Protected, or exploited?

If you're interested in markets, competition or regulation, you're bound to have a few eye-opening and brain-opening moments along the way: for me, one of the key ones was The Commerce Commission v The Ophthalmological Society of New Zealand Incorporated And Ors, a 2004 High Court judgement known in some circles as 'Eyes 1'.

The case, which the Commerce Commission won,  was about some Southland ophthalmologists and their professional body. They had acted together to intimidate some (highly qualified) Australian surgeons from dealing to the backlogged waiting list of cataract operations in Southland, and at a cost much lower than the fees the incumbent Southland doctors wanted to charge. And one of the deplorable tactics they used was declining to provide 'oversight' to the Australian medics. Supposedly, these eminent Australian doctors required 'oversight' to operate safely in New Zealand, and since their New Zealand colleagues refused to provide any, their plans got scuppered.

It was a brutal example of how regulations brought in for one, worthwhile, and even necessary purpose (patient safety) can be piggybacked into an anti-competitive rort. As the judge in the case said, “I do not accept that the defendants had any proper foundation to believe that the proposals would put patients in jeopardy”. On occasions, the alleged worthwhile basis for a regulation or practice can be very flimsy indeed, and little other than a convenient cloak for protection of a professional market.

It seems to me that this is going to be an increasingly fraught issue across a wide range of services, including education and health, for a whole range of reasons. Services in general are becoming an ever larger share of modern economies, some services such as health are becoming more important to us as we live longer, and there is a general trend to greater credentialism and professional/occupational licencing, which gives ever greater leeway to gatekeepers to abuse quality standards to protect their own patch.

It's even cropped up as a (somewhat peripheral) issue in the current US presidential primaries. Last month the Committee for a Responsible Fiscal Budget, an independent non-partisan think tank in Washington, looked at the policy plans Hillary Clinton and Bernie Sanders have come up with to tackle US prescription drug costs. Both of them have identified a "safety" provision they'd like to deal to. In the Clinton plan, she "would allow Americans to safely and securely import drugs for personal use from foreign nations whose safety standards are as strong as those in the United States". In the Sanders plan, he would "Allow individuals, pharmacists, and wholesalers to import prescription drugs from licensed Canadian pharmacies".

There is, of course, no good pro-consumer reason why American (or other countries') consumers shouldn't get their prescriptions filled in Canada or the UK. As Hillary Clinton puts it, "it’s unfair that drug companies charge far lower prices abroad for the same treatment, while imposing higher prices on Americans", and - while I wouldn't normally give you tuppence for Bernie Sanders' views on anything - you've got to admire him when he says that in 1999 he "became the first Member of Congress to take a busload of Americans across the border into Canada to purchase prescription drugs. Americans should not have to pay higher prices for the exact same drugs than our Canadian neighbors simply because Congress is bought and paid for by the powerful pharmaceutical industry".

The same tension between competitive provision and real or fantasised patient safety crops up all over the place. I recently read in the Harvard Business Review, for example, 'Why Health Care Mergers Can Be Good for Patients'. The author says, and I'm sure he's right, that "Patients who undergo complicated operations fare worse when their hospitals or surgeons rarely perform them", and his response is that hospitals should bulk up so that there are high volumes of lower-risk operations being performed all the time. The flipside, though, is that there are all sorts of clear competitive downsides to wholesale health mergers: as the American Medical Association recently said, 'Health-Care Mergers: Good for Health-Care Companies, Not So Good for Patients and Doctors' (though in this case it wasn't a completely pro-consumer stance, as the AMA was also concerned about the enhanced countervailing power of merged insurers against doctors).

Maybe it's time for competition authorities to be given the job of riding shotgun on some of these 'patient safety' and 'professional qualification' arrangements?

The picture of health

This chart, from the OECD's latest Health At a Glance publication, is going the rounds of the social media, and it's a bit of a reality check, in a good way. If you'd thought that we were all going to hell in a handbasket because of binge drinking, bad driving, obesity and all the rest of it, think again.

The graph shows people's self-reported state of health, and we're very near the global top. Even if you take off a positive bias for the way the question was asked in some countries (our score is 5-8% higher than it would be if measured the same as in most countries), we're still well up there.

How people feel about their health is one reasonably important outcome, but if we go away from perception and look at some of the hard numbers, we stack up pretty well, too. Here's life expectancy.

The wealthier OECD countries are all pretty much of a muchness, really, but again we're in a pretty good place. Interestingly, as the next graph shows, we have much less of a gap in life expectancy between the well-off and the poor than exists in most countries. No idea why this should be, but there you go - another pretty good outcome.

From an economist's perspective, it's interesting to see that we've got better health (measured by life expectancy) than you'd expect for a country of our income level, and better health than you'd expect for the amount we spend on healthcare, as the next two graphs show. In both cases you want to be north of the fitted black line, and we are. And it's interesting to see that some of the stylised facts we all 'know' about global healthcare are, indeed, true, notably the hopelessly inefficient level of the health spend in the US.

I know, I know, we could be even healthier again, and if we did a better job of managing the booze, the weight, the fags, the exercise, the diet and the heavy foot on the accelerator, we'd all be even better off. But at the same time we ought to take on board that as far as comparisons with countries like us are concerned, we're already making a pretty good fist of health outcomes.

That "heavy foot on the accelerator" isn't a random comment, by the way. I'm recently back from Ireland, where I couldn't help noticing how much more polite and orderly the driving is than here in NZ. And it shows in these OECD stats, too: neither country is a smash palace along Brazilian or eastern European lines (and America doesn't show to advantage, either), but Ireland's death rate on the roads is clearly lower than ours. Which is something you could think about next time you cut me off on the motorway.