Who cares about patients?

Marty Makarty discusses the US health care system: 

A host of new studies examining the current state of health care indicates that approximately one in every five medications, tests, and procedures is likely unnecessary. What other industry misses the mark that often? Others put that number even higher. Harvey Fineberg, M.D., president of the Institute of Medicine and former dean of the Harvard School of Public Health, has said that between 30 percent and 40 percent of our entire health-care expenditure is paying for fraud and unnecessary treatment. Marty Makary, Are hospitals less safe than we think?, 'Newsweek', 17 September

We shouldn't really be surprised. The disconnect between the decision-makers and ordinary people is about as wide in medicine as it is in education, justice or politics the world over, which is to say: vast. This gap is filled by middlemen: lobbyists, government agencies with their own agenda, and other vested interests representing big corporations or purporting to represent labour. Outcomes that matter to ordinary people are a long way down the list of priorities for these organisations. Marty Makary's article later points out that there is information readily available that would see appalling doctors and surgeons struck off... but it's not made available to those who would benefit from it. Instead, hospitals, just like every institution, whether it be a government agency, corporation, trade union, or church, have as their over-arching goal that of self-perpetuation. The interests of the people they are supposed to serve are incidental. And the predictable result, in medicine as in other areas of social and environmental policy is tragedy and waste. Our impotence in the face of big government and powerful organisations leads to alienation and cynicism about the whole political process.

Social Policy Bonds could close the gap between policy and outcomes that actually benefit ordinary people. Instead of having to satisfy organisations with deceptive names that promise to get things done, a bond regime would reward only the successful achievement of meaningful outcomes; however they are achieved and whoever achieves them. In the world of medicine, enlightened governments (or philanthropists or non-governmental organisations) would issue and back bonds that are redeemable only when broad health outcomes  (perhaps expressed as an index of longevity, infant mortality, Quality Adjusted Life Years, etc) have been achieved and sustained.

Middle East Peace Bonds

This is a short, updated, and so far unpublished, piece on applying the Social Policy Bond principle to conflict in the Middle East

Peace in the Middle East: giving self-interest a chance

I have no solution to the anxieties and potential catastrophes facing Israel, nor to the wider problems facing the citizens of all the Middle Eastern countries. What I offer instead is a means to encourage people to find solutions. Everybody has their own ideas about what should be done. I offer a way of channelling resources into those ideas - but only if they are effective and efficient.

Incentives

Where we are now: rockets are daily fired into Israel; we might well be on the brink of a nuclear calamity; and the entire region is a seething cauldron of every sort of hatred: ethnic, confessional, sectarian and gender.

Most ordinary people in the region, given time to reflect and the freedom to express their opinions would like nothing more than to see an end to the violence in the region. But there are too many people with a vested interest in keeping conflict going. They include the men of religion, the ideologues, and many of the politicians and bureaucrats. The international agencies and the military, whatever their intentions, aren’t exactly helping either. There are also, of course, the more nakedly financial incentives on the ‘defence’ industries and their beneficiaries in government, to fuel the fear of conflict. Well-meaning idealists on all sides do what they can, but their efforts are relentlessly undermined by the powerful people and institutions that want them to fail.

Peace above all

Perhaps it’s now to time to give people incentives to create and sustain peace, rather than conflict.  For my proposal to work we need a verifiable definition of peace, which will probably consist of an array of conditions that have to be satisfied and sustained. These could include:

·         a much-reduced number of people killed in conflict;

·         a much-reduced level of terrorist events, or military incursions;

·         no use of nuclear weapons.

Under my proposal, investors in the bonds would be rewarded once these, and other agreed conditions had been satisfied and sustained for, say, 30 years.

We need to be just as single-minded as the arms merchants and fanatics in wanting peace to the exclusion of everything, which might mean putting aside feelings of fairness, justice and history, except insofar as they help our cause. Being single-minded about our goal doesn’t mean that we simply pick the one project that we think will work and go for that. The circumstances that fan the flames of conflict vary radically from place to place and over time. No one solution, nor even an array of solutions will work all the time. We need a system that will encourage those projects that are most efficient for their time and place, and that will terminate projects when they become inefficient. In short, we need diverse, adaptive solutions.

And we need a way of promoting peace that can modify or circumvent people's uncooperative or obstructive behaviour. We need to mobilise the interests of the far greater number of people who want peace. We need to find a way that can co-opt or subsidise those people in positions of authority and power who want to help, and at the same time bypass, distract, or otherwise undermine, those opposed to our goal.

Ideally too, we would use market forces. Markets are the most efficient means yet discovered of allocating society's scarce resources, but many believe that market forces inevitably conflict with social goals: accentuating extremes of wealth and poverty, for example, or accelerating the degradation of the environment. So it is important to remind ourselves that market forces can serve public, as well as private, goals.

Middle East Peace Bonds

My suggestion is that philanthropists perhaps with governments and other interested organisations and individuals, collectively raise a large amount of money, put it into an escrow account, and use these funds to redeem a new financial instrument: Middle East Peace Bonds. These would be sold by auction for whatever they would fetch. They would be redeemed for, say, £100 000 each only when all the conditions for peace, as defined by the issuers, had been satisfied and sustained. Importantly, the bonds would make no assumptions as to how to bring about greater peace. Nor would they make any assumptions as to who would hold the bonds or carry out peace-creating projects. Those decisions would be made by investors in the bonds. Unlike normal bonds, Middle East Peace Bonds would not bear interest and their redemption date would be uncertain. Bondholders would gain most by ensuring that peace is achieved quickly.

Trading the bonds

Middle East Peace Bonds, once floated, must be readily tradable at any time until redemption. The operation of such a ‘secondary market’ would be critical to the working of the bond mechanism. Many bond purchasers would want, or need, to sell their bonds before redemption, which might be a long time in the future. With tradability,  these holders would be able to realise any capital appreciation experienced by their holdings of Middle East Peace Bonds whenever they choose to do so. Tradability would make the bonds a more attractive investment in the first place, and allow us to target an outcome as remote as peace in the Middle East, that will probably take longer to achieve than any bondholder’s investment horizon.

As the bonds are traded, they will tend to flow towards those who can do most to help reduce the violence. In fact, though, an actual flow of bonds would not be necessary. Large bondholders might simply decide to subcontract out the required work to many different agents, while they themselves held the bonds from issue to redemption. The important point is that the bond mechanism would ensure that the people who allocate the finance had an incentive to do so efficiently and to reward successful outcomes, rather than merely to pay people for undertaking activities. At the limit we can conceive of just one single buyer of all the bonds. If this buyer were determined to hold on to the bonds until redemption, then the bonds would function as a sort of performance-related contract, with the backers paying only when the objective had been achieved. The buyer could contract out most, or all, of the work required to achieve the objective, with the incentives given by the bonds for speedy accomplishment cascading down from the bondholder to those subcontracted to do the work of reducing the violence.

Too large a number of small bondholders could probably do little to help achieve peace by themselves. If there were many small holders, it is likely that the value of their bonds would fall until there were aggregation of holdings by people or institutions large enough to initiate effective peace-building projects. As with shares in newly privatised companies the world over, Middle East Peace Bonds would mainly end up in the hands of large holders, be they individuals or institutions. Between them, these large holders would probably account for the majority of the bonds. Even these bodies might not be big enough, on their own, to achieve much without the co-operation of other bondholders. They might also resist initiating projects until they were assured that other holders would not be free riders. So there would be a powerful incentive for all bondholders to co-operate with each other to help bring about peace in the Middle East. They would share the same interest in seeing targeted objectives achieved quickly. So they would share information, trade bonds with each other and collaborate on conflict-quelling projects. They would also set up payment systems to ensure that people, bondholders or not, were mobilised to help build peace. Bondholders would either trade bonds, or make incentive payments to ensure that any proceeds from higher bond prices, or from redemption, would be channelled in ways most likely to end the violence. Large bondholders, in co-operation with each other, would be able to set up such systems cost-effectively.

Regardless of who actually owned the bonds, aggregation of holdings, and the co-operation of large bondholders, would ensure that those who helped build peace were rewarded in ways that maximise the reduction in violence per unit outlay.

So, in contrast to today’s anaemic, short-term, tried, tested and failed approaches, a Middle East Peace Bond regime would stimulate research into finding ever more cost-effective ways of achieving peace. Indeed, bondholders would be in a better position than governments to undertake a range of peace-building initiatives. They have the freedom as well as the incentive to try innovative approaches. They might, for example, finance sports matches between opposing sides, promote anti-war programmes on TV, set up exchange schemes for students of the opposing sides. They might even facilitate intermarriage between members of the opposing communities, or try to influence the financial supporters of conflict outside the region to redirect their funding into more positive ways. They could offer the Palestinians and the citizens of neighbouring Arab countries different forms of aid, including education and scientific aid, and measures aimed at providing a secular education for all Arab citizens.

Bondholders could lobby, or work with, the Israeli and Arab governments to, say, give a higher priority to peace studies in schools, but they could also develop peace-teaching projects of their own. While immediate peace might not result, much more could be done to enhance the prospect of peace in the future. Bondholders could, for instance, make strenuous efforts in Israel and the neighbouring countries to have some mixed classes of Jewish and Palestinian children at kindergarten and school. Both groups could be given the chance of spending time with each other. At the very least, bondholders might think, there should be opportunities for the younger people from both sides of the conflict to meet, discuss, argue and form friendships.

Some powerful people in governments, religious institutions or militant organisations would resent the targeting of such objectives by external agencies in this way. But, while under the current system they can oppose peace in ways that attract support, under a Peace Bond regime, they would have openly to declare their opposition to peace itself. It is precisely this focus on the outcome of peace –  rather than activities or institutions – that would help strengthen the coalition working to achieve it. We could broaden the definition of peace to include not only numbers killed or injured, but other quantifiable goals, such as the amount spent on defence in the region, the results of surveys of people’s fears and anxieties, or net migration rates. For the bonds to be redeemed, all goals shall have to be achieved and sustained.

By appealing to people's self-interest, Middle East Peace Bonds are likely to be more effective than conventional efforts aimed at reducing violence. In channelling market forces into the achievement of this objective the bonds could bypass or even co-opt the corrupt or malicious people in government or elsewhere who stand in the way of peace.

In today's emotional climate decision-making is too often reactive. It is too easily swayed by those with a propensity for violence or those who benefit from it, whether financially or emotionally. Governments can evade or deflect censure on grounds of communal affiliation or patriotism, because the adverse effects of their policies are difficult to relate to their cause. Middle East Peace Bonds would focus on an identifiable outcome and channel market efficiencies into exploring the ways of achieving it. They could be the most effective means of achieving the peace that the people of the Middle East yearn for and deserve.

© Ronnie Horesh, September 2012.

Barnacles

 From the Economist

Modern governments play a much larger role in the economy than the ancient Greeks or the founding fathers could have imagined. This makes political leaders a huge source of patronage, in the form of business contracts, social benefits, jobs and tax breaks. ...[T]hese goodies are highly valuable to the recipients but the cost to the average voter of any single perk will be small. So beneficiaries will have every incentive to lobby for the retention of their perks and taxpayers will have little reason to campaign against them. Over time the economy will be weighed down by all these costs, like a barnacle-encrusted ship. The Greek economy could be seen as a textbook example of these problems. One answer could be to take fiscal policy out of the hands of elected leaders, just as responsibility for monetary policy has been handed to independent central bankers. Democracies and debt (subscription), 'The Economist', 1 September

And not only the Greek economy. It is not so much the existence, but the persistence of these barnacles that is the biggest indictment of the way we currently run things. In important respects they are self-entrenching: the more favoured are certain interest groups, the more resources they have to lobby against withdrawal of their special privileges. It's true that one reason for their persistence is because 'the cost to the average voter of any single perk will be small'. Another reason is that the cost to the voter of understanding what's going on is large. Current policymaking is incomprehensible to outsiders. It's very difficult to trace the vague statements about policy goals to actual policies, and no easier to identify links between policies and outcomes. Only people who are highly motivated will make the effort to do so. Whether such obscurity is deliberateis not that important. (Though I suspect it largely is where enormous subsidies and tax breaks for wealthy landowners and large corporations are concerned.) More important is: what to do about it?

One answer might be to express policy in terms of goals that are meaningful to ordinary people. Instead of talking about, for example, the institutional structures for health care, for instance, or funding arrangements, we should talk about national (or global) health care outcomes and ensure that whatever agencies are set up, and whatever their activities, they are all aimed at achieving these outcomes. Similarly with education, housing, crime or pollution or whatever. What is important is not who achieves our goals, nor how they do so, but that they have sufficient incentives to do the job.

A Social Policy Bond regime would immediately refocus our attention on our social and environmental goals. Under a bond regime we could target long-term, broad, societal goals, and reward those who are most efficient at achieving them. Because of the way the bonds work, it would be the disinterested market, rather than politicians who would make these decisions. Would people still opt to transfer wealth, as we do now, from the working poor to the ultra-rich? Unlikely, but if we did we'd at least be doing so with our informed consent. That in itself would be an improvement over the current policymaking environment.