The economists' capture

Luigi Zingales has written a salient chapter on a book on preventing regulatory capture. His focus is not on the regulator, he describes the capture of economists by business interests. A reading of the whole article is required. I highlight this statement:

Most academic economists are very honest people, who chose their career because they were motivated by noble goals, like the quest for the truth and “making the world a better place”. Yet, the same can be said for the regulators. So why academic economists think that the regulators are generally captured, while they cannot stand even the thought that this might happen to one of them? This time we are different?

Those that have seen "Inside Job" may remember quite well good examples of such situations: academics serving on boards close to the revolving door and forgetting the theory and its implications for a while.

PS. From Marginal Revolution: firms with academics on board of directors are associated with higher performance.

PS. NYT on Kaiser Permanente: The face of future healthcare

Choice architecture

A Nudge Too Far? A Nudge at All? On Paying People to Be Healthy

Is there a need to change "choice architecture" to adopt healthy behaviours?. From behavioral economics perspective, the answer is yes. However, the doubt is over how it should be done.  The lead article on HealthcarePapers is about pushing healthy behaviours. I'm not a fan of financial incentives for these issues. The article hightlights pros and cons, a good review for any newcomer to the field.
From all the comments, Pierre-Gerlier Forest poses a difficult trade-off between the role of the democracy and "nudging" by experts. Unfortunately, he gives no answer and waits for pragmatic improvements.Meanwhile, have a look at this article: beyond nudges, "tools for a choice architecture".

PS. Check "I nudge you".

A country in a desperate situation

Early this morning on the radio this was the statement: "We live in a country in a desperate situation". The reason is that the rule for public expenditure is tied to a fiscal deficit of 0.7% and unless this figure is relaxed this means a cutback of 4,500 million euros. (1,800 million in health expenditure).
This is nonsense, a threat to citizens health. A country that only receives 57 euros out of 100 of taxes, can't cut its health expenditure again. As citizens, we are currently subject to threats and blackmailing with our money. The first thing to do is not to accept such rules. It's an issue of dignity.
Enough is enough, the day to say goodbye is closer.

PS. Now the neighbouring government is threatening us with no subsidies for transplants while retains our taxes.
PS. You can listen to the radio to confirm what I'm saying.

A market that grows

This is the case of voluntary health insurance. Amid the current downturn, in 2012 there was an increase in the number of members (2.04%) and premiums (6.09%). This data confirms previous trends although it reduces its strength. The market serves 1.9 m members and generates €1,300 m  in premiums (close to 8% of health expenditure). The trend towards collectivization is consolidating again. Right  now close to 45% of premiums come from group insurance due to tax-breaks that only to apply to such policies.
The key question then is not regarding the growth of that market, we have to ask ourselves if such growth is in the right direction towards a more competitive and efficient market. My impression is that information asymmetries and current incentives (tax rebates) need to be rebuilt. 
Let's leave it here for today.

PS. Gary Becker on the Breakup of Countries: No Economic Disaster

PS. Carles Boix, on the role of elites.

PS. Yesterday I attended at the conference on economic and legal dimensions of independence:



PS. Extracted from Vilaweb: Message to the elites: independence is viable and inevitable
 
The Wilson Initiative at Cercle d'Economia explains the arguments for a own state
 
'The independence movement goes from bottom to top, from the street to the Circle. And the role of the elite is to provide what is inevitable. There is vibration, there is anxiety ... But we have to make an effort to allow this to happen. " This is the message that Professor Boix has sent on behalf of the Wilson Initiative to representatives of the country's economic and political elites that assembled at the Economic Circle to hear the arguments of this group of distinguished academics . They have appeared amid great excitement and deploying all arguments to show an audience traditionally reluctant to independence process, that is feasible and necessary. 
Savings of 1,800 euros per person per year
The own state is an opportunity, said Jaume Ventura, who presented figures on the balance between the cost and expense to have a state and maintain their structure.
'He says that if we want exactly replicate the structure in Spain that would cost us 383 euros per person per year. And that, assuming we want to maintain the same embassy as many guns and so on. ' This would be the cost per head, said Ventura. But, eliminating the annual fiscal deficit of Catalonia would provide € 16,000 million. 'The Catalans pay 2,251 euros per person per year in excess of contribution to Spain. After paying 100 euros in taxes, only 57 are spent in Catalonia. Why do we pay that extra money? Not because lower pensions than in Spain. The unemployment benefit is also the same. The explanation is that the deficit is not reversed in Catalonia infrastructure. We have the lowest public capital stock '
What could we do with this after saving 1,868 euros? "With a third of the money we could stop the budget cuts, with 1,868 of these would spend $ 500 to be the sixth country with more investment in education, and 550 euros per person per year, we would be the third country in Europe in investment in research and development.

Listen to Lizz Right while waiting for the next concert in Barcelona. 

The lyrics apply to the former text

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.

The size of the pie

From the WEF  report last year on non communicable diseases, I retrieve the size of worlwide health expenditure in 2009:

World expenditure on health in 2009 totalled US$ 5.1 trillion (US$ 754 per capita)13, of
which 61% was spent by public entities. The vast majority of this expenditure (US$ 4.4 trillion) took place in high-income countries, where spending per capita was US$ 3,971 and the share of public spending was 62% of the total. At the other end of the spectrum, low-income countries spent an average of US$ 21 per capita, of which 42% was supplied by public entities.

As far as we need to know the value created from such resources devoted to health care, the European Commission said recently in this document Investing in Health. Accompanying the documentCOMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS:

Increasing the return on health investments requires a solid assessment of the efficiency and effectiveness of spending. Such an assessment faces three main methodological challenges.
The first is to verify that the evidence of efficiency gains and improvements in health obtained through better use of healthcare budgets remains valid when different definitions of health outcomes are used. A major problem is that much of the evidence focuses on crude measurements such as life expectancy, failing to consider the quality of the years of life gained. This is more clearly brought out by concepts such as Disability Adjusted Life Years (DALY), or Healthy Life Years (HLY).
The second challenge is to disentangle the relative influence of health systems on health outcomes from the impact of other determinants of population health, especially living and working conditions, income, education and the most common lifestyle-related risk factors
The third is the time lags between policy changes and their impact on health outcomes, a problem that may involve ‘false savings’ because they may lead to increased costs or other unintended consequences in the long term.
Further assessment of the efficiency of health systems therefore requires a refined analytical framework, structured along three axes:
(1) the definition of sound, reliable indicator(s) of health outcomes, building on the existing European Community Health Indicators,
(2) a better understanding of the effects of health systems on health outcomes, as distinct from the impacts on health of other factors such as health determinants and lifestyles, and
(3) a better understanding of the mechanisms, and therefore the timing, of how health policies affect health outcomes.

Sounds familiar.

The ownership of drugs data

Starting in 2014, clinical trials data of drugs approved by European agency will have to be released publicly. This has been a major claim by researchers and some regulators that are "concerned that too many drugs are approved based on selective evidence that exaggerates benefits and plays down the risks" as FT explains.
However, the news is that several companies are suing European Union to avoid such release of data, saying that this will harm their "competitive advantage". We are at a crucial moment. If these companies achieve what they want in the courts, it will be extremely difficult in the future to apply what it is expected for next January, the release of data to check safety and efficacy of drugs.
My understanding is that once you ask for authorisation you have to follow what the regulator has established, otherwise you should avoid such process and go to another market. Breaking the rules through the courts may be a successful strategy in corporate terms, but the firms can't forget that the final buyer and payer of pharmaceuticals is mostly the government, and it is the government who has considered that ownership of data is public once the drug is authorised. This is the cost of playing this game.

Back to essentials (2)

In many cases, delay is not feasible. Decisions need to be made, even if the environment is one of limited attention, information, and processing capacity, so shortcuts, or heuristics, are necessary. A heuristic is a decision rule that utilizes a subset of the information set. Since in virtually all cases people must  economize and cannot analyze all contingencies, we use heuristics without even realizing it. Medical decision making is plagued with heuristics and biases. Sometimes may be helpful and others may distort and have serious consequences for health and costs.
Once a government has set up a program to identify low-value medical interventions (Essencial), a list of what should be avoided, the most difficult part is how to translate it into practice. Of course, right now there are only 9 interventions and it is quite easy, but with larger complexity it would require a new framework for medical decision making. We need to understand deviations from what should be expected, and what to do about it: a "behavioral" medical decision making framework. Information and rules are not enough. Unfortunately, we still don't have a universal toolkit to fix such issue, only some pieces that may help. Anyway, this is not a rationale to fold the arms.

PS. The opposite of bad can be worse, by the Incidental Economist.

Back to essentials

Fortunately, we have started a new paradigm.A little bit late, but last Friday the government announced what I call clever budget cuts. The readers of this blog are familiar with the concept, here you'll find an example. The Essencial program of the government will focus on:

• Promoure una pràctica clínica que eviti la realització de pràctiques que no aporten valor a la ciutadania i que, en conseqüència, millori la qualitat de l'atenció sanitària.

• Informar la comunitat professional i la ciutadania sobre procediments que, segons l'evidència científica i el consens d'experts, no aporten beneficis per a la salut.
• Fomentar la participació dels professionals sanitaris en la identificació de pràctiques de poc valor.
• Avaluar l'impacte de les recomanacions en el sistema sanitari, tant des del punt de vista de procés com de resultats finals

Congratulations! Hope this will bend the expenditure curve and improve quality of care.

PS. Mediterranean diet, interesting comment at GCS blog.

It's all about economies of scale

Last week I participated in a round table on pharmacy. The biggest concern right now is when the government will pay the bill. The pharmacists are waiting four months but things suggest that may worsen. In such situation the pharmaceutical dispensing problems are so immediate that the challenges for the pharmaceutical distribution will be delayed for another day.
Beyond the issue of payment, I focused my speech on the need to make the most of economies of scale in dispensing drugs. The current situation is unsustainable, and unless there is a reform led by proposals from the professional side, the market and the state will decide the future. The excess of capacity is around us, you can see pharmacies with practically no stocks and daily distribution from more than 4 wholesalers in each pharmacy. The number of wholesalers is beyond what should be expected in this sector.
The time for a new structure of pharmaceutical distribution has arrived. Has anybody heard about it?

Still waiting after all these months

Waiting lists may be considered the most prominent consequence of a publicly funded health system. Without price barriers, the queue for an operation may take months. Data to compare the situation of waiting lists between countries is not that easy to find. However, in the last report by OECD you can get the indicator of how many patients were waiting for more than 4 months in several countries. Take a look at this OECD report (p.42). Only one country in its worst year achieved 41% (UK).
Right now data show that we have the record.  The latest information (p.7) highlights that 100% of interventions for elective surgery required waiting for more than 4 months during 2012. This represents 1,63 more months than in 2011. That's a lot. The number of persons waiting is 93,2 per 10.000 inhabitants (70.814), but 5.000 patients that were on the list and tired of waiting declined the intervention once they were allocated them to a hospital (unfortunately, there is no information about the impact or how they have solved it).
Definitely, waiting lists is a hot topic. they should be fixed and indicators should be close to international standards. Right now we are far, too far away.

The patent cliff is not over

Imagine for a while that the size of a market drops by 290 billion between 2012 and 2018. This is the case of pharmaceuticals. This is not new. Now we can start to check the strategies to cope with this cliff and wether the companies are succesfull or not. Nature RDD explains details, must read. A picture is worth one thousand words:

A startling achievement

INFORME MENSUAL DE SEGUIMENT DE LA PRESTACIÓ FARMACÈUTICA

Pharmaceutical expenditure in 2012 has dropped 14,27%, double of last year. That's unusual, a confirmation of trend reversal started in 2011. The total expenditure was €1.450 m, the decrease in prices 8,2% and on prescriptions 6,5%. The exact reasons behind such a fall are known: the introduction of copayments, the reduction of prices and benefits, and the changes in prescription. We still don't know the size of the impact for each factor.
The question is only one: Has this change affected the population health?. If not, why have we had to wait until now to do it? Unfortunately we can't aswer properly right now. I expect we'll show results in some months time.
Anyway, on one hand my congratulations to the regulator -he has finished vacation at least in pharmaceuticals-, and on the other hand I would like to remind everyone that the expected decrease in the pharmaceutical budget was 27%, therefore the deviation is 13%. I said in this post that it was very difficult to acomplish. The facts confirm my prediction.

PS. January data confirm the trend, on interannual basis a decrease of 15,95%

PS. A non-democratic failed state, yesterday voted to block any potential self-determination referendum, although 78% of its deputees were asking for that. This is a clear message for the international community. Next steps are closer to unilateral declaration.

PS. The beloved princess of the king (not the queen) and lobbyist of the failed state in the press. NTA.

The collapse of managed competition

The colombian Health Minister has just announced the end of competition between insurers under a mandatory health insurance scheme. This is an important announcement, two decades after Ley 100, managed competition will be removed from health policy scene.
We still have to wait for the details, but the application of what Alain Enthoven considered the best efficient option to ensure competition and mandatory coverage is ending in Colombia. The reasons are multiple and difficult to summarise in a post. The explanation deserves a whole book. The breaking point has been the scandals, corruption and fraud in EPS, the insurers side. About 50 companies were intervened and the amounts of embezeled money are impressive. Crime has entered into health care arena.
In my opinion, the most important lesson is that the introduction of social experiments and innovations are not appropriate if regulators don't understand the concept and the tools to manage the system. The policy dynamics and short-term views act against any regulatory stability, unless the country is committed to preserve the underlying principles of the health system. Therefore, be careful on experiments, it can be extremely costly in social terms.