Prof.dr Tammo H.A. Bijmoltt.h.a.bijmolt@rug.nl

Do Political or Economic Factors Drive Healthcare Financing Privatisations?

Empirical Evidence from OECD

RRasmus Wiese

r.h.t.wiese@rug.nl

Contribution

1)A novel methodology to detect healthcare privatisations

2)Empirical test of political economy theories and conventional wisdom. Main results:

- Economic crisis trigger healthcare financing privatisations

- Political factors do not

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Background

› Why/When do countries (not) undertake economic reform?

- Sovereign debt crisis imply a lack of reform

- Public healthcare expenditure 8% of GDP

- Profit and healthcare!

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Motivation › Lack of studies testing conventional wisdom and

theory - Economic crisis, ideology, war of attrition, elections (Drazen & Easterly 2001; Hibbs 1977; Alesina & Drazen 1991)

› Poor measurement of privatisations and reform (Megginson & Netter 2001)

› No quantitative studies of healthcare financing privatisations?

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Do Political or Economic Factors Drive Healthcare Financing Privatisations?

Presentation plan:1)Detecting privatisations

2)Which factors triggered these privatisations?

3)Conclusion

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Detecting privatisations› General definitions of economic reform and privatisation

- Should have a significant economic impact and be a result of planned policy

- A shift in ownership (e.g. Saltman 2003)

› Problems: - Policy input or economic outcome data? (Rodrik 1996; Campos & Horváth 2012)

- Not necessarily any shift in ownership

› Specific definition of a healthcare financing privatisation:

A statistically significant policy induced shift from public to private funding of healthcare

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Detecting privatisations. 2 parts:

1)Detect statistically significant shifts in which “pockets” incur the costs to healthcare. Private vs. public.

2)Validate these shifts using de jure evidence

Case study: Healthcare financing privatisations in Austria

Part 1: Data and statistical filter

›Data: Public and Private funds incurred to healthcare (OECD)

›Healthcare financing source:

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Healthcare financing source: Austria

(Bai & Perron 1998, 2003)

privatisation

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In Austria the filter detects:•Privatisation in 1968•Privatisation in 1988

Part 2: Validate the detected significant shifts

•Civil Servants’ Health and Work Accident Insurance Act of 1967

•Employment and Social Security Tribunal Act of 1987

Healthcare systems in transition, country reports (WHO)

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Findings in a panel of 23 OECD countries

Findings:• 33 privatisations detected by the filter• 21 can be validated as the result of planned policy• Evidence of ‘rigid institutions’ (Acemoglu et al. 2006)

• Evidence of ‘stroke-of-the-pen’ policies

›Privatisations in 14 out of 23 OECD countries (1960-2010)

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Which factors triggered these privatisations?

› Panel of 23 OECD countries (unbalanced 1975-2006)

› Dependent variable privatisation

- Privatisation yit=1, no privatisations yit=0

› Binary outcome random effects logit model

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Variables of interest

› Political factors

- Ideology (Potrafke 2009)

- War of attrition (Political fractionalisation, World Bank DPI)

- Elections (executive and legislative, World Bank DPI)

› Economic Crisis- Job crisis (unemployment rate, mean + st.d., OECD)

- Debt crisis (interest rate on gov. debt, mean + st.d., OECD)

- Recession (year with negative growth, OECD)

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Control variables

› Economic factors: Demographics, technological change, inflation (Oxley & MacFarlan 1994, OECD)

- percentage of population over 65

- potential years of life lost

- inflation rate

› Duration dependence (Beck et al. 1998)

- probability of a reform is affected by earlier reforms

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Main empirical results

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Conclusion › The filter picks-up privatisations

- maybe too strict

› Economic crisis trigger privatisations robustly1) Perception of the need for significant reform (Drazen 2000) 2) Uncertainty of reform outcome (Fernadez & Rodrik 1991) 3) …

› Other political factors do not impact healthcare financing privatisations: Ideology?

- Other measures of ideology

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The end

Thank you for your attention

r.h.t.wiese@rug.nl

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