American Health Care for All

Proponents of government provision of health care often refer to America as if the uninsured there were left to bieed to death in the streets. David Green, Research Fellow of the IEA, confutes this garish propaganda with the evidence of health core for all.     

Briefing Paper: What Economists can learn from Game Theory

Game theory is a branch of mathematics which analyses interdependent decision-making. It attempts to explain how decision-makers might take into account the likely response of others in formulating their own decisions. It has long been applied to microeconomics especially to the theory of the firm under oligopoly where the firm, in devising its pricing and production strategy, will take into account the likely reactions of other firms within the industry. More recently it has been appreciated that many situations in macroeconomics can be analysed in terms of game theory. For example, if one country introduces import controls, how will others react? If one country tries to control inflation by adopting a tough monetary policy, or tries to reflate, what will other countries do? How will exchange rate speculators respond to the government's announcement that it will not intervene in currency markets? Will they believe the government or will they adopt actions which will eventually force the government to intervene? How will markets respond if the government changes its macro-economic strategy? In some cases the “players” are the government and the business community, in other cases one government may be playing against another. In this Briefing Paper we introduce some ideas and results from game theory and show how they can be applied to macroeonomics as well as microeconomics.     

Closing the Gap Between Research and Practice in Health: Lessons from a clinical effectiveness initiative

Pressure to utilize research evidence in decisions about patient care and population health, so-called evidence-based medicine, has swept the health care systems of most industrial countries. In the UK, the attention of policy makers has recently turned from the production of more 'effectiveness information' to the more fundamental challenge of understanding the factors involved in influencing the attitudes and practices of health care professionals. This article seeks to contribute to this process by reporting the findings of an evaluation of a clinical effectiveness initiative established in Wales between 1996-9 (Locock et al . 1999). The study shows that a number of different factors are involved in improving the implementation of effectiveness information, including the strength of the evidence, and the role of peer influence. However it is the interaction of various elements rather than any single factor, which appears to be crucial. These findings are important not only for health but for informing future interventions across other parts of the public sector.     

Health Care Educators: New Directions in Leadership Development

Fortune 500 companies have a competitive advantage in leadership development, whereas health care has lagged far behind. Physician leadership development, in particular, is a game changer for a closed staff, group practice that relies on a pipeline of physician leaders—such as the Cleveland Clinic. To address this leadership development gap in health care, the Cleveland Clinic Academy (CCA) was established in 2006. The academy is predicated on developing health care leaders with specific emphasis on physician leadership education using a competency‐based curriculum with value‐added components, including continuing medical education (CME) and master's of business administration (MBA) transfer credits. In the pioneering spirit of Dr. F. Mason Sones, the novel curriculum includes didactic learning, experiential immersion, and executive coaching, designed to promote physician career development, leadership potential, productivity and job satisfaction, and business acumen. The unique programs—54 stand‐alone courses, and customized programs such as Leading in Health Care, Staff Leadership Rotation, Samson Global Leadership Academy, Healthcare Finance and Accounting, and others—have affected individuals and patient care by reaching over 6,000 health care providers, including physicians from Cleveland Clinic, Bulgaria, France, Ireland, Japan, Qatar, UAE, India, Belgium, Saudi Arabia, Nigeria, Turkey, Dominican Republic, and throughout the United States. CCA provides a new direction in leadership development with an integrated competency‐based curriculum for physicians, nurses, and administrators.     

The Demand for Health Care Services in Rural Tanzania

This paper examines the pattern of health care demand in rural Tanzania. We distinguish between hospital and clinic‐based care, in both the public and private sector using a two‐level nested multinomial logit model. Own price elasticities of demand for all health care options are high, although less so for public clinics and dispensaries than other choices. However, there is a high degree of substitution between public and private care. Consequently, price increases or user fees will result in small percentage of people opting for self‐treatment. Another important contribution of this paper is that the quality of medical care has large effects on health demand. This applies to the quality and availability of doctors/nurses, drugs and the clinic environment.     

The Existence and Nature of Physician Agency: Evidence of Stinting from the British National Health Service

The ability of physicians to make take-it-or-leave-it offers of treatment implies that even fully informed consumers of health care may receive treatments that they would not themselves choose. This paper examines both the extent and direction of this distortion away from patient choice—the physician agency effect—using a large patient-level claims-based data set for dental treatments under the British National Health Service. We find that an improvement in the outside opportunities of patients results in a small but significant increase in the level of service provided when dentists are remunerated on a fee-for-service basis. This is suggestive of stinting, wherein physician agency results in undertreatment relative to what patients would choose. We further find that the effect is increased when patients are fully insulated from the cost of their treatment.     

Separating the True Effect from Gaming in Incentive-Based Contracts in Health Care

This paper studies the effect of incentive regulation on health care. In the context of incentive-based health contracts, which might also introduce an incentive for the providers simply to report better treatment outcomes, evaluation of treatment using the information supplied by the providers (reported output) could be problematic. The systematic error on the output report is called providers' gaming behavior. This paper develops a general method for decomposing the effect of incentive-based contracts on performance into the true effect, which is the result of clinicians' improved effort induced by the contract, and the gaming effect, which is due to the change in the providers' reporting practice. The method follows the essence of linear structural relation (LISREL) models, and the true treatment output is modeled using a latent variable. Various output measures can be included in the structural evaluation model, but objective measure(s) (output measures not affected by providers' potential gaming) must be constructed based on available information to identify gaming through its correlation with the reported measures. The strengths of this method are that information from more than one output measure can be used, no monitoring system is required, and the construction of a gold-standard measure is not necessary. This method is applied to evaluate the impact of Maine's performance-based contracting on its public providers' substance-abuse services. Evidence of gaming is found in Maine's system, which remains robust in most of the sensitivity analyses. The methodology developed here can be used to evaluate the impact of a broad range of incentive-based contracts.     

Network Incentives in Managed Health Care

This paper introduces a theory of network incentives in managed health care. Participation in the plan's network confers an economic benefit on providers; in exchange, the plan expects compliance with its protocols. The network sets a target for the number of outpatient visits in an episode of care. A provider failing to satisfy the target may be penalized by the plan's attempt to direct patients to other providers within its network. There is an equilibrium in which every provider in the network uses the target. We test the theory by observing behavior of providers before and after the introduction of managed mental health care in a large, employed population. Managed care consisted of price reductions, utilization review, and creation of a network. Quantity per episode of care fell sharply after initiation of managed care. We identify a network effect in our empirical work. The results indicate that in this case, network incentives account for most of the quantity reduction due to managed care.     

The American Example in Health Care

Medical provision to British taxpayers under the National Health Service has often been favourably contrasted with the experience of American consumers. Frances Stevens who has worked in the NHS for years suggests from her observation of the American health system that the NHS can learn much from America.     

American Health Care: the Re-awakening of Competition

The market for health care in America is constantly used as an Aunt Sally by British health economists. But, Dr David Green (above), a political scientist and welfare economist at the IEA, reveals why the American system is hardly a free market and why it has misled debate in the UK.     

The Economists of Tomorrow: The Case for Assertive Pluralism in Economics Education

This article presents the case for “assertive pluralism” in economics education and proposes how to achieve it, illustrating the point with reference to the U.K. Subject Benchmark Statement in Economics (SBSE). It proposes a revision of the benchmark, prioritizing the role of controversy in the teaching of economics, combined with pluralistic principles that uphold and guarantee critical and independent thinking. This reform is a necessary response to what Colander et al. (2009 ) term the “systemic failure” of economics—the inability of the profession, taken as a whole, to anticipate and understand the financial crash and recession of 2008. Failure on this scale testifies to a more deep‐seated weakness in economics than commonly recognized. It arises from what Turner ( Tett 2009 ) terms the regulatory capture of the economics profession by narrow financial interests. The public, and the economics profession, require specific protection against the pressures that have produced this systemic failure. This requires a rethink of the relation of economics to society, founded on a rejection of the idea that the function of economics is to provide a single, unequivocal solution to every problem of policy. Instead, the article explains, good economics should be constrained to evaluate the full range of relevant solutions to any given policy issue, leaving the decisionmakers accountable for the decisions they make on which solution to adopt.     

The Effect of Performance Standards on Health Care Provider Behavior: Evidence from Kidney Transplantation

Performance standards are designed to ensure a basic level of quality, and through public reporting of firm performance, encourage firms to compete on quality thus allowing the market to determine the optimal level of quality. In markets with substantial excess demand, however, demand effects may be insufficient to induce any change in firm behavior and enforcement may be required to ensure high quality. Even with enforcement, quality still may not improve at underperforming firms if gaming the system is less costly than improving quality. We test whether information alone or with regulatory enforcement improves outcomes or elicits gaming behavior in our study of 266 kidney transplant centers between 2001 and 2012. In a context of excess demand induced by price controls, we show that information alone has no impact and enforcement may actually increase market inefficiencies; firms respond to costly quality requirements, not by improving quality, but by reducing supply, which exacerbates the disequilibrium between supply and demand, and by cream‐skimming, which reduces access to transplantation among sicker patients.     

Unconscious Processes of Organizing: Intergroup Conflict in Mental Health Care

A critical but overlooked issue in Weick’s seminal work, The Social Psychology of Organizing (1969/1979), concerns ‘the heat’ of organizing processes, namely, the underground emotional processes underpinning the organizing of conflictual work relationships. We present a qualitative case study of psychiatric agencies mandated by public policy to collaborate but instead engaged in persistent conflict despite its deleterious effects on their working relationship and on the wellbeing of the clients they intended to serve. To explain these conflictual features of organizing, we integrate Weick’s organizing theory with systems psychodynamics to deepen the understanding of emotions in organizing, specifically the motivational forces underpinning sensemaking and actions between interacting psychiatric agencies. This integration of theories reveals a critical feature of the relationship between the conscious and unconscious organizing processes: When a threat is involved, sensemaking and action are overtaken by social defences, resulting in dysfunctional organizing of the primary task. Drawing on these findings, we enrich Weick’s seminal work by developing a model that portrays organizing as the ritualized interaction of emotions, sensemaking and behavioural responses.     

Health Care Payment Systems: Cost and Quality Incentives

This paper compares the cost and quality incentive effects of cost reimbursement and prospective payment systems in the health industry. When a provider cannot refuse patients who require high treatment costs or discriminate patients by qualities, optimally designed prospective payments can implement the efficient quality and cost reduction efforts, but cost reimbursement cannot induce any cost incentive. When the provider can refuse expensive patients, implementation of the first best requires a piecewise linear reimbursement rule that can be interpreted as a mixture of pure prospective payment and pure cost reimbursement, Under appropriate conditions, prospective payment can implement the first best even when the provider can use qualities to discriminate patients.