The Changing Role of the State Simon Blair 15 May 2001
Jan 17, 2016
The Changing Role of the State
Simon Blair15 May 2001
Huge Variability in Degree of Private “Invasion”
40%* of countries have > 50% of health costs met by non-government sources
0.9% 99.3% 5 < 10% ; 10 > 90% The ‘ironic antithesis of expectation’ Historical legacy, ideology, affordability,
relative strengths of governments and markets, and consumer expectation as influencing factors
An observable, evolutionary path
The Economic Arguments
For government involvement:Public goods / externalitiesMarket failures re info asymmetry
Against government involvement:‘Neo-classical’- private ownership,
competition & efficiencyInstitutional – property rights & provider incentives
And in real life …… Overall a declining % of
expenditure is state funded
Public Share of Total Health Expenditure
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 10000 20000 30000 40000 50000
GNP per capita
Pu
blic
as
% t
ota
l HE
1977
1987
1997
And in real life…… Declining/flattening government %s Emotion > evidence ; correlations not as
many envisage Both economic and empirical evidence
suggest optimal results are derived from mixed systems
Policy issues vis a vis the role of the state are critical for low and middle income countries
‘Externalities’ argument valid for public health, medical education, and R & D
Vocal critics are becoming evermore ‘aggressive’…
“political considerations not only strengthen the case for privatization, but actually are the crucial reason for it in the first place”
Shleifer
“government enterprises are far more likely to engage in wasteful, anti-competitive pricing than private ones”
Lott
Role ‘recalibration’ now has wider support
“Active government involvement in providing universal health care has contributed to the great gains – but many governments have overextended themselves. Efforts to provide all services to all people have led to arbitrary rationing, inequities, non-responsiveness and inadequate finance for essential services.”
WHO 1999
Support for ‘recalibration’ (2)
“Unfortunately weak institutional capacity to deal effectively with regulatory problems in the private sector often causes governments to become excessively involved in the direct provision of health services. Such over-involvement is typically associated with insufficient government involvement in: regulating the private sector; financing essential services and securing access to public goods with large externalities for the whole population.”
WB 1998
Support for ‘recalibration’ (3)
All State systems examined in a recent “Economist” report showed one or more of the following symptoms : Shortages of funds Inefficiency / lack of cost containment Hospital overcapacity Access inequities Inappropriate hospitalization
From “classical” to “new” universalism
“The values of WHO when combined with the evidence …cannot lead to a form of public intervention that has governments attempting to provide and finance everything for everybody. This ‘classical’ universalism … fails to recognize both resource limits and the limits of government.” (1999)
Government and Market Involvementin Health Systems
Rev
enu
e C
oll
ecti
on
Pu
rch
asin
g/
Co
ntr
acti
ng
Ser
vice
Del
ive r
y
Government
Market Forces
?
?
P
C SD
R
Unbalanced - Government excessively involved in “Rowing Function” and not sufficiently involved in “Steering Functions”
Balanced - Government activities concentrated on “Steering Functions”
Role Of Government
ComplianceServiceDelivery
Policy
C SD
RegulationsContractsSubsidies
Steering
Rowing
Distorted Roles
More Balanced Roles
I InformationR RegulationC ContractingF FinancingP Provision
P
R
I
C
I
Government Roles in HNP Sector
R
F
C
P
F
HOW ESSENTIAL IS PUBLIC SECTOR INVOLVEMENT IN HEALTH CARE?
Stewardship
Revenue collection
Fund pooling
Least essential Most essential
PurchasingPurchasing
ProvisionProvision
High Contestibility Low Contestibility
Hig
hM
easu
rabi
lity
Low
Mea
sura
bilit
y
Asy
mm
etry
N
o A
sym
met
ry
Type I Type III
• Retail of• Drugs • Medical Supplies• Other Goods
• Production• Pharmaceuticals • High Technology
• Routine Diagnostics• Hospital Support Services
Type IV - A Type VI-A
Type IV-B Type VI-B
• High Tech Diagnostics• Research
• Policymaking• Monitoring/Evaluation
• Ambulatory Clinical Care• Medical• Nursing• Dental
The Nature of Health Care GoodsBased on Neo-Institutional Economics
Medium Contestibility
Type II
• Wholesale• Drugs• Medical Supplies• Other Goods
• Management Services• Training
Type V-A
Type V-B
• General Hospitals• Public Health Services• Health Insurance
High Contestibility Low Contestibility
Hig
hM
easu
rabi
lity
Low
Mea
sura
bilit
y
Asy
mm
etry
N
o A
sym
met
ry
Dealing with Low Contestibility and Information Asymmetry
Medium Contestibility
Info
rmatio
n Disclo
sure
Regulations and C
ontractin
g
Public Financing
Productio
n
HighContestibility
LowContestibility
Hig
hM
easu
rabi
lity
Low
Mea
sura
bilit
y
Asy
mm
N
o A
sym
m
Shifting the Grid and Boundaries of Public Interventions
MediumContestibility
Public Financing
Productio
nRegulations and C
ontractin
g
Informatio
n Disclosure
High Contestibility Low Contestibility
Hig
hM
easu
rabi
lity
Low
Mea
sura
bilit
y
Asy
mm
etry
N
o A
sym
met
ry
Type I Type III
Type IV - A Type VI-A
Type IV-B Type VI-B
The Dynamic Nature ofHealth Care Goods and Services
Medium Contestibility
Type II
Type V-A
Type V-B
Univers
ity H
ospitals
Exp
ensi
veE
qu
ipm
ent
and
Dru
gs
Ambulatory Care
Why Private Sector Participation: Pragmatism
Affordability - efficiency, access to capital, cost-transfer (off balance sheet)
Lack of government ‘skill-superiority’- i.e. not all areas are ‘core-skill’ areas
Increases role clarity & specificity of deliverables
Risk transfer e.g. financial, industrial relations, facility,technological obsolescence and service delivery risk
Hospital Privatization : the evidence
Limited, but passionate, non-evidence based articulation
Overall international findings: not for profit = for profitprivate > publiccompetition = a positive
Kaiser: preservation of ‘public goods’
Purchasing: Increasingly tomorrow’s focus
The arguable nature of government purchaser’s ‘market power’
The political discomfort of service and/or access rationing
Product heterogeneity vis a vis government skill and knowledge deficiencies
Consumerism & choice
Conclusions : From ‘Bevanite’ to role for
government to targeted role focus on information provision,
regulation and financing; on provision
Incremental > programmed privatization
Private sector = broad church & there is no single solution
“The only reliable way to arrive at an appropriate solution is to rely on what has worked in the past and adjust it to meet the specifics of each new or changing situation.”
Van der Gaag
“It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change.”
Charles Darwin
The changing role of the state