1 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS Towards a better measure of non market output The OECD non market project Report of the joint OECD/UK/Norway seminar (London, October, 3-5, 2006)

2 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The context : SNA « In principle, volume indices may always be compiled directly by calculating a weighted average of the quantity relatives for the various goods or services produced as outputs using the values of these goods and services as weights. Exactly the same method may be applied even when the output values have been estimated on the basis of their costs of production. » « There is no mystique about non-market health or education services which make changes in their volume more difficult to measure than volume changes for other types of output, such as financial or business services or fixed tangible assets. Moreover, changes in their volume are also needed in order to be able to measure volume changes for the actual consumption of households. The same principles apply to the measurement of consumption as to production. »

3 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The context : the European handbook Education« the quantity of teaching received by the students, adjusted to allow for the qualities of the services provided, for each type of education » « the transfer of knowledge, successfully or not » Health « quantity of health care received by patients, adjusted to allow for the qualities of service provided, for each type of health care. » « The quantity of health care received by patients should be measured in terms of complete treatments ». pupil-hours or number of pupils class size, school inspections, scores ? by ISCED-97 number of treatments, or consultations, or first visits by providers, then by functional care, then by DRGs ?

4 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The context : the Atkinson review Principle A : the measurement of government non-market output should, as far as possible, follow a procedure parallel to that adopted in the national accounts for market output. Principle B : the output of the government sector should in principle be measured in a way that is adjusted for quality, taking account of the attributable incremental contribution of the service to the outcome. Principle C : Account should be taken of the complementarity between public and private output, allowing for the increased real value of public services in an economy with rising real GDP. 6 other principles (H on triangulation…) Note : the UK had already output methods, but sub-optimal ? good practice for quality adjustment

5 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The context : a transatlantic gap ? European countries : by commission decision 2002/990/EC, almost all countries will apply output methods in education and health according to the European handbook recommendations, in 2006 or following years. Australia and New Zealand have applied also output methods for years. North America (US, Canada) still apply input methods Output methods often < Input methods There could be a transatlantic gap of 0.25% of GDP growth / year. OECD role is to promote international comparability.

6 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The OECD non market project This project, focussed on education and health especially, both in temporal and spatial dimensions, was presented by OECD at the 2005 meeting of the Committee on Statistics. INSEE has assigned Alain GALLAIS to coordinate this project in OECD, for 18 months (April > September 2007). workshop in London, 3-5 October 2006, co-hosted by ONS and the government of Norway. Attendance of more than 160 experts of National Accounts, PPP, education, health and public services efficiency fields. workshop in London

7 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS Objective : OECD handbook on best practices OECD non-EU countries Questionnaire OECD June 2006 AU, NZ wo quality adjustments, projects in the US ? => Promotion of output methods The originality of the OECD non-market project : develop a synergy between experts in NA, PPP, education, health and public services efficiency fields (several networks). EU countries Questionnaire Eurostat June 2006 Almost all countries in the process, but few with quality adjustment => Promotion of best quality adjustments Review of best practices in output methods, more detailed international guidelines for temporal analysis Frameworks and formulas for output methods in PPP limited to education and health

8 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The London seminar : the UK experience Of course, the UK was not chosen « by hazard » to host the workshop : the ATKINSON review and then the creation of the UKCeMGA inside the ONS have provided a good experience, still in progress (public order and safety, social services). Importance of the communication strategy. Key stakeholders. Need for more timely, detailed and better quality data on government expenditure. A lot of proposals by DfES (education) and DH (health). Not always easy for the NA unit.

9 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The London seminar : nordic experiences Norwegian StatRes project : transparency and benchmarking. Mapping the current information jungle (input, activity, output, outcome) : –KOSTRA for municipalities –SAMDATA for health statistics –Skoleporten for education –Each sector / agency has its own specific website Swedish NA : all individual services, including social services and culture. Finnish project for NA : each public entity is asked on its shares of turnover / costs and on its outcomes / quantity indicators. No quality adjustment. Example

10 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The London seminar : US projects There is no agenda for moving to output methods. But there are 3 parallel projects on alternative methods for education : –Barbara FRAUMENI et al., relying on human capital theory; –Michael CHRISTIAN et al., more classic output method; –Use of market prices. In health, research is still "in its nascent stage. A paper of Michael CHRISTIAN has explored several possibilities, mainly relying on DRGs, leading to counter intuitive results (output < < input).

11 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The London seminar : terminology aspects In the view of policy makers : Source : Wouter Van Dooren Activities = quantities ?

12 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The London seminar : terminology aspects In the view of health economists : « The term of outcomes refers to a multi-dimensional concept of (positively or negatively expressed) characteristics of output, such as health changes, responsiveness of services to peoples non-health expectations (e.g., no waiting time, other convenience of access, quality of facilities, and amenities in hospitals or nursing homes). There are several possibilities for valuation of changes in health states measured, such as Quality Adjusted Life Years (QALYs). » No ! (quality adjustment) Source : Manfred HUBER

13 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The London seminar : scares and hopes about output methods National Accountants Before, with hypothesis of null productivity, countries were comparable. Now, with diversity on quality adjustment, countries could not be comparable any longer. Data on productivity will be scrutinized by politicians But new productivity is often negative ! Output is not outcome Policy makers Before, output in NA was of no interest. Interest of harmonization. Now, NA could capture all outcomes useful for policy makers, with an official and consistent label, according to the vocation of NA. Interest of explanations. NA can only be one- dimensional

14 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The London seminar : differences between output and outcome (1) Influence of consumers characteristics The outcome can be influenced by consumers characteristics (level of knowledge of pupils, health status of patients before they are provided any service). Should the output be as close as possible of outcome, or should it neutralize consumers characteristics to rely only on providers ? Externalities In general, National accounts do not record externalities (pollution…). But some expected outcomes of an activity can concern other ones (road safety for health or health status for market economy). Should the output of public services record the externalities on other activities ?

15 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The London seminar : differences between output and outcome (2) Inequalities Some policies in individual non market services focus on reduction of inequalities (of knowledge and skills in education…). Market activities do never take them into account (total F C = single addition of individual F C, total income…). Should NA make an exception for non market services ? Including individual services ? Coverage of policy makers purposes Must all the dimensions of outcomes be reflected in the one- dimensional output ?

16 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The London seminar : education The European handbook suggests several possibilities for quality adjustments : Pupil-hours (if possible adjusted for occasional absence of pupils) are a better « quantity » indicator than number of pupils; The class-size or pupil/teacher ratio after a sound analysis on its effect on the quality of teaching ; School inspections ; Examination data. But are all these quality adjustments consistent with each other ?

17 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The London seminar : education for PPP (not yet validated) Output in NA (my point of view) OECD Education unit statistics Outcome for policy makers (ex of FR point of view) PISA national scores corrected on ESCS + time-lag PISA national average scores Level of knowledge Out of purpose of NAPISA national SDReduction of inequalities Externality ? Out of purpose of NA Citizenship Quality adjustment for upper second. vocational Rates of employment Insertion in Labour market Translation of the same formula in spatial dimension :

18 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS Education : draft framework for PPP (M + NM) Recommendations of the handbook Finest detail of cycles Act. F.C. Num. pupils Quality index Pre-school - ISCED 0 Pre-school none Primary school – ISCED 1 Primary school PISA / PIRLS + TIMSS ? Special primary Lower secondary – ISCED 2 Secondary 1 st stage PISA Special secondary PISA Upper secondary - ISCED 3 general, pre-voc. PISA vocational PISA + employ. rate ? Post-sec. non tert. - ISCED 4 Post-secondary non tertiary PISA Higher education - ISCED 5 and 6 Long superior ISCED 5A Number of degrees and duration of studies. Short technical superior- ISCED 5B Advanced research qualification – ISCED 6 Other education

19 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS The London seminar : proposals of DH for health output (UK) Two treatments might have the same costs, but one might result in a major increase in health outcomes (longer life, or better quality life) while the other might have much smaller health gain. The aggregate measure of healthcare output should reflect the number of treatments with major health gain, rather than just taking account of current costs. Use of value weights (QALY) instead of cost weights. Use of mortality rates and waiting times. Use of « value weight » for statins : prevention better than curative care. Patient experience. None of these has been into account in British NA yet. Some proposals can be exclusive of each other.

20 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS New : Paris Health accounts meeting, 6 th of October, 2006 « Cost of illness » has been compared among a dozen of European countries, and Eurostat find the results homogeneous and plausible. « Cost of illness » is recommended for international comparisons, should be integrated in SHA, which would harmonize some conventions (fixed costs, prevention, collective purposes…) NL wants to calculate volume and price with this framework (no methodology yet). But few data on QALY (main idea for quality adjustment).

21 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS Possible content of the final « OECD best practices manual » Synthesis of national experiences and results Definitions, principles and terminology (input / output / outcome) Then by activities (education, health, public order and safety ?) Definitions, principles, terminology Review of (best) stratification and quantity indicators Review of best quality indicators Temporal formulas Spatial framework and formulas Verification of consistency between market and non-market methods For September 2007

22 October 10-12, 2006 Working Party on National Accounts Alain GALLAIS Next steps 2 meetings in 2007 for the Eurostat-OECD NA-PPP task force on Non Market Services ? Meetings in 2007 for the (planned) upcoming OECD task force on Health specific PPP Permanently in contact with countries to study their practices and projects Submission of proposals to Health and Education OECD networks Workshop in Paris, 7-8 June 2007, on the model of the London workshop. Presentation of draft handbook to the October 2007 WPNA