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Ann Glover, as reported on Euractiv (here):

But it appears she also found it difficult to disentangle the Commission’s evidence gathering processes from what she calls the “political imperative” that’s behind them. …

To back its policy proposals, the Commission often outsources the evidence-gathering part of the job to external consulting firms, which provide ‘impact assessment studies’ or ‘research’ that are often branded as ‘independent’. However, Glover says such consultancies have little incentive to produce evidence that contradicts the Commission’s political agenda. “If they want repeat business, [they] are not going to go out and find the evidence to show that this is a crazy idea,” she says.

Disturbing stuff. In my role as an advisor and having taught policy development to civil servants, I have emphasised their responsibility to “speak truth to power”. If, as Glover says, this isn’t happening within the European policy-making machinery, then that may explain much policy creep at the Commission level.

Giant Squid, Glover's Harbour

The policy process: Not what Ann Glover has in mind? Source: Giant Squid, Glover's Harbour (Photo credit: Product of Newfoundland)

Her characterisation of European civil servants wind-up toys, that just run off and do what they are told suggests there could be some danger to good governance from hyperactive civil servants who unthinkingly do what they’re told with dossiers that should be binned. This suggest two things problems: the first is the quality of guidance on developing policy options itself, how to work with external advisors (carefully by the way) and the second is that the interface between the most senior level and Commissioners lacks candour and the failure of the most senior to truth to power. This is evidence of cowardice. at least, and incompetence at most.

Her remarks suggest that perhaps Glover hasn’t also been particularly effective elevating the evidence base of policy-making itself.  Her solution, though, is seriously flawed. She seems to believe that it is possible to create a definitive evidence base around which all can agree and that it is indeed possible in policy processes to factor out the political dimension. The ‘symmetry of ignorance’ [see NOTES below] explains why a room full of experts don’t usually agree and why it is relatively easy for ‘my’ experts to challenge ‘your’ experts. Policy problems are complex, sometimes called wicked, problems, and that means that one single course of action is unlikely, that interventions may create new problems, and unlike (scientific) problems, you may not know when you’ve solved the problem (called ‘the stopping’ problem).

What science dislikes is absence of agreement (e.g. science is about proof, not consensus), whereas policy is about consensus and disagreement: the result is one of the following: do nothing, act from the precautionary principle (i.e. do something just in case, but knowing there isn’t really any good evidence), guess, compromise or satisficing [see NOTES below].  Scientists often believe that evidence leads unequivocally to specific policy actions, but this is just one view of the world. While Glover has claimed to provide independent advice, she has actualy provided ‘her’ advice, reflecting how she weighs the balance of evidence against her understanding and framing of the problems and choices on offer from what she has read, and the people she has spoken to. One could legitimately ask whether her academic roots and scientific preferences as a biologist have preconditioned her towards thinking about policy problems and evidence in a particular way.That does not detract from her alarm at the policy machinery, but does inform our assessment of her proposed solution.

Hasn’t anyone read Feyerabend?

Therefore, purely technocratic policy governance, as I think Glover is advocating, is flawed and likely dangerous as it replaces the messiness of the real world of policy problems and choice-making with tidy authoritarianism.

Equally worrying is her comment on the quality of advice from paid consultants. I once put a dossier to a DG to be be an advisor, but haven’t been called (we’re up to almost 3 years, so I guess I shouldn’t expect the phone to ring!)  It is the job of advisors to advise, and that means also saying when something is not a good idea. That the European Commission has constructed a giant out-sourced advisory industry is not surprising as it is actually a tactic to cement the European project by creating an advisory system that works in harmony with the Commission’s objectives. That so many consultancies have fallen for this trick and taken the bait is disappointing but not surprising.

Many of the Commission-funded consultancy reports I have read have started and ended with the merits of the proposed Commission actions. I can’t recall a report that said something shouldn’t be done. It is also a tactic in assessing policy options (what Glover refers to as risk assessment) to write the most about the favoured option and less about the least favoured option.I blogged here on a Commission consultancy meeting, the cost of which was no doubt staggering; the Commissioner spoke on what she wanted, everyone agreed, the presentations showed how Europe would be a better place if this were done and everyone agreed with everyone, had a nice lunch and the many unpaid interns took notes for their CVs to PR firms or consultancies so they could get more work. And so the system feeds itself by indoctrinating people into the world of uncritical agreement.

Now, for disclosure, I have been ticked off by Commission civil servants for things I’ve said that were not European Commission

doctrine. Perhaps that explains why my dossier is in a box on the bottom shelf.

NOTE:

Symmetry of Ignorance: The expertise and ignorance is distributed over all participants in a wicked problem. There is a symmetry of ignorance among those who participate because nobody knows better by virtue of his degrees or his status. There are no experts (which is irritating for experts), and if experts there are, they are only experts in guiding the process of dealing with a wicked problem, but not for the subject matter of the problem. Source: Horst Rittel, 1972 “On the planning crisis”.

Satisficing is a decision-making strategy that attempts to meet criteria for adequacy, rather than to identify an optimal solution.

Just about every country has identified life sciences in some form or other as a priority for academic and commercial development. But what will characterise the countries that may in the end prevail?

  1. The research community needs a high degree of autonomy. The European University Association released an interesting study, University Autonomy in Europe II: the Scorecard, in 2011, assessing the degree of institutional autonomy universities in the various EU member states enjoyed. The countries with the greatest university autonomy were from northern Europe: Denmark, Ireland, UK, Finland, Sweden Latvia, Lithuania. Those with highly regulated and state controlled systems were from southern Europe, or had systems where the state just likes to intrude: France, Luxembourg, Greece, Italy and others. To be fair, some countries were more or less autnomous on different indicators, but the rough distinction can be drawn. Surprisingly, at least to me, was the middling performance of countries like the Netherlands, Austria and Germany. No doubt various higher control states will endeavour to justify why the state needs to be so intrusive, but as evidence that this is perhaps an unhealthy state of affairs, we see the highly instrusive French state over the past year moving to create greater diversity and differentiation in funding for its universities with greater autonomy (see this news item for instance). Clearly, greater autonomy necessitates greater diversity and differentiation and in the end some will need to become better than others. While we would like to think that all universities are essentially the same, reality suggests that the only real equality lies in the extent to which they all meet minimum standards, rather than all trying to meet some arbitrary ‘gold standard’.
  2. The second point is that the bulk of significant research results in life sciences arise from centres known as academic health science centres (AHSC). This is a theme I warm too, as it provides an organisational model that drives innovation from the clinical user end, rather than from the research end. Yes, more research funds are always needed, but we also need solutions. Efforts to operationalise translational medicine are doomed to fail if the driving forces are not coupled to the clinical user and innovation policies in general need to start with problems needing solutions, and hence a factor more likely to be evidenced. Only a few countries have AHSCs — such as US (over 50), Canada (about 14), Sweden (1), Belgium (1), Netherlands (8) and the UK (5). Germany arguably has at least one as does Italy. France has none, and one will need to see whether changes in their higher education system are likely to lead to formal establishment of this approach. The challenge (and this was the subject of a paper I presented, see the previous entry below), is that while universities are more likely to enjoy degrees of autonomy, hospitals are less likely to. The UK was only able to move toward establishment of AHSCs when the state control of the hospitals was relaxed through successive periods of NHS reform. The Netherlands model built on existing relationships. Countries without AHSCs, though, will confront the twin challenge of institutional autonomy of both universities and hospitals.
  3. The third point is that not all countries will be able to do everything in life sciences and therefore will need to set some priorities. National priorities are hard to conceive, because countries usually think of themselves as being able to do everything and so efforts for instance, get diluted and underperform. Cash is tight these days (think debt) and governments just cannot afford everything, so the most difficult challenge is establishing priorities.

The UK government is releasing, over time, its review of the balance of competencies of EU legislation. Within the first 6 papers released is the one on Health, Review of the Balance of Competencies between the United Kingdom and the European Union: Health.

At minimum, these reviews provide a timely perspective on this balance of competencies, and provides a focus for further commentary. Other EU members states may find it useful to be reminded what this balance is. It is not always in the interests of the European project to look at all things taken together as it shows whether overall the claimed benefits are in fact there. But such policy review, if that is another way of talking about them, does draw a line in the sand against which to measure and assess changes in the future, and avoids the problem of the boiled frog syndrome, where small incremental changes are not noticed until it is too late.

Health is a funny subject for the EU as it is both inside and outside the European competency box, depending on how you define things. Countries can run their healthcare systems broadly as they wish, and maintain control of financing, but the European Court of Justice, in a variety of decisions, has defined the contours of that national control, as seen through the lens of the single market, and freedom of movement of goods and services in particular — both of which are agnostic with respect to health. It all depends whether you think of healthcare systems commercially or socially. That hospitals are socially beneficial but also commercial entities does not help, any more than drugs as goods flowing across EU borders, and so on.

The report concludes in the main that the balance is about right. There is little argument with the benefits of European action in medicines regulation, public health, tobacco, etc. Where the UK has a problem is with employment policy as it impacts the UK more generally and the National Health Service specifically. Different logic of the relationship between the employee and the workplace applies in the UK and this throws up a wide range of relevant issues.

The Working Time Directive is the elephant in the room here. The concerns are how the NHS structures clinical work, trains junior doctors, and generally organises itself to provide for continuity of care. Other countries, not just the European ones, have the same concerns about over-worked doctors. The heroic fictional doctors on television, who nap on couches and awake fully prepped to save patients is fantasy. Next time you’re in mid-Atlantic, be grateful your pilots got a good night’s sleep. The criticism of the WTD is more an indictment of the inability of the NHS and its massive provider infrastructure to put in place appropriate patient management systems that ensure a sensible balance of workload and rest. But the Health Paper makes the point that the European Court’s judgements have actually further constrained operational flexibily within the NHS. While the paper notes that the NHS operates on a 24 hour system, it actually doesn’t as it isn’t fully staffed on weekends, and many services operate within a traditional working hour day (e.g. laboratories, imaging). Much of this arises from the politically influenced structure of the NHS which has made it very difficult for alternative providers to enter the healthcare market in the UK, and thus offer relevant services, whether day-case surgery, or imaging, at times more convenient to patients. However, other countries in Europe appear able to manage demand and service provision more easily, so one much wonder why the NHS problems of their own doing.

The other area that exercises the NHS is free movement of patients. Medical tourism is a big issue in the UK, as its health system is based on residency. Social insurance systems have built often formidable barriers to gaining healthcare cover because they generally link the insurability with the workplace. Self-employed individuals are frequently disenfranchised from full benefits, and often pay disproportionately. Retired people continue to need insurance. But an insurance system does make cross-border transactions much easier. The UK has not really understand the operational dimension of the differences for UK taxpayers moving within Europe. The Limosa Convention is not mentioned in the briefing, while the European Health Insurance Card is. The EHIC is only really for tourists and retired people and the paper promotes the benefits of them. However, the EHIC is not for people temporarily located in another country for employment or work purposes.  They do not refer to the bureaucratic overhang of the A1 and S1 forms needed for people working in other EU countries and the forum-shopping associated with it as countries seek to get ‘the other country’ to pay the bills. I wonder how many people realise they need an S1 to run a seminar in another country as this is defined as work, or that working from home and living in country A while your office is in country B could be a bureaucratic nightmare. The report is silent here.

Continuing with my thoughts today on excess costs (last post was on medicines waste), I thought I think about excess hospitalisation, another type of waste.

Excess risk of hospitalisation is calculated as the difference between observed hospitalisation (for a condition) and expected population rates.

What are the determinants of excess hospitalisation?

  • Excess hospitalisation can be driven by factors which increase population risk, such as influenza/epidemics, and seasonal and weather variation (e.g. respiratory/COPD, asthma, stroke).
  • Readmissions are viewed as excess hospitalisation.
  • There is some research, in the US, showing ethnic and gender variation in hospitalisation.
  • Complex conditions indicate potential for excess admission with failed primary care but that is a design feature of the health system. Complex/high risk patients disproportionately account for hospital activity. Depending on the other co-morbid conditions, some conditions signal excess costs some of which translate into (excess?) hospitalisation (e.g. Alzheimers), depending on how care is managed.
  • Not having a primary care doctor is a factor in excess use of emergency services and hospital emergency departments, and in turn to excess hospitalisation. On average, perhaps 10% of excess (inappropriate) emergency visits convert into admissions.
  • There is also misdiagnosis and excess length of stay caused by adverse hospital events (such as hospital acquired infection, accidents, patients falls, dropping patients, medicine errors).
  • Excess capacity (where utilisation is less than about 70%) leads to over-provision of care and obviously excess hospital admission. Incentives in reimbursement systems can drive hospitalisation.

Just so you don’t think I’m making this up, consider:

  1. US data show 17.6% of all Medicare hospital admissions were readmissions costing $15 billion annually, of which $12 billion was deemed preventable admission.
  2. The number of BSIs caused by MRSA and G3CREC was extrapolated from EARSS prevalence data and national health care statistics. Prospective cohort studies, carried out in hospitals participating in EARSS in 2007, provided the parameters for estimating the excess 30-day mortality and hospital stay associated with BSIs caused by either MRSA or G3CREC. Hospital expenditure was derived from a publicly available cost model. Trends established by EARSS were used to determine the trajectories for MRSA and G3CREC prevalence until 2015. In 2007, 27,711 episodes of MRSA BSIs were associated with 5,503 excess deaths and 255,683 excess hospital days in the participating countries, whereas 15,183 episodes of G3CREC BSIs were associated with 2,712 excess deaths and 120,065 extra hospital days. The total costs attributable to excess hospital stays for MRSA and G3CREC BSIs were 44.0 and 18.1 million Euros (63.1 and 29.7 million international dollars), respectively. Based on prevailing trends, the number of BSIs caused by G3CREC is likely to rapidly increase, outnumbering the number of MRSA BSIs in the near future. [de Kraker M, et al. Mortality and Hospital Stay Associated with Resistant Staphylococcus aureus and Escherichia coli Bacteremia: Estimating the Burden of Antibiotic Resistance in Europe, PLOS Medicine, October 2011]
  3. A total of 538,580 admissions generated 4,310,654 hospital bed-days and total costs of €940,026,949. People with diabetes accounted for 9.7% of all hospital discharges, 13.8% of total stays, and 14.1% of the total cost. Of the total cost for individuals with diabetes (€132,509,217), 58.3% were excess costs, of which 47% was attributable to cardiovascular complications and 43% to admissions for comorbid diseases. Individuals 45–75 years of age accounted for 75% of the excess costs. The rate of admissions during the study year was 145 per 1,000 inhabitants for individuals with diabetes compared with 70 admissions per 1,000 inhabitants for individuals without diabetes. [Oveira-Fuster G, et al. Excess Hospitalizations, Hospital Days, and Inpatient Costs Among People With Diabetes in Andalusia, Spain,Diabetes Care, August 2004]
  4. Schwartzberg studied health literacy among patients, and noted that patients with low literacy skills were twice as likely to be hospitalised and twice as likely to report poor health. She argues that low health literacy may cost $73 billion [US figures] annually in excess hospitalisation days alone. Much depends on improving the ability of patients (with help from their families) to carry out complex health instructions on their own. [Schwartzberg J. Patient safety. Low health literacy: what do your patients really understand? Nursing Economics, 20(3-2002), 145-147]

Want to know more?

As you local hospital to tell you what they do.

 

Euractiv has reported on Commissioner Dalli’s comments that the Euro-zone crisis should not turn into a public health crisis. He added: “difficult times can indeed

Johnny C Fiddle

Policy options may look good, but do they actually play decent music? (Photo credit: Cindy Funk)

provide an incentive to think creatively and push forward in-depth reforms and contain costs, while building modern, responsive, and sustainable health systems fit for the future.”

I agree, yet despair.

Countries have healthcare systems for good reasons and allocate resources because they believe the system in place is the best solution. What we are now seeing is that these systems are very costly, perhaps with weak GDP, almost unaffordable in terms of medical inflation and the impact of demographic factors on services, which outstrip society’s ability to afford more, given other competing demands.  The ability to affect needed healthcare reform is further complicated by governments with limited policy instruments or imaginations. Some may have been literally captured from a policy perspective by powerful vested interests.

My hope is that the current austerity will be a spur to reform; however, in this case, my thinking is that governments need to see themselves as encouraging innovation, and not protecting the status quo.  We can no longer afford to continue to put taxpayers’ money into unreformed governmental and healthcare systems.

As I have written elsewhere, governments fear the creative destruction of public institutions, yet these are frequently the ones most likely to be the barriers to system reform.

The Euractiv article gave some illustrations of the responses by government, none of which involved in-depth reforms. Let’s take a look at some of the examples in the Euractiv article and deconstruct them a bit: (the Euractiv’s text is italicised, my deconstruction follows).  The following comments are not intended to be comprehensive, and I have not addressed in detail whether in some cases there was fundamental logic in the actions. I am looking at these actions in the context of IF you’re thinking like this, THEN you are NOT thinking of more sustainable strategies. You are only, as they say, kicking the can down the road for others to deal with in a few years.

  1. Many countries in Europe have cut public health budgets drastically since the beginning of the global financial crisis in 2008. Regretfully, this is usually the simplest and easiest thing for governments to do. I accept that healthcare system reform is not easy, particularly because of the perceived influence and power of healthcare professionals, and the public’s deep lack of knowledge of how healthcare funding can be mis-spent. That expenditure might be too high for the delivered value of the expenditure actually buys is of course the real issue, not whether budgets can be cut per se.
  2. In France, the government expects to reduce spending by €2.4 billion on the health insurance side. Some 40% of these reductions will be made through a shift to generic medications and savings on medical devices, while measures in favour of greater efficacy in hospitals are expected to lower cost by €1.5 billion. France has failed to balance its public accounts since the 1970s — why should now be any different? The centrality of government in France makes it hard to use local or regional drivers of change as there is the bureaucratic overhang of the centre — what is surprising in France is that despite this overhang, and the central ministry of health employing over 15,000 people (what do all these do all day??) regional outcome differences exist.  Despite some regional level reforms (the ARS), hospital cost structures and payment to doctors (in France doctors can extra-bill!) are the real cost drivers. Shifting to generic medicines is a typical knee-jerk approach. But medicines spending often suffers from poor, even irrational, prescribing practices, weak medicines use management, and weak patient adherence programmes — perhaps 30% is misused, unused or disposed of so much of this expenditure may be suspect.  France has a weak record in biotechnology (despite what they say) and its research has worried the Ministry of Health as it lacks global visibility across a broad spectrum. But investment in life sciences R&D is, for most countries now, seen as a critical driver of economic growth (despite the fact that few countries actually have the research, development, university or commercial infrastructure to do just that). So as generics replace branded medicines, so investment in life sciences research will leave to more congenial countries (other macroeconomic policies may encourage this). The same can be said of trying to save money on medical devices; though devices are not priced like medicines and do not behave like medicines — there are no generic devices in that sense. So it is hard to image what might be meant by savings here. As for hospitals, the great sink hole of healthcare expenditure in any country, what tools are available to drive ‘greater efficiency’?  Country after country is grappling with this. However, €1.5 billion is not a lot of money in the French system which accounts for 11.8% of French GDP (3rd highest in the OECD), which translates into €3872 per person, of which €1639 per person is spent on hospitals. I would be looking for significant analysis of hospital cost structures, skill and service mix, utilisation, etc. to know how efficiency gains will be realised through resource releasing strategies.
  3. In Estonia since July 2009, the sickness benefit rate has been reduced from 80% to 70% of the insured person’s income. The sickness benefit rate in the case of caring for a child under 12 was reduced from 100% to 80%. Cost-shifting to the patient is a regretfully increasing tendency; it also affects lower incomes more than higher incomes. The likely ability to alter patient behaviour and use of healthcare is not completely clear, though the research does show that increasing or even the existence of co-payments reduces the likelihood individuals will seek healthcare and hence lead to increased burden of ill-health, particularly amongst those most price-sensitive. Better to have targetted the underlying costs, first; however, with a shift to a larger co-payment, there is the potential to increase public awareness of healthcare costs and use consumer behaviour to drive faster and more thorough-going reform than simply through government diktat.
  4. The Greek government this year decreased its mental health services by 50%, and the budget was further reduced to cover only 45% of the psychosocial rehabilitation services. In the end, I suspect that this will have a longer term negative impact on mental health status, the problems from which Greece will not be able to export to other EU member states, under the cross-border health rules. Reductions in budgets alone, though, do not tell the whole story as embedded in these services may be higher overheads and administrative burden, inefficient work patterns, and poor use of available expertise (perhaps low case loads); these comments do not say Greek therapists may not be up to the challenge, but the system they work in may constrain their ability to deliver better care through infrastructural and systemic inefficiences. This is where I would look. My view is that as these are broadly predictable costs within known demographic factors, decoupling this debt component from the total would be sensible as it can in the end by better managed than through short-term quick fixes.
  5. In Latvia, nurses’ salaries have fallen 20-40% since 2009. Between 2006 and 2010, the number of hospitals in Latvia have decreased to 39 from 106 and the number of hospital beds decreased to 493 from 761. Reducing the number of hospitals, in and of itself, is not a problem, nor is the reduction in numbers of beds. Bed utilisation is what matters and the intensity with which beds are used, such as length of stay and whether people are hospitalised inappropriately, or held in hospital because of poor discharge facilities (e.g. step-down units, community care) all of which can be provided at substantially lower costs (owing partly to different skill mix, and partly to lower capital costs). Cutting nurses’ salaries (and presumably doctors, physiotherapists, pharmacists, etc., too, though I doubt it) may be counterproductive as it will simply create a reason for people to leave; there is a global shortage of nurses. Better, is to focus on work processes. We know that up to 30% or more of a nurse’s time can be unproductive in terms of patient care. By simply reducing this waste of time through systematic reform of work practices, staffing can increase the equivalent of 15% or so; equally, nursing is a highly stressful job, and nurses tend to have very high absenteeism rates; perhaps 10% of the nurse complement exists simply to respond to absenteeism.

The financial markets have broadly spoken and find the leaders of the Euro-zone patently unable to implement the solutions to the crisis.  Knowing what the problem

Confused Man Reading a Bill or Bank Statement

Where did it all go wrong? I thought there was enough money…. (Photo credit: s_falkow)

 

really is is very important and it now appears that the core structural reforms necessary seem too hard for doctrinaire European thinking. If you keep trying to implement the same solutions and keep getting the same results — namely a sovereign bailout — that is a rational clue that you are doing the wrong thing.

Medical indebtedness is a big part of the problem, as much of the debt arises from state controlled or funded health systems, and therefore the payment from public funds to pharmacists, doctors, hospitals, etc. adds to the debt load. Indeed, going forward, the debt rating of Euro-zone countries may be in part determined by their ability to handle these types of debts. So far, though, the prognosis is not good.

A summary: figures arising in the period February 2012 to date [Sources: Financial Times, Reuters]

  1. overall, pharmaceutical companies are owed €12 billion in unpaid bills for medicines (debts more than 30 days unpaid).
  2. about €6 billion of that is apparently in Spain; overdue bills in Spain are approaching 800 days unpaid; recently, though, the Spanish central government found €17 billion euros to pay suppliers of the autonomous communities — 73% of this amount was for unpaid medical bills
  3. medical device makers are owed about €4 billion
  4. one device company recently took back about €4 million in unpaid inventory
  5. an insulin supplier shifted to cash on delivery for Greece and has threatened to withhold new drugs from the market
  6. many pharmaceutical companies are reprofiling their product portfolio in high risk payment countries, with a focus on medicines where there is no alternative source of supply or where there is higher clinical need
  7. there is in some cases a broad strategic shift away from customers who don’t pay their bills (e.g. hospitals) to the patients, thereby avoiding high risk local or regional government payers
  8. many health industry intermediaries are diversifying their business away from this sector
  9. some companies have written down their debt selling sovereign bonds; amounts in the tens of millions of Euros are involved.
  10. some of Greek national debt arose from hospital capital expenditure and the failure to properly account for these in national accounts, despite the fact that their hospitals are in poor physical condition; there is a comparable risk associated with capital expenditures across the Euro-zone as it generally involves public bodies and public debt
  11. and so on….

What does this mean?

Consequences to health systems are unlikely to be short term. The suppliers are bearing the costs of granting credit to governments with increasingly fragile credit ratings. They are going to be more cautious in future, no doubt. But a few consequences can be anticipated based on current actions:

  1. There is an evident shift from state payers to patients, forcing patients to pay full costs and then recover these costs from payers. This can be serious hardship for some patients. To some extent, increasing copayment/full payment increases price awareness amongst patients, and increases their awareness of true costs and medicines or device availability. Where national policies may act to suppress introduction of innovative products, public salience of this will rise. Increased public salience will have the effect of limiting the ability of governments to act to constrain costs and availability. This alone could lead to calls for radical reform of state controls in health systems.
  2. Innovative medicines and devices are unlikely to be supplied to at-risk countries until there are assurances of payment. Indeed, medicine reimbursement policies which seek to drive down medicines prices or encourage generic substitutions are likely to have a perverse consequence as industry has the option of restricting to supply to manifest demand, or delaying the introduction of innovative medicines for fear not only that they won’t get paid, but the price paid may be punitive.
  3. Infrastructure renewal in the healthcare system will come under considerable scrutiny. Do we need to renovate hospitals; should new ones be built or should we be looking at newer ways to deliver healthcare at lower costs (e.g. e-health), and how will the vested interest groups (health professionals) react to far reaching system reform to reduce the capital costs of hospitals?
  4. Reduction in availability of supplies has a variety of consequences: shortages of medical/surgical supplies delay operations; shortages of gloves can increase the risk of spread of hospital infections (which can cost upwards of €100,000 per incident to clean up, a lot more than gloves cost); general cost containment can compromise linen supply and sterilisation, increase the risky use of reusable surgical instruments and encourage staff to take risks with reusing equipment in general; given the scale of infrastructure, staff shortages (not hiring replacements) can lead to increased patient loads for health professionals and thereby shorten time available for patient care. This list can go on and on.

The point is that healthcare is a system, and shocks to that system, whether unpaid medicine bills, staff shortages, hospital infections, whatever, have consequences throughout and many of these consequences are likely to be far more costly than the savings and could lead to widespread risks to public health.

Solutions? In my view, the time is ripe for the at-risk countries, in particular, to reflect on the cost-drivers in their systems and focus on substantial reform of the delivery system, as well as the financing itself. Long-term sustainability is needed, so short-term or ill-thought through reforms will only make things worse. We’ve already seen the consequences of that with current Euro-zone leadership.

Email me your suggestions and let’s start building a list of possible solutions that protects the integrity of the public’s health without bankrupting the country.

/p

dead duck

A French Entrepreneur (Photo credit: Dave Malkoff)

A paper by academics Nadine Levratto and Evelyne Serverin, “Become Independent! The Paradoxical Constraints of France’s Autoentrepreneur Regime” (available here) shows the failure of this programme to generate entrepreneurial behaviours.

What went wrong, and why should other member states not copy France?

Since January 2009, when the autoentrepreneur category of working was first introduced, over 550,000 people have registered. They system differs from the also complex Regime Reel in France by taxing autoentrepeneurs on gross turnover (up to the allowed ceiling of €32100, at the rate of between 12 and 21.3%) rather than on revenue (turnover less expenses). People in this category discharge all their taxes by paying this amount, but do not get to claim expenses and do not need to do VAT accounting. In France, the very high national debt is driving lawmakers toward a regime that is levying the regressive social charges on everything from the first euro (!); this is evidence more of desperation than leadership — that entrepreneurs have been captured by this is not surprising.

Almost 50% of autoentrepreneurs in France had an annual turnover of zero, while 15% had a turnover of less than €1000. Only 500 autoentrepreneurs exceeded the upper threshold.

This regime fails because it is not about being entrepreneurial, but about collecting tax and creating bureaucratic barriers to success: more specifically:

  • autoentreprenurs can’t hire anyone — the authors speak of them as ‘lonesome’, working out their entrepreneurial dream on their own, forbidden to collaborate with others, even hire an assistant
  • they can’t recycle capital to build the business as it taxed away at the turnover level as there is no recognition of the extraordinary expenses of business startups
  • because of the structure of business, they are a bad risk for banks to lend to
  • two autoentpreneurs can’t collaborate as tax authorities would view them as a company
  • there is an excessive concern for employment law and insufficient understanding that entrepreneurial behaviours are not about being secure, but about risk, and therefore has little to do with employment law itself.

There should be no surprise that the system failed and people outside France can say simply on this basis, and with some justification, that the French don’t have a word for ‘entrepreneur’ as clearly they don’t seem to understand what the word means. Indeed, the authors note that the programme has been such a dismal failure, that the French government is rebranding it as better for second incomes, than entrepreneurialism.

What we need is an analysis of these failing efforts at entrepreneurialism by member states, certainly as a warning to others, but more importantly to establish a general understanding of how entrepreneurialism should be treated within member states from the perspective of taxation and law.

If I were forum-shopping for a member state to pursue my entrepreneurial dreams, I would be looking for a country with light-touch taxation, and flexible employment rules.  Start-ups have real problems with cash flow and locking them into high social charges and rigid employment laws is counterproductive.

What is worrying is that other member states, according the authors, have copied this regime: Portugal (recibos verdes) and Poland (samozatrudnierie). Others may be thinking about it. We should all be very afraid of this.

If you are entrepreneurial or have experience in specific member states, please email or comment. Which do you think is the best country in Europe to start a business or be entrepreneurial?

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