The OECD on user pays
I normally ignore OECD reports on the Australian economy, since they are in essence, a Paris republication of the Australian Treasury policy line of the day. The OECD is largely staffed by officials from national treasury departments on temporary postings, and its primary source in consultations is the Treasury. If there has been an instance of substantive disagreement between the OECD and the Australian Treasury in the past 30 years, I’m not aware of it (corrections welcome on this!). Of course, if you think Treasury is always right, this isn’t a problem.
The latest calling for a renewed push on reform and so on, fits the pattern perfectly. But there was one para that caught my eye, and so I’ll try to dig out the report.
The health system, it said, needed more market incentives and a strong user-pays approach.
Private health insurers should be able to cover risks outside hospitals, while there should also be less reliance on paying doctors on a fee-for-service basis, which encouraged them to over-service their patients.
This seems entirely self-contradictory, but consistent with my general view of the OECD. Fee for service is the only real “user pays” system, since a privately insured person faces exactly the same incentives as someone consuming free public health services. On the other hand, concern about medical over-servicing and support for central planning as a method to control it has been a characteristic feature of the Treasury/Finance view for many years. But, I’ll have to read the whole thing.
Update Treasury is pretty well-informed about the Australian economy, and likes to play its cards close to its chest, so the OECD reports are a useful guide to the way Treasury is thinking. But when Treasury gets it wrong, don’t expect the OECD to correct them. In early 1990, for example, when anyone in the private business sector could have told them a catastrophic crash was under way, the OECD Report said “A severe recession is unlikely … the task for policy is to ensure that the necessary weakening of domestic demand continues”.
This report is also interesting reading for those who now deny that the current account was the policy target driving the credit squeeze that gave us ‘the recession we had to have’.