Ideas@TheCentre – The Centre for Independent Studies

Ideas@TheCentre

Ideas@TheCentre brings you ammunition for conversations around the table.  3 short articles from CIS researchers emailed every Friday on the issues of the week.

Combating (genuine) poverty need not punish 'the rich'

24 October 2014

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October 12-18 was Anti-Poverty Week, aiming to encourage all Australians "…to organise or take part in an activity aiming to highlight or overcome issues of poverty and hardship here in Australia or overseas." Anti-Poverty Week often provokes new offensives in the poverty wars, which usually ensures a few entertaining op-eds, but does nothing to alleviate genuine poverty.
 
In recent times Anti-Poverty Week has been kicked off with the release of the Australian Council of Social Services' (ACOSS) Poverty in Australia report. According to this year's report, 2.55 million Australians (13.9%) were living below the poverty line.
 
Poverty, as defined in the report, includes anyone in a household with an income less than half of the median household income (after adjustments for differences in household composition and housing costs).
 
By defining poverty in these terms, the focus is shifted away from living standards towards income inequality so that poverty can only be eradicated through an extreme policy of income redistribution that leaves all households with the same (equivalised) disposable income.
 
This focus on relative poverty as a metric for measuring the effectiveness of Australian social policy conflates income inequality with the material deprivation that most Australians associate with 'living in poverty'.
 
The other consequence of the income inequality/anti-poverty rhetoric of the left is to shift the focus away from those who are living in genuine poverty to the incomes of those they deem to be "the rich". Redistribution of income alone tells us nothing about the effectiveness of programs that aim to improve the lives of the disadvantaged.
 
The effectiveness of programs targeted at the less fortunate is far more important. If these programs are not working, the costs imposed on society are not being offset by any increase in overall social welfare. As we learned earlier in the week it is possible to spend $120 million on an employment program that manages to provide only 277 jobseekers with a job that lasts more than six months at a cost of $433,000 per placement.
 
Alleviating poverty should focus on ways to change people's lives for the better. While this will require some income redistribution, redistribution should never be an end in itself.

 

taylor-matthewMatthew Taylor is a Research Fellow at the Centre for Independent Studies.

 

 

What is the right standard for success in Iraq and Syria?

24 October 2014

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In 1954, then United Nations Secretary-General Dag Hammarskjöld remarked: 'The UN was not created to bring us to heaven, but in order to save us from hell.'
 
Hammarskjöld's point was that in the often messy and brutal world of international affairs, the standard of success is not perfect peace and security but whether war and genocide can be minimised.
 
Despite ongoing strife in Iraq and Syria and sustained Islamic State combat strength, Hammarskjöld's lesson should chasten critics of the US-led campaign of air strikes.
 
IS has not given up its fight to seize the Kurdish-controlled city of Kobane, IS-linked terror attacks are multiplying even in the Iraqi government stronghold of Baghdad, and nimble IS units can easily evade air strikes by fleeing into urban areas.
 
It would nevertheless be a massive misjudgement to conclude that the international intervention is failing.
 
US President Barack Obama last month pitched expanded air strikes across Iraq and Syria in typically grandiose terms. The proclaimed aim was to 'degrade and ultimately destroy' IS and 'hunt down' its fighters 'wherever they are.'
 
Obama's forceful rhetoric notwithstanding, the mission's immediate goals were actually much more modest: to frustrate IS' genocidal ambitions and stall its advance in western Iraq and eastern Syria.
 
These more limited objectives have already been achieved. Attempted mass atrocities against religious and ethnic minorities have been thwarted and IS has been unable to significantly expand on spectacular territorial gains made in June.
 
Of course, even if the coalition campaign of air strikes was able to pull off a heroic feat and totally neutralise IS forces in a matter of mere months, Syria would still be mired in civil war, the Kurds would still be unhappy partners in the fragmented Iraqi federation, and Iraq would still be racked by sectarian divisions and periodic intercommunal violence.
 
But it would be unreasonable to expect even the best planned and most honourably intentioned international intervention to fully free Iraq and Syria from internal troubles.
 
In fact, as Hammarskjöld would have recognised, if international intervention in Iraq and Syria only saves these countries from the hell of a total IS takeover, the mission will have been a resounding success.

 

herscovitch-benjaminDr Benjamin Herscovitch is a Beijing-based Research Fellow at The Centre for Independent Studies.

 

Integrating insurance with health service provision - a volatile partnership

24 October 2014

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It is rare for a large provider of medical services to assume control of a health insurance company. But this occurred in September when Primary Health Care, a publicly-listed provider of medical and laboratory services, with a market capitalisation of some $2 billion, acquired Transport Health for $18 million. While Transport Health has traditionally provided health insurance for employees of the transport industry, it will now convert to an open-access fund.
 
Primary claims that members of Transport Health "will benefit from access to Primary's extensive network of health care providers".  It will use its suite of healthcare services "to establish an extended provider network for existing and future Transport Health members".
 
It appears a corporate health provider has assumed control of a health insurer as a strategy for underwriting and expanding the demand for the services of its health businesses. Although the Health Insurance Act seeks to prevent private insurers from writing private medical cover, this has not inhibited Medibank Private from trialing an insurance model that is designed to guarantee 'priority' access to out-of-hospital GP services at zero price in south-east Queensland at medical practices owned by Sonic, a major publicly-listed competitor to Primary.
 
To the extent that competitive offerings of this type of gap cover may neutralise the impact of Government attempts to introduce a GP co-payment or patient cost sharing, they could encourage the demand for medical services and prove a burden to health fund contributors obliged to meet higher premiums to pay for incremental front end medical costs.
 
Therein lies the dilemma for Primary: it can profitably underwrite expansion of its health services that prove costly to its insurance division and its contributors; alternatively, it can attract contributors to low cost insurance offerings that incorporate cost sharing and encourage patients to make rational decisions about the care they use-but not both.
 
Asymmetry between the welfare of fund members on the one hand and providers and users of services on the other has been a principal reason to have discouraged providers of services from taking over insurers. Such marriages have potential to wreak maximum damage where providers are remunerated in a fee for service setting where patients make no contribution to the cost. This maximises opportunities for providers to drive demand for health care that may not always be clinically supportable.
 
To be sure, there are examples of successful vertically integrated health insurance and health service provision. But these occur when insurance companies have initiated a takeover or have established their own service businesses. Providers have resisted them because, to protect their financial integrity, insurers have sought to influence the quality and content of services they underwrite.
 
Doctors interpret this as 'managed care', intruding into their professional realm. In 1988 a major health fund established a 12-chair dental centre in central Sydney that has since grown into a dental network. This was fiercely opposed by dentists. The fund had acquired the right to comprehensively audit and benchmark work of the profession, who in turn interpreted this as a threat to their autonomy and independence.
 
Wherever insurers have capacity to monitor services they underwrite and to calibrate price signals and provider remuneration to encourage doctors to keep patients well and out of hospital, there is greatest scope for vertical integration. The message here for corporate health providers in Australia is that where conventional fee-for-service prevails without cost-sharing, it is risky to conflate investment criteria for mutually opposed service objectives.

 

gadiel-davidDavid Gadiel is a Senior Fellow at the Centre for Independent Studies.