30 March 2013

Impartiality and health care

Chrystia Freeland writes:

[T]he muscle of the philanthro-capitalists is such that they can sometimes unintentionally distort the social safety nets of entire nations. That has been a complaint in some African countries, where the richly funded, relentlessly focused Gates programs on AIDS medicine and tuberculosis and malaria vaccines have lured local doctors and nurses away from providing desperately needed, but less glamorous, everyday care. Chrystia Freeland, Plutocrats: the rise of the new global super-rich and the fall of everyone else (page 91), October 2012
Which is why it's best to target social and environmental outcomes that are as broad as possible. Unfortunately, even under the, presumably, less idiosyncratic government-run systems of health care, expenditure is heavily influenced by groups of medical specialists with little incentive or capacity to see improvements in the general health of the nation as an objective. As a result, funding of these specialities depends to a great and varying extent, on the strength of their lobby groups or on their public profile, rather than on what would best meet the needs of society. At one time the British national health care system’s terminal-care budget: 95 percent of this is allocated to the 25 percent of the UK’s population who die from cancer, and just 5 percent to the 75 percent who die from all other causes. (Source: Alternative endings, ‘Radio Times’ (UK), 13 July 2002. This was the subject of a British Channel 4 television documentary Death: you’re better off with cancer, broadcast on 16 July 2002.)

A Social Policy Bond regime would target broad indicators of healthcare; probably including measures of longevity and Quality Adjusted Life Years. Apart from overcoming the biases of wealthy individuals or interested agencies, including government bodies, a bond regime would also see that the rational allocation of resources would not be undermined by high-profile events. Another UK example: in the aftermath of a tragic rail disaster in London that resulted in the deaths of 40 people the UK Government came under considerable pressure to order the installation of an automatic braking system for trains that go through red signals. Cold calculations showed that this would cost around $21 million for each life that the system could be expected to save. This is around five times the figure that the UK Treasury used as its benchmark valuation of a human life, which means that if the government had succumbed to pressure to install the automatic braking system it would have diverted funds from more cost-effective life-saving projects, and so caused the loss of more lives than it would have saved. A Social Policy Bond regime that had as its objective the maximising of the number of lives saved per government dollar would not waver in the face of spectacular one-off events.

11 March 2013

Almost there

More on Social Impact Bonds in the Economist of 23 February. I've posted about SIBs and compared them to Social Policy Bonds in previous posts (here, for example). I'm glad to see the concept of payment for performance enter social policy. The flaw, though, remains that SIBs don't appear to be tradable and so, under a SIB regime, as the Economist says:
Projects which take many years to have an effect (the impact of pre-school education on university admissions, say) will not interest investors.
I have outlined my reasons for advocating tradability of the bonds here. It does appear, I'm pleased to say, that there are bodies interested in making a secondary market for SIBs.

When I first came up with the idea of Social Policy Bonds one of my colleagues told me that I was 20 years ahead of my time. He was almost right: it's been 25 years. This long pdf contains my first published paper on the subject and is dated 1988.