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.