevitably favor the articulate, confident middle classes and
disadvantage the less well-off. Put another way, the better off
have better contacts and sharper elbows-a louder voice in the
terminology of Hirschman (1970). And they are adept at using their
voice to demand access to more extensive services (such as
specialist outpatient consultations, diagnostic tests, inpatient
treatments, better teachers, and so on).Generally, middle-class
patients and parents are more articulate, more confident, and more
persistent than their poorer equivalents. Moreover, the medical
practitioners who are making the relevant treatment decisions and
the school principals often are more likely to speak the same kind
of language as, and thus relate better to, middle-class patients
and parents. In addition, many of the relevant professions, and who
can help them those lower down the social scale in no-choice
systems to ensure they obtain quality medical treatment for
themselves and their family and education for their children.So how
will this be affected by extending choice? In fact, the shift of
power from professional to user that is implicit in the choice
strategy directly favors the less well off precisely because it
reduces the role of middle-class voice in allocating health service
resources. Ultimately, extending choice to all goes a long way
toward equalizing power between users from different social groups;
and that can only be equity enhancing.There are many who would
dispute this conclusion, arguing that poorer groups do not have the
ability to make choices that middle class ones have. However, this
argument is usually supported by anecdote rather than evidence. In
fact, I can find no hard evidence that the capacity of lower
socioeconomic groups for choice is less than that of higher
ones.Still, it is possible that differences in capacity for
exercising choice between social groups do exist. In the case, some
mechanism for giving advice, information, and support would help
level the playing field-especially in areas where social capital is
low. An appropriate policy response could be what we might term
guided or supported choice. This would use advisers to help
individuals and families to make choices. Thus in health care, the
responsibility for the adviser role could include monitoring care
plans, offering choices of provider, discussing treatment options,
identifying social needs regarding travel, disability, and
language, and providing information and updates about the care
pathway (including assessment, treatment, and aftercare), booking
appointments with providers, arranging transport, helping patients
navigate the system, and supporting/coaching patients on self-care,
self-management, and behavioral change.Part of the supported choice
package could include help with transport and travel costs as
discussed in the previous section. The package would then have the
advantage of overcoming both the capacity and resource problems of
individuals in making choices.
Risk SelectionRisk selection is often also termed skimming or
cherry picking. It is argued that, with choice, providers,
especially if they are oversubscribed, will have the power to
select the users to whom they provide services: the easiest, the
cheapest, those who are most likely improve their finances or to
boost their ratings in any league tables. User choice thus turns
into provider choice with again particularly adverse consequences
for the poor and disadvantaged.This is an obvious problem in
education, where oversubscribed schools can select pupils or
students who are easy to teach or who in other ways can boost the
schools performance. In health care systems with consumer choice of
multiple insurers, it can arise on the insurance side, where
insurers try to select good health risks as enrollees and
discourage worse health risks or charge them higher premiums. In
social insurance systems with multiple funds, choice of funds, and
capitated allocations (such as Germany, the Netherlands, and
Belgium), funds try to select below average risk enrollees. In
systems such as the United Kingdom, where purchases have a defined
population, the problem is confined to the provider side, whereby
GPs or hospitals may try to select patients who are easier or
cheaper to deal with. The consequence is discrimination against
groups with a higher risk of ill health, such as the old and the
poor.It is worth noting that, at least in the care case, there are
factors that militate against cream skimming. There is first the
question of knowledge: Can those in charge of acceptance on a GP
list or in charge of hospital outpatient referral effectively
distinguish between high and low risk patients? Second, there are
professional interests: more difficult patients may present more of
an intellectual challenge (although, of course, for doctors in
search of a quiet life, this could act a positive incentive for
cream skimming).It is worth noting that, in hospitals at least,
these incentives not to cream-skim are largely associated with
specialists, whereas the direct incentives to cream-skim (finance,
pressure to meet waiting lists) impact primarily on hospital
management. Several studies indicate that it is specialists who are
the principal decisionmakers in hospitals (see, for instance,
Crilly and Le Grand, 2004), suggesting that perhaps the incentives
not to cream-skim may currently dominate the incentives to do
so.The situation complicated further by the use of private
providers. It could be argued that the incentives to cream-skim are
intensified in a profit- making context: that private providers are
run by knaves not knights, and hence will ruthlessly exploit any
opportunity they have to enhance their profits, including the
opportunities offered by cream skimming. This is clearly a danger,
although it is likely to be partly offset by the fact again some of
the private organizations concerned are actually nonprofits and
thus likely to have a more complicated (and more knightly)
motivational structure than of simple profit-maximization.So cream
skimming or risk selection is likely to be a problem for any system
of extending user choice in public services. But there are a
variety of policy options for addressing it. These include
stop-loss insurance; restrictions on the admission freedoms of
providers; and risk adjustment of funding formula.Stop-loss
insurance is a scheme whereby providers faced with a user whose
service costs lie well outside the normal range are allocated extra
resources once the cost has passed a certain threshold. This has
the advantage of removing the incentive to economize on service
once the thresh-old has been passed.A second possibility is to take
admission decisions completely away from users. So in health care,
social insurer, hospitals, and other treatment centers would be
required to accept whoever was referred to them. Schools would have
to accept every applicant up to capacity and, once capacity was
reached, to allocate by lottery or some other random process.A
third alternative is to risk-adjust the pricing system so that
higher-cost users have higher costs associated with them. If full
risk adjustment is possible, this could eliminate the incentive to
cream-skim completely. However, as has often been demonstrated,
risk adjustment is arguably an impossible one. But so long as risk
adjustment is not perfect, there will remain an incentive to
cream-skim. Risk-adjusted payments also provide the incentive for
coding creep for example, in health care, upcoding patients to more
lucrative high cost categories.A form of risk adjustment that would
be simpler and help assuage any socioeconomic inequities arising
from cream skimming would be deprivation: adjust the tariff or
price. The tariff could be associated inversely with an area
deprivation index such that treatments for those from wealthier
ones. This could act as form of risk adjustment since it is widely
believed that poor users have greater need than better-off ones.The
policy challenge is to identify which of these options is likely to
be most effective and most consistent with other government
policies.
CONCLUSIONThe overall conclusion arising from these arguments is
simple. Contrary to popular belief, public services that offer
their users little or no choice can create substantial inequities.
Extending user choice within those services, therefore, so far from
being inequitable, can create greater equity in the sense of
greater equality of choices and utilization. However, the policies
concerned have to be appropriately designed. In particular, they
should contain features that offer support to those who might find
it difficult to make choices; and they must have mechanisms that
offset or neutralize incentives to risk select or cream-skim. If
those features exist, the choice in public services will promote
equity and do so more effectively than no-choice alternatives.