Podem reimaginar-nos un nou capitalisme? (6)

The crisis of democratic capitalism 

En aquest blog he escrit anteriorment sobre reimaginar el capitalisme i realment fa molts anys que se'n parla però qui dia passa any empeny. Ara en Martin Wolf, cap d'opinió de FT acaba de publicar un llibre il·lustrador. Ho és perquè explica amb tot detall com hem arribat fins aquí, i què caldria fer per avançar en les institucions democràtiques i econòmiques, i evitar així més d'un ensurt.

Aquest llibre argumenta que quan la gent no veu cap esperança i perd la confiança en les institucions democràtiques, tant la democràcia com els mercats poden fallar i fallaran. En resum, cal una reforma radical i valenta de l'economia capitalista i hem d'enfortir els vincles econòmics de la ciutadania alhora que s'aprofundeix la cooperació internacional.

El llibre es llegeix magníficament, està molt ben escrit. Destaco alguns paràgrafs clau:

A market economy that operates under trustworthy rules, rather than the whims of the powerful, underpins prosperity and lowers the stakes of politics. In turn, a competitive democracy induces politicians to offer policies that will improve the performance of the economy and so the welfare of the people. Beyond these practical reasons for the marriage of liberal democracy and market economy, there is also a moral one: both are founded on a belief in the value of human agency—people have a right to do the best they can for themselves; people have a similar right to exercise a voice in public decisions. At bottom, both are complementary aspects of human freedom and dignity.

Els objectius de reforma del capitalisme democràtic haurien de ser:

• Un nivell de vida creixent, àmpliament compartit i sostenible
• Bona feina per a aquells que poden treballar i estan preparats per fer-ho
• Igualtat d'oportunitats
• Seguretat per a qui ho necessiti
• Acabar amb privilegis especials per a uns pocs

Removing harms, not universal happiness, is the objective. The approach to reform is that of “piecemeal social engineering,” as recommended by Karl Popper, not the revolutionary overreach that has so often brought calamity.

Behind these specific proposals is a wider perspective. A universal suffrage democracy will insist on a citizenship that is both economic and political. This means that business cannot be free to do whatever it wishes. It means that taxes must be paid, including by the economically powerful. It means that the state must be competent and active, yet also law-governed and accountable. All of this was the clear lesson of the twentieth century.

I sobre el concepte de ciutadania, el que no és i el que és:

Here are things this does not mean.

It does not mean that democratic states should have no concern for the welfare of noncitizens. Nor does it mean that it sees the success of its own citizens as a mirror image of the failures of others. On the contrary, it must seek mutually beneficial relations with other states.

It does not mean that states should cut themselves off from free and fruitful exchange with outsiders. Trade, movement of ideas, movement of people, and movement of capital, properly regulated, can be highly beneficial.

It does not mean that states should avoid cooperating closely with one another to achieve shared goals. This applies above all to actions designed to protect the global environment.

Yet there are things it clearly does mean.

It means that the first concern of democratic states is the welfare of their citizens. If this is to be real, certain things must follow.

Every citizen should have the reasonable possibility of acquiring an education that would allow them to participate as fully as possible in the life of a high-skilled modern economy.

Every citizen should also have the security needed to thrive, even if burdened by the ill luck of illness, disability, and other misfortunes.

Every citizen should have the protections needed to be free from abuse, physical and mental.

Every citizen should be able to cooperate with other workers in order to protect their collective rights.

Every citizen, and especially successful ones, should expect to pay taxes sufficient to sustain such a society.

Those who manage corporations should understand that they have obligations to the societies that make their existence possible.

Citizens are entitled to decide who is allowed to come and work in their countries and who is entitled to share the obligations and rights of citizenship with them.

Politics must be susceptible to the influence of all citizens, not just the wealthiest.

Policy should seek to create and sustain a vigorous middle class, while ensuring a safety net for everybody.

All citizens, whatever their race, ethnicity, religion, or gender are entitled to equality of treatment by the state and the law.

The West cannot go back to the 1960s. It cannot go back to a world of mass industrialization, where most educated women did not work, where there were clear ethnic and racial hierarchies, and where the Western countries still dominated the globe.

Missatge contundent pels qui el vulguin sentir, no podem tornar als 60s, i de vegades penso que hi anem de camí.

I per aquells que no els agrada el capitalisme i el voldrien fer desaparèixer, unes paraules de recordança: 

There are, it is true, alternative ways to seek power under democratic capitalism. All will fail. One extreme is to offer a fully socialized economy. But the economy will founder, and the rulers will be forced out of power or seize it undemocratically, as happened most recently in Venezuela. An opposite extreme is to marry laissez-faire economics to a populism founded on anti-intellectualism, racism, and cultural conservatism. Such pluto-populism is also likely to end in an autocracy in which even plutocrats are insecure. A still faster route to autocracy is via a blending of the two extremes in nationalist socialism (or national socialism). This combines a welfare state with arbitrary rule by demagogues. This, too, will ultimately ruin both the economy and democracy, as the unaccountable gangster in charge rewards cronies and punishes opponents.

 Human beings must act collectively as well as individually. Acting together, within a democracy, means acting and thinking as citizens.

If we do not do so, democracy will fail, and our freedoms will evaporate.

It is our generation’s duty to ensure it does not. It took too long to see the danger. Now it is a moment of great fear and faint hope. We must recognize the danger and fight now if we are to turn the hope into reality. If we fail, the light of political and personal freedom might once again disappear from the world.

L'alerta és clara per qui la vulgui sentir, és el deure de la nostra generació, ens hi juguem la llibertat. Ho diu ben clar. Actuar depèn de cadascú de nosaltres i de tots nosaltres col·lectivament. 

Per tant, si que és possible reimaginar el capitalisme i en Martin Wolf dona algunes pistes. Molt recomanable la lectura i relectura pausada. Malauradament em temo que a molts dirigents els passarà per alt i ni se'n adonaran que s'ha publicat.

 

La necessària consideració als professionals de la salut

 Paying Respect

L'argument següent és d'aplicació als metges i a qualsevol professió. Ara bé tenint en compte l'anunci de vagues continuades en els propers dies ens centrarem en els metges, en un sentit ampli de professionals de la salut. Fa anys, un article al Journal of Economic Perspectives es preguntava per què treballa la gent. La resposta elemental és per a rebre una compensació i els economistes ho han enfocat principalment cap a la perspectiva dels incentius. Però evidentment és una resposta parcial. I els autors deien:

We will argue that while economists have been right to focus on incentives, they have been wrong to focus so exclusively on material incentives. While workers appreciate monetary rewards, they also get utility from what (they believe that) others think about them. Thus, employers can pay their workers with a combination of monetary rewards and respect. Employers can help to fulfill employees’ desire for respect in at least four ways, each of which sheds some light on observed practices: First, attention from an employer can enhance the employee’s sense of being respected for good performance. Second, a manager or the employer can increase the value of respect by proving to be a worthy audience; for example, hard-working employees appreciate the respect of hard-working managers, and idealistic workers appreciate the respect of an idealistic employer. Third, the employer can influence the norms of respectability—that is, what traits gain respect in a certain workplace. Fourth, employers can affect what information about an employee is available to others, and therefore, the respect or esteem that the employee receives from others.

El missatge és prou clar, cal tenir en consideració als professionals, no és només una qüestió de compensació acurada. Hi hauria moltes més coses a dir, però just avui que a les notícies sortia una comparació dels salaris dels metges, el relat és precisament un altra, el focus se sitúa només en la quantia de la remuneració. El problema esdevé encara més gros si a més a més tenim en compte que estem davant una maniobra col.losal de desinformació sobre la qüestió. Senzillament, el que han dit és fals i interessat. Les dades de l'OCDE de comparació del salari/ingressos dels metges respecte el salari mitjà de cada país són aquestes:

1. Physicians in training included (resulting in an underestimation). 2. Practice expenses included (resulting in an overestimation).

Source: OECD Health Statistics 2021 and OECD Employment Database 2021.

Convé assenyalar que no és pot comparar les dades amb els metges autònoms perquè les despeses administratives hi són incorporades. Els especialistes d'aquí estarien millor que Suècia, Noruega, Itàlia, Islàndia, França, Bèlgica, etc. I si algú no està d'acord amb l'OCDE aleshores que mostri dades comparables acreditades internacionalment.

Quan comparem només aquestes dades aleshores ens oblidem de la consideració als professionals, el respecte com a variable clau de la compensació. I és que allò que és difícil de mesurar, deixem sovint de gestionar-ho, però no per això no deixa de ser important.

PD. Avui toca llegir en Martin Wolf sobre el pensament màgic a la política sanitària a FT. Magnífic, per guardar.

 

 

The roots of good governance (2)

 The Handbook of Board Governance: A Comprehensive Guide for Public, Private, and Not-for-Profit Board Members

Contents:

1 The Handbook of Board Governance: An Introduction and Overview 1

Richard Leblanc

I The Board’s First Responsibility: The Right CEO 43

2 CEO Succession Planning Trends and Forecast 45

Gary Larkin

3 CEO Succession Planning 58

David F. Larcker and Brian Tayan

4 CEO Succession: Lessons from the Trenches for Directors 77

Mark B. Nadler

Appendix 1 Model CEO Succession Planning Charter 98

Richard Leblanc

Appendix 2 Model CEO Position Description 105

Richard Leblanc

II The Board’s Second Responsibility: The Right Board Chair 111

5 The Nonexecutive Chairman: Toward a Shareholder Value Maximization Role 113

Henry D. Wolfe

6 Great Boards Don’t Exist Without Great Chairs 148

Elizabeth Watson and Heather Kelsall

7 What’s in a Name? The Lead Director Role at U.S. Public Companies 164

Richard Fields and Anthony Goodman

Appendix 3 Model Board Chair Position Description 192

Richard Leblanc

III Who is at the Board Table? Board Composition, Dynamics, and Decision-Making 197

8 Director Independence, Competency, and Behavior 199

Richard Leblanc

9 Board Behaviors: How Women Directors Influence Decision Outcomes 233

Dr. Mary Halton

10 The State of Gender Diversity in Boardrooms 253

Dr. Nancy Gianni Herbert

11 Every Seat Matters 269

Annie Tobias and Lina Pallotta

12 The Art of Asking Questions as a Director 283

J. Lyn McDonell

13 Board Succession, Evaluation, and Recruitment: A Global Perspective 301

Jakob Stengel

Appendix 4 Model Individual Director Position Description 319

Richard Leblanc

Appendix 5 Model Conflict of Interest Policy for Directors 323

Richard Leblanc

IV The Work of the Board 333

A. Climate governance 333

14 Climate Change and Directors’ Duties: Closing the Gap Between Legal Obligation and Enforcement Practice 335

Ellie Mulholland, Sarah Barker, Cynthia Williams, and Robert G. Eccles

15 Board Oversight and Climate Change: What Directors Need to Know 369

Patricia A. Koval

16 Responsible Boards for a Sustainable Future 398

Dr. Yilmaz Argüden

17 Corporate Governance to Advance Business and Society 434

Alice Korngold

B. Technology Governance 467

18 Technology and the Corporate Board 2020 and Beyond 469

Dr. Gary L. Evans

19 Responsive Governance in a Digital World: The Need to Up-Skill 492

Dr. Elizabeth Valentine, Dr. Steven De Haes, and Dr. Anant Joshi

20 The Impact of Blockchain Technology for Corporate Governance 526

Jack J. Bensimon

21 Blockchain: An Introduction for Boards of Directors 556

Dr. Elizabeth Valentine, Dr. Greg Timbrell, Lachlan Feeney, and Dr. John Puttick

22 Reflections of a Board Chair on the Christchurch Massacre: Governing Social Media 578

Drew Stein

C. Risk and Financial Governance 595

23 Financial Literacy and Audit Committees: A Primer for Directors and Audit Committee Members 597

Jason Masters

24 Corporate Governance in an Age of Populism 624

John Zinkin

25 A Call to Action for Geopolitical Governance 641

Sean West and Rohitesh Dhawan

26 Governing Boards, Risk Management, and Deliberative Thinking 655

Michael Useem

27 Lawyers’ Advice to Directors on Overseeing Executive Pay 672

Howard Levitt and Allyson Lee

28 Accountant’s Advice to Company Directors: Directors’ Obligations to Detect Top-10 Frauds 687

Dr. L. S. (Al) Rosen

29 Ten Tell-Tale Signs ofPossible Fraud: A Director’s Primer 704

James Hunter

30 100 Questions Directors Should Ask When Assessing the Effectiveness of Risk Systems 713

F. Edward “Ted” Price

31 Risk Oversight for Directors: A Practical Guide 719

Stephen J. Mallory

32 Risk Governance: Leading Practice and Demographic Impacts 739

Ingrid Robinson

D. Strategic Governance 759

33 Agile Governance 761

Scott Koerwer and Joseph Perfetti

34 The Three Dilemmas for Creating a Long-Term Board 786

Ariel Fromer Babcock, Robert G. Eccles, and Sarah Keohane Williamson

35 Strategic Blindspots in the Boardroom 815

Estelle Métayer

E. Human Capital and Compensation Governance 839

36 Winter is Coming: The Approaching Human Capital Management Storm 841

Solange Charas and Michael Young

37 The Effective Compensation Committee 861

Steven Hall and Steven Hall Jr

38 Compensation Governance and Performance-Based Executive Compensation 889

Paul Gryglewicz

39 Measuring and Improving Pay for Performance: Board Oversight of Executive Pay 906

Stephen F. O’Byrne

40 Designing Performance for Long-Term Value: Aligning Business Strategy, Management Structure, and Incentive Design 930

Mark Van Clieaf

41 Mind the Gap: How Human Resources Can Become More Integral to the Corporate Boardroom Agenda 953

Jay A. Conger and Edward E. Lawler III

F. Legal and Governance Responsibilities of Directors 967

42 Board Risk and Responsibility Under Regulatory and Criminal Law 969

Norm Keith

43 Riding Between Cars: The Position of the Corporate Secretary 987

Douglas K. Chia

44 Ensuring Good Governance and Business Success in International Subsidiaries 1004

Thomas C. Sears

V Shareholder Engagement and Board Accountability 1021

45 The Rise of Investor Stewardship 1023

Stephen Davis

46 Director/Shareholder Meetings 1049

Stephen Erlichman

47 Dual-Class Share Firms in Developed Market Economies 1066

Anita I. Anand

48 For Directors: The Long-Term Relationship Between Directors, Companies, and Institutional Investors 1088

Carol Nolan Drake

49 Proxy Scorecards Will Empower Investors 1111

James McRitchie

VI Not-For-Profit Governance 1127

50 Charitable and Not-for-Profit Organization Governance 1129

Donald J. Bourgeois

51 The Best of Boards, the Worst of Boards: The Not-for-Profit Experience 1145

Adam Quinton

52 Fundraising Best Practices for Not-for-Profit Boards of Directors 1164

Stephanie Cory

VII Small and Medium Company Governance 1179

53 Governance of Small and Medium-Sized Entities 1181

Jo Iwasaki

54 Private Versus Public Company Governance: Top-13 Questions for Board Members to Consider 1197

Carol Nolan Drake and Sally J. Curley

55 Cannabis Governance: Advice for Current and Prospective Directors in This Emerging Industry 1220

Steve Chan

VIII Global Corporate Governance 1229

56 Cross-Border Corporate Governance 1231

Hari Panday

57 Corporate Governance in Asia-Pacific 1260

John Zinkin

58 Boards of Directors of Chinese Companies 1287

David H. Zhu, Wei’An Li, and Yaowei Zhang

59 The Russian Corporate Governance Story 1316

Alexander A. Filatov

60 CARICOM (Caribbean Community) Governance 1333

Ronaele Dathorne-Bayrd

61 King IV: Taking Corporate Governance to the Next Level 1343

Parmi Natesan and Dr. Prieur Du Plessis

Efficient health insurance as a first best

 Sick Insurance: Adverse Selection and Regulation of Health Insurance Markets

When heterogeneity in consumer tastes and needs, and in cost and quality of products, are publically observable, markets can price, sort, and match these variations, and product choices made by consumers yield demand signals that foster efficient resource allocation. These conditions hold, roughly, for a broad swath of economic activity, allowing lightly regulated private markets to successfully approximate allocative efficiency. However, in health care systems around the globe today, participants do not necessarily see the big picture of lifetime health costs and quality of life, and in many systems the incentives that consumers and providers face do not promote efficient allocation of health care resources. Information asymmetries are the fundamental source of difficulties in health insurance markets and in efficient provision of health services. Additional factors contributing to poor performance of health markets include (1) government regulation that is intended to protect the disadvantaged and promote equity, but creates incentives antagonistic to allocative efficiency, (2) inefficient provider organizations and non-competitive conduct, sometimes sheltered by government policies, and (3) behavioral shortcomings of consumers in promoting their own self-interest, including inconsistent beliefs regarding low-probability future events, myopia, and inconsistent risk assessment.

The seminal contributions to economic analysis of Kenneth Arrow, George Akerlof, Joe Stiglitz, Mike Spence, Mike Rothschild, and John Riley establish that when there are information asymmetries between buyers and sellers, adverse selection, moral hazard, and counter-party risk can result, causing markets to operate inefficiently or unravel. Asymmetric information between buyers and sellers, or market regulations that restrict competitive underwriting and force common prices for disparate products, can induce adverse selection. Moral hazard occurs when effort to avoid risks cannot be observed by sellers and stipulated in insurance contracts, and buyers have less incentive for risk-reducing effort when some of their potential losses are covered. When the productivity and cost of medical interventions is not known to all parties, then buyers and third-party-payers may not make informed decisions on therapies. Counter-party risk occurs when sellers evade payment of benefits for losses, or fail as agents to respect the interests of the consumers who are their principals. Adverse selection of buyers with high latent risk or low risk-reducing effort, or sellers with high counter-party risk, make insurance less attractive to buyers, and may cause insurance markets to unravel. Administrative overhead will induce less than full insurance. By itself, this does not make insurance market outcomes inefficient, but increasing returns to scale in administrative costs may lead to an inefficient concentrated market.

In principle, the problems of asymmetric information can be overcome by government operation or regulation of health services; in practice, there remains a major mechanism design problem of designing incentives that handle the asymmetries; e.g., “single payer” systems permit additional levers of control, but information asymmetries cause principal-agent problems even in command organizations. Legal mandates and regulations can make adverse selection worse. Government policy on private health insurance markets often reflects a social ethic that individuals should not be denied health care because of inability to pay, expressed for example in requirements that hospitals admit uninsured patients with life-threatening conditions, and a social ethic that insurance contract underwriting should not be based on risk factors such as gender, race, and pre-existing conditions. When these requirements are not publically financed, they are implicit taxes on insurers and providers that are at least in part passed through to consumers as higher premiums that increase the effective load for low-risk consumers. Both the higher loads and the prospect of public assistance as a last resort reduce the incentive for consumers to buy insurance and to pay (or copay) for preventative care.

The United States has, more than any other developed country, relied on private markets for health insurance and health care delivery. These markets have performed poorly. Denials and cancellations, exclusion of pre-existing conditions, and actuarially unattractive premiums have left many Americans with no insurance or financially risky gaps in coverage. Administrative costs for health insurance in the United States are seven times the OECD average. These are symptoms of adverse selection. Delayed and inconsistent preventative and chronic care, arguably induced by incomplete coverage, have had substantial health consequences: the United States ranks 25th among nations in the survival rate from age 15 to age 60. This impacts the population of workers and young parents whose loss is a substantial cost to families and to the economy. If the U.S. could raise its survival rate for this group to that of Switzerland, a country that has mandatory standardized coverage offered by private insurers, this would prevent more than 190,000 deaths per year.

Given the damage that information asymmetries can inflict on private market allocation mechanisms, the obvious next question is what regulatory mechanisms can be used to blunt or eliminate these problems. This involves examining closely the action of adverse selection and moral hazard, and the tools from principal-agent theory and from regulatory theory that can blunt these actions. There is an extensive literature relevant to this analysis that can be focused on the regulatory design question. Less well investigated are the impacts of consumer behavior, particularly mistaken beliefs. This paper examines these issues, and studies the impacts of regulations intended to promote equity and efficiency. More practically, this paper investigates these issues with reference to the private market in the United States for prescription drug coverage for seniors, introduced in 2006 and subsidized and regulated as part of Medicare.

The efficient regulatory design is mandatory universal insurance, this is the answer. But it has to be eficient, otherwise appears duplicate insurance, paying twice for the same. This is the worst second best, a combined failure of mandatory and private coverage.

The right to healthcare access

 Population Health and Human Rights

From NEJM article:

The study of population health encompasses two main objects of analysis: the health conditions affecting a population (the frequency, distribution, and determinants of diseases and risk factors) and the organized social response to those conditions, particularly the way in which that response is articulated in the health system, including the principles and rules that determine who has access to which services and at what cost to whom. These services include both clinical and public health interventions. Since the 19th century, national health systems have sought to provide health services to an increasing proportion of the population, using four eligibility principles: purchasing power, poverty, socially defined priority, and social rights. Reliance on purchasing power means that access is  determined by ability to pay, with governments limiting their role to basic regulation. Because this principle excludes many people, governments have historically intervened to expand access, either through public assistance programs covering families with incomes below a predetermined level or through social insurance schemes for prioritized groups (e.g., the armed forces, industrial workers, civil servants, or older adults). All these eligibility principles result in only  partial coverage, but the ideal of universality has influenced public policy in most countries, though the design and performance of health systems vary widely.

Dual practice regulation

Dual practice regulatory mechanisms in the health sector A systematic review of approaches and implementation 

Dual practice refers to physicians concurrent activity, public and private. The conflicts of incentives arise and some regulatory mechanisms are needed.

The regulatory mechanisms that have been employed across countries can be divided into three categories: those that advocate for total banning of DP, those that allow it with restrictions and those that allow it without restriction. Countries that attempted total banning of dual practice, as in Portugal and Greece, could not easily stamp it out. DP continued to exist on a wide scale in Portugal until the ban was lifted in 1993 (Oliveira and Pinto, 2005). Similarly, the ban in Greece from 1983 to 2002 did not prevent public doctors from practising privately (Mossialos et al., 2005). Efforts to ban dual practice failed because of lack of capacity to enforce it. The resources needed to enforce it may not be commensurate with the benefits a country gets from banning it. Moreover, banning dual practice has in some countries been associated with the migration of health workers, especially specialists, from the public to the private sector as well as an international brain drain (Buchan and Sochalski, 2004; Mossialos et al., 2005). In LMIC settings where health workers are underpaid and members of the general population are willing to pay for more convenient and possibly better services, this option might not be viewed as legitimate or even feasible.

 The second category is allowing dual practice with restrictions. This was the most frequent approach used by countries. Financial and licensure restrictions as well as promotional incentives were employed. Financial restrictions included limiting private sector earnings, providing incentives to limit private sector activities, salary increases for public sector workers and performance-based payments. All financial restrictions intrinsically require well-established and adequate health financing systems to fund and monitor public and private sector activity. A combination of tax-based public financing, mandatory health insurance and private insurance might be necessary to counter the financial resource demands of this approach, while supervision, monitoring systems and transparent bureaucracies would be necessary to ensure that private sector activities and earnings are indeed limited and payments are matched by performance.

 Allowing DP without restrictions was noted in countries like Indonesia and Egypt, where DP is routine and accepted. An interesting point to note is that in both countries, the productivity of physicians far exceeded the capacity of the public sector to employ them. Because of the low salaries offered in the public sector, physicians are allowed to supplement their incomes with private sector earnings. This approach is unlikely to be feasible in countries with health worker shortages. Considering the three options of total ban, allowing dual practice with restrictions and allowing it without restrictions, the most feasible for the LMICs is allowing it with restrictions. With health workers who are underpaid, in short supply and working in areas with a high burden of disease, they will scarcely be able to satisfy the demands of the public or the private sector alone.

Hockney

 

On being honest in politics

 Eliciting preferences for truth-telling in a survey of politicians

From PNAS: 

Voters who would like to accurately evaluate the performance of politicians in office often rely on incomplete information and are uncertain whether politicians’ words can be trusted. Honesty is highly valued in politics because politicians who are averse to lying should in principle provide more trustworthy information. Despite the importance of honesty in politics, there is no scientific evidence on politicians’ lying aversion. We measured preferences for truth-telling in a sample of 816 elected politicians and study observable characteristics associated with honesty. We find that in our sample, politicians who are averse to lying have lower reelection rates, suggesting that honesty may not pay off in politics.

Therefore, in this case, truth-telling is a dominant non-rational strategy in politics. We still do need more evidence. Maybe the next presidential election will provide us a confirmation of this article.

Fact-Checker from WP

Bill Brandt at KBR-Mapfre Barcelona

How technology may reduce the compensation of health professionals

THE IMPACT OF TECHNOLOGICAL ADVANCEMENTS ON HEALTH
SPENDING - A LITERATURE REVIEW

Six years ago I said that the argument of continous growth of health care expenditures due to techonology and ageing was flawed. Bob Evans explained long time ago that politicians sya that costs are inevitable to avoid responsibilities.
I demonstrated that it was possible to constrain health expenditures having both effects: technology innovation and ageing. Right now, it seems that OECD has not seen these patterns and publishes a review and says that according to:

Historical growth rates across OECD countries (1995-2015), we can estimate a historical contribution of around 1% yearly health care expenditure growth. Looking at projections in the next decades, health expenditure is projected to grow at a slightly lower pace compared to the previous period, with 2.7% estimated yearly growth . On average, this would mean a contribution of 0.9% per year to total health expenditure coming from technological change.

And...what happens if there is no growth in per capita health expenditures as has happened in our country in the last decade? which is the contribution of technology?. The answer is easy. If technology has been applied in fact, there has been a reduction in the cost of other inputs (!!!). And I can guess that there is only one factor that explains the growth in technology costs, the reduction in human resources costs. Salaries have decreased in real terms and there is no prospect for recover. I think that this result is the worst of any potential scenario. Physicians and professionals have to be compensated according to effort, responsibility and performance. Reducing its relative compensation is not an option. If you want innovation you have to pay for it.

 Guido Guidi. In Sardegna: 1974, 2011, an exhibition at the MAN museum (Museo d’Arte Provincia di Nuoro)

Incentives and behavior

THE MORAL ECONOMY
WHY GOOD INCENTIVES ARE NO SUBSTITUTE FOR GOOD CITIZENS

For those interested in pay for performance, the book by Samuel Bowles will open their minds to new perspectives. The rationale behind the Homo economicus needs to be adjusted to ethical and altruistic motives, professionalism in other words. This explanation of the prisoner's dilemma is helpful.

In the Prisoner’s Dilemma game, defecting rather than cooperating with one’s partner maximizes a player’s payoff, irrespective of what the other player does. Defecting in this game is what game theorists call a dominant strategy, and the game is extremely simple; it does not take a game theorist to figure this out. So, assuming that people care only about their own payoffs, we would predict that defection would be universal.

But when the game is played with real people, something like half of players typically cooperate rather than defect. Most subjects say that they prefer the mutual cooperation outcome over the higher material payoff they would get by defecting on a cooperator, and they are willing to take a chance that the other player feels the same way (and is willing to take the same chance.

When players defect, it is often not because they are tempted by the higher payoff that they would get, but because they know that the other player might defect, and they hate the idea that their own cooperation would be exploited by the other. We know this from what happens when the Prisoner’s Dilemma is not played simultaneously, as is standard, meaning that each person decides what to do not knowing what the other will do, but instead is played sequentially (one person chosen randomly moves first). In the sequential game, the second mover usually reciprocates the first player’s move, cooperating if the first has done so, and defecting otherwise. Keep in mind the fact that avoiding being a chump appears to be the motive here, not the prospect of a higher payoff. 

Stanton at Galeria Barnadas

Provider payment strategies to improve health

Value-based provider payment: towards a theoretically preferred design

The case for improving health is related, among many things, with the incentive structure of the whole system (people, professionals and providers). If we focus our aim towards providers, then we need to reassess current flaws in the system, and ask what do we have to do. A new article tries to address these issues.

In order to tackle the problems related to current payment methods, worldwide, policymakers and purchasers of care are exploring alternative payment strategies to help steering health care systems towards value . A well-known endeavour in this regard is pay-for-performance (P4P), in which providers are explicitly rewarded for ‘doing a better job’. Although P4P is an appealing idea, explicit financial incentives for value should in principle be used only modestly in provider payment methods because of the multitasking problem. Therefore, it is not surprising that in practice, the majority of provider revenues (typically referred to as the base payment) is not explicitly linked to value. This base payment, however, does create implicit (dis)incentives for value, because each payment method influences providers’ behaviour through incentives.

The article reflects a conceptual framework of key components and design features of a theoretically preferred Value Based Payment method. And the key message is:

We conclude that value is ideally conceptualised as a multifaceted concept, comprising not only high quality of care at the lowest possible costs but also efficient cooperation, innovation and health promotion. Second, starting from these value dimensions, we derived various design features of a theoretically preferred VBP model. We conclude that in order to stimulate value in a broad sense, the payment should consist of two main components that must be carefully designed. The first component is a risk-adjusted global base payment with risk-sharing elements paid to a multidisciplinary provider group for the provision of (virtually) the full continuum of care to a certain population. The second component is a relatively low-powered variable payment that explicitly rewards aspects of value that can be adequately measured.

I fully agree with what they say. Close politicians and officials should take this message into consideration regarding the next primary care physicians' strike, and forget the current confusing approach.

Norman Rockwell 

TIRED SALESGIRL ON CHRISTMAS EVE

Estimate $5,000,000 — 7,000,000

(It may be yours, upcoming auction at Sotheby's)

Behavioral provider payment systems: the next step

Impact of Provider Incentives on Quality and Value of Health Care

Experimenting with incentives for quality is a risky task. The variable requires a precise measure and it must indicate the appropriate signal to the provider to have impact in decisions and behaviour. Usually, rational behaviour is assumed int the models. A recent review highlights this is issue:

Advocates of pay-for-performance in health care maintain that its early failures are the result of inadequate design, a failure to incorporate a more sophisticated understanding of provider motivation into program design (26). On the basis of evidence from early schemes and readings of economic and psychological theory, several researchers have produced blueprints for secondgeneration pay-for-performance frameworks. Their recommendations for designers include making rewards large enough to be meaningful; using penalties in addition to rewards; aligning incentives to professional priorities; using absolute rather than relative performance targets; providing frequent, discrete rewards or punishments; and making an explicit long-term commitment to incentives

But the authors admit that: " Some of these solutions are difficult to implement, are contradictory, or introduce further unintended consequences". And this paves the way to a pessimist view:

Programs are slowly becoming more sophisticated, but unless clear evidence for cost-effectiveness emerges soon, the incentive experiment may have to be abandoned. Many commentators see this abandonment as inevitable, believing incentive programs to be fundamentally flawed. Some concerns are technical in nature and relate to the difficulty of accurately defining and measuring the most important aspects of quality with the greatest impacts on patient outcomes

My impression is that the unit of analysis is usually wrong. Until we are not able to measure patient focused episodes of care properly, in a holistic way, will miss something. This should be the first concern. Of course, this is an overwhelming task, not an easy one.

Camille Pissarro in Sant Feliu de Guixols right now

Stimulating ideas for drug development and pricing

New Health Technologies. Managing Access, Value and Sustainability

This new OECD report sheds light over several issues in an heterogeneous way, but the pharma chapter has a box that I want to highlight. It is really suggestive:

Future scenarios about drug development and drug pricing

These disruptive scenarios result from an expert consultation led by ShiftN and commissioned by the Belgian Health Care Knowledge Centre of Expertise and the Dutch Health Care Institute. The aim of the consultation was to imagine disruptive ways to finance R&D that could potentially better respond to public health needs.

Scenario 1: Needs-oriented Public-Private Partnerships
Public actors and drug developers are tackling public health priorities in vigorous and pragmatic partnerships. The public actor identifies indications representing high public health needs; specifies criteria for the performance levels of drugs to be developed for those indications; and indicates his willingness to pay. Through procurements with enforceable contractual commitments, the public actor enters into a partnership with drug developers to
find solutions for these needs. Developers are prepared to enter into the partnership and to give price concessions for a pre-negotiated fixed agreement on price and volume, and speedier access to market, which reduces their development risk. This drug development and pricing model is close to existing governmental procurement practices in researchintensive areas such as public transport, defence and space exploration.

Scenario 2: Parallel Drug Development Track
EU member states set up a parallel, not-for-profit drug development track that exists alongside, but independent of, the pharmaceutical and biotechnological industry. The aim of the parallel track is to develop cheaper drugs without compromising safety and effectiveness. After having made up an inventory of the public health gaps and priorities in health care, EU member state authorities ask leading public research institutes which
discoveries, assets, tools and capabilities they possess to develop solutions addressing (some of) the needs that were identified. Starting from the match between demand and available expertise, coalitions are built between these (not-for-profit) research institutes, payers, authorities and patients’ organisations. All these partners make the commitment to participate in an open and transparent way in clinical research projects. Intellectual
property (IP) rights are acquired early on in the development process by the partners of the consortium, and ownership is shared. Alternatively, the parallel research infrastructure can completely deprioritise ownership; i.e. inventions and developments in the parallel track are not protected and are in the public domain.

Scenario 3: Pay for Patents
A consortium of European countries join forces and establish a “Public Fund for Affordable Drugs”. Each of the participating countries deposits a fixed annual percentage of what it currently spends on drugs into the Fund. Private payers (including insurance companies) can also join the Fund. The Fund continuously screens the research market for “interesting” drugs that are being developed in Phase II or in Phase III for indications with clear health priorities. The Fund buys the patent from developers, conducts or commissions the last phases of research in public research institutes or subcontracts to private partners (with strict public oversight), and guides the submission process for market authorisation. Because the drug is then put on the market at a relatively low price, substantial savings are generated for the public payer. Once the system is functioning “at cruising speed”, these
savings can (partly) serve to replenish the Fund. The “Pay for Patents” model delinks R&D from manufacturing and sales. The prices decrease because the partners in the Fund consider medicines as public goods that should not be financed through monopoly prices.
Hence, once the patent is owned by the public sector, after a successful development and authorisation trajectory, the rights to produce, distribute and sell the drug can be licenced to manufacturers and distributors that provide the best deal in terms of quality, safety and accessibility for the lowest cost. As a rule, various private partners compete with each other, with the result that “new drugs enter the market at generic prices”.

Scenario 4: Public Good from A to Z
Drug development is essentially a public enterprise, and is radically re-oriented from serving private profits towards serving the public interest and patients’ needs. In a drug development system that is essentially a public enterprise, private drug companies still have a role, albeit with a completely different business model. They mainly manufacture drugs and deliver services to the public provider on a competitive basis. With drugs and other health technologies essentially public goods, patents and monopolistic prices have no role.
Patients and public health providers, not corporations, choose which unmet needs research should address. Public authorities regularly publish lists of research priorities, based on objectively established and patient-informed unmet medical needs. Governments organise and fund that research through a variety of mechanisms, including requests for proposals based on well-defined targets that any research team, public or private, can compete for, or milestone compensation, and active management of the innovation process. By paying directly for R&D and active management of the drug development pipeline, nations and health care systems pay much less than the patent-protected prices of the past. Ultimately, drug prices are set on the basis of the real costs of manufacturing, quality control and distribution, which are decoupled from R&D.
Source: Vandenbroeck, Ph. et al. (2016), “Future Scenarios About Drug Development and Drug Pricing”, Health Care Knowledge Centre (KCE) Report 271, D/2016/10.273/59, Health Services Research (HSR), Brussels.

The building blocks of healthcare payment systems

The Building Blocks of Successful Payment Reform: Designing Payment Systems that Support Higher–Value Health Care

The implementation of healthcare payment systems is a complex task for any insurer, either public or private. Any option for reform is path-dependant and uncertain. The context and the inertia are the sources of lack of support for a change, unless a larger amount of Money -a big carrot- is put on the table.
A new report highlights the building blocks of a payment system. This is the instruction manual, and it refers to 4 issues:

Building Block 1: Services Covered by a Single Payment
Option 1–A: Adding new service–based fees or increasing existing fees.
Option 1–B: Creating a treatment–based bundled payment for a single provider
Option 1–C: Creating a multi–provider treatment–based bundle.
Option 1–D: Creating a condition–based payment.
Option 1–E: Creating a population–based payment.

Building Block 2: Mechanism for Controlling Utilization and Spending
Option 2–A: Adjustments in payment (pay for performance)based on utilization.
Option 2–B: Adjustments in payment (pay for performance)based on spending or savings.
Option 2–C: Bundled payment.

Building Block 3: Mechanism for Assuring Adequate Quality and Outcomes
Option 3–A: Establishing minimum performance standards.
Option 3–B: Payment adjustments (pay for performance) based on quality.
Option 3–C: Warrantied payment

Building Block 4: Mechanisms for Assuring Adequacy of Payment
Option 4–A: Risk adjustment or risk stratification.
Option 4–B: Outlier payments.
Option 4–C: Risk corridors.
Option 4–D: Volume–based adjustments to payment.
Option 4–E: Setting and periodically updating payment amounts to match costs.

A must read, keep it for your files.

 Halley meets Hortal, at Galeria Senda

 

PS. The revolving door of those that claim against revolving doors

Mental health case-mix measurement

Payment by Results in Mental Health: A Review of the International Literature and an Economic Assessment of the Approach in the English NHS

If there is an area where case-mix measurement has been difficult to tackle it is mental health. After all these years, there are several options, but they need an assessment and adaptation to the context of care.
Fortunately there is an excellent review that can be used as starting point. A York University paper commissioned by UK Health Department that tries to compare a UK specific system and its potential application for budgeting and payment:

The Care Pathways and Packages Clusters classification system addresses both clinical  and nonclinical needs. Care pathways have been mapped, although the degree of clinical  consensus for these is unclear. Nonetheless, they offer a starting point from which to  develop consensus. The English approach will require a more systematic approach to data collection and reporting. This offers an opportunity to collect additional data on resource  use and process or outcome measures that can help evaluate quality and cost-effectiveness, and so inform the debate on what constitutes best clinical practice. Over time, it may be possible to introduce Pay-for-Performance (P4P) elements into the system, so that good practice is appropriately rewarded. However, P4P using a target based approach can  encourage ‘tunnel vision’, in which non-incentivised activity is displaced and would counteract the holistic approach embodied in the Care Pathways and Packages Clusters

Is there anybody thinking about this issue nearby?

Navigating through data

The Health Data Navigator

Undertanding health system performance starts with the availability of data. Many sources are available, but beyond data you need a framework for the analysis. Since this week a new and healthful source is the Health Data Navigator, the outcome of the Euroreach research. The toolkit summarizes in one document the approach. It is a helpful resource. The institutional basis for performance is often a key neglected element in the analysis. They follow the WHO Building Blocks perspective, although there are other options.
Beyond OECD data, we have right now a new database to check. Unfortunately our country has not joined this initiative by now.

PS. The six building blocks:
• Good health services are those which deliver effective, safe, quality personal and non-personal health interventions to those that need them, when and where needed, with minimum waste of resources.
• A well-performing health workforce is one that works in ways that are responsive, fair and efficient to achieve the best health outcomes possible, given available resources and circumstances (i.e. there are sufficient staff, fairly distributed; they are competent, responsive and productive).
• A well-functioning health information system is one that ensures the production, analysis, dissemination and use of reliable and timely information on health determinants, health system performance and health status.
• A well-functioning health system ensures equitable access to essential medical products, vaccines and technologies of assured quality, safety, efficacy and cost-effectiveness, and their scientifically sound and cost-effective use.
• A good health financing system raises adequate funds for health, in ways that ensure people can use needed services, and are protected from financial catastrophe or
impoverishment associated with having to pay for them. It provides incentives for providers and users to be efficient.
• Leadership and governance involves ensuring strategic policy frameworks exist and are combined with effective oversight,coalition-building,regulation,attention to
system-design and accountability

P4P: Ethics and effectiveness

Ethical Physician Incentives — From Carrots and Sticks to Shared Purpose

The strict focus on carrots and sticks in the design of physician incentives may contribute to unintended results. Have a look at NEJM and you'll find an outstanding article that puts the stuff in the right place:

Using incentives both effectively and ethically requires a shift away from a simple, one-lever model that relies on tradition, self-interest, or emotional responses to reward participants for a desired action (or punish them with financial loss or shame for an undesired one). Such an approach risks alienating physicians and other personnel. Rather, the challenge is to cultivate consensus on an organization’s shared purpose and put that orientation into action through performance measurement and use of the other types of incentives.

 However, having said that, we know that the introduction of performance measures may be easier than to create a shared-purpose orientation on the organization (i.e. "an organizational commitment to the triple aim of improved patient outcomes, better population health and efficient costs"). Therefore, there is a need to guarantee "ethical conditions" under any pay-for-performance (P4P) scheme. Although I agree absolutely in this approach, the precondition is a consensus in the whole organization, from the top (board of directors) to the bottom (employees) and I'm uncertain about how to build and create such consensus in the current environment. Anyway, such uncertainty should not prevent efforts in this direction.

PS. On the HA blog you'll find the same topic and the same conclusion, by Dan Arieli and Stephie Woolhandler:

None can doubt health care’s grave quality deficits and cost excesses.  As remedy, P4P suggests manipulating greed, a fuel that’s powered exponential growth in productivity in the overall economy.  But Adam Smith, who first recognized greed’s awesome power, was also a moral philosopher who believed that commodity production required a parallel public service economy driven by social duty.

Sadly, greed has caused many of the worst abuses within the current system.  Injecting different monetary incentives into health care can certainly change it, but not necessarily in the ways that policy makers would plan, much less hope for.

El resultats de pagar segons rendiment

The Long-Term Effect of Premier Pay for Performance on Patient Outcomes

Ja sabeu que als USA el tema de moda és pay for performance. I al NEJM en parlen aquesta setmana. Anava a escriure un comentari i resulta que l'Incidental Economist l'ha escrit en un sentit similar al que jo desitjava fer. Així doncs us dirigeixo cap allà.
Resum: tota precaució és poca, i l'impacte esdevé complex d'identificar.

PS. Contra els peatges espanyols.

Embolicar els doblers (2)

Medicare’s Bundled Payment Pilot For Acute And Postacute Care: Analysis And Recommendations On Where To Begin

El pagament per episodi de malaltia és una tendència imparable, del moment i del futur. Si volem més coordinació, ho necessitem. Ara bé, mentrestant sorgeixen els "bundled payments", que no arriben a ser episodis però volen acostar-s'hi. L'article de HA esdevé una referència clau per entendre el moment als USA. Destaco:

Payment bundling has the potential to reduce costs without compromising outcomes. The entity receiving the bundled payment earns a higher margin if a patient is discharged to the community earlier, but it also bears the financial risk of both a readmission and the cost of all postacute care. This arrangement produces a strong incentive for the recipient of the bundled payment to coordinate care across settings and not to discharge patients too early.

Els autors suggereixen que alhora caldria combinar "bundled payment" amb "pay for performance", i això ja és per nota. Mentrestant per aquí som a les antípodes.

Compensar les millores en salut

Paying Doctors for Patient Performance

El NYT ens resumeix l'article del JAMA sobre les dificultat de pagar pels resultats de salut als metges. Cal anar en compte doncs, el resum seria aquest:
“Pay-for-performance can work,” said Dr. Clemens S. Hong, lead author and a general internist at the Massachusetts General Hospital, “but we need more sophisticated measures to make sure we are actually measuring physician quality.”