Prioritization and the Elusive Effect on Welfare – A Norwegian Health Care Reform Revisited Arild Aakvik, Institutt for økonomi, Universitetet i Bergen Tor Helge Holmås, UNI Research Rokkansenteret, Bergen Egil Kjerstad, UNI Research Rokkansenteret, Bergen Rokkansenteret

Tilskuddsordning for helse- og rehabiliteringstjenester (Raskere tilbake) I november 2006 avga Sykefraværsutvalget (Stoltenbergutvalget) sin rapport (Ot.prp. nr. 6 ( )). Utvalget skisserte flere tiltak for å redusere sykefraværet og sluttet seg til en satsing som inneholdt en kombinasjon av: mer aktivitetsorienterte tiltak tidligere i sykemeldingsperioden sammenliknet med tidligere, tiltak som bidrar til bedre og mer forpliktende oppfølging og tydeliggjøring av ansvar sammenliknet med tidligere, tiltak som bedrer muligheten for kontroll og sanksjoner enn dagens regelverk. Rokkansenteret

En historie om en utfordring, et tiltak og ….. ”Det er en utfordring at sykefraværsperioden kan være avhengig av helsevesenets behandlingskapasitet. Det innføres en ordning for kjøp av helse- og rehabiliterings- tjenester for å bringe personer som mottar sykepenger raskere tilbake til arbeidslivet og dermed redusere sykefraværet” (fra Sykefraværsutvalgets/ (Stoltenbergutvalgets rapport). Stimulere helseforetakene til å etablere nye tilbud rettet mot sykmeldte arbeidstakere og personer som står i fare for å bli sykmeldte. Rokkansenteret

….prioriteringer. “according to the human capital approach resources should first and foremost be allocated to health services for which the indirect cost (or opportunity cost) of waiting for treatment is the largest, all else equal.” (Aakvik et al. 2014) “For example, additional resources specifically aimed at employed people in need of planned hospital treatment will lead to a better cost-benefit ratio compared to resources allocated to children, the unemployed and retired people.” (Aakvik et al. 2014) Rokkansenteret

A few facts The average waiting time for hospital treatment was around 70 days in 2008 (Norwegian Directorate of Health). Around 40 % of persons registered as being on sick leave received hospital treatment during the sick leave episode (Holmås and Kjerstad, 2010) Indicate that a reduction in waiting times could lead to a reduction in length of sick leave and faster return to work. Rokkansenteret

Hypothesis Waiting lists prolong productivity losses compared to a situation without rationing. Additional resources aimed at employed people will therefore contribute to reduce the productivity loss in connection with sickness absence. Prioritization will give a welfare enhancing effect. Rokkansenteret

The FRW scheme The Faster Return to Work (FRW) scheme was introduced early Hospitals received 80% of DRG “price” for FRW patients compared to 40% for ordinary patients. The Government spent approximately NOK 500 million (around EUR 70 million) yearly in the period on FRW patients. Rokkansenteret

On data ….. Register data: hospital data (NPR, 2008) is merged with social security data including socio-economic characteristics (2006-July 2009). Approx observations (3428 surgical, non-surgical) A treatment group and a comparison group are created based on a quasi-natural experiment design. Rokkansenteret

Some descriptive statistics All patientsSurgical patientsNon-surgical patients FRW -treatmentRegular treatmentFRW -treatmentRegular treatmentFRW -treatmentRegular treatment Length of sick leave ( ) ( ) ( ) ( ) ( ) ( ) Waiting time (72.448) (81.325) (66.171) (77.691) (73.879) (82.304) Post- treatment period (94.477) (93.599) (91.632) (93.322) (95.400) (93.667) Rokkansenteret

…..and methods We estimate ordinary least squares (OLS) regressions matching models different binary treatment effect models with and without heterogeneous average treatment effects taking into account unobserved selection into treatment. Rokkansenteret

Exclusion restriction (”instrument”) Distance to the nearest FRW hospital minus the distance to the nearest hospital of any type (FRW or regular hospital) for each patient as the exclusion restriction for identifying causal effect of the FRW scheme. The distance variable should affect the decision to enter the FRW scheme but should not affect our outcome variables length of sick leave and return to work. Rokkansenteret

Main results Waiting times was 13.8 to 15.5 days shorter compared to people on sick-leave enlisted on the regular waiting list. Reduction in waiting times is only partially transformed into a reduction in total length of sick leave. On average, the reduction in total length of sick leave is around 9 days. Rokkansenteret

However…. A significant difference between surgical and non-surgical patients. Patients undergoing surgical treatment have episodes of sick leave that are 13 to 22.5 days shorter compared to surgical patients on the regular waiting list. We find no significant effect of the FRW scheme on length of sick leave for non- surgical patients. Rokkansenteret

Non-surgical patients OLSSelection model Sick leave WTPT Sick leave WTPT FRW (4.303) ** (4.394) ** (2.510) (6.153) *** (4.404) * (5.411) Rokkansenteret

Main results cont. We do not reject the hypothesis of no selection on unobserved variables in any of the models, i.e. we find no indication of selection on unobservables. We do not find clear indications of heterogenous effects from switching or interaction term specifications based models. Rokkansenteret

Simple Welfare Analysis The main welfare effects are - on the benefit side - changes in the production loss due to sickness absence. On the cost side, the extra financial resources allocated to the hospital sector due to the FRW scheme. Study surgical patients, the group of patients with significant reduction in sick leave compared to ordinary patients. Rokkansenteret

Simple Welfare Analysis cont. Benefits are measured as the reduction in number of sick leave days that the FRW scheme leads to. We calculate the effect by multiplying the increase in number of working days with daily gross wages, i.e. wages inclusive social costs and taxes. Based on 2007 wage income data from The Norwegian Labour and Welfare Administration (NAV) Rokkansenteret

Simple Welfare Analysis cont. In 2008, 1556 surgical patients were treated through the FRW scheme. With an average reduction in sick leave days of 22.5 days, the benefits measured in NOK amount to approximately 61.1 million NOK. The Government spent million NOK on surgical capacity offered through FRW in The cost-benefit ratio is approximately 2.4. Rokkansenteret

Conclusions Our results confirm that additional funds to the hospital sector can reduce waiting times significantly. There is a significant difference in the effects of FRW on length of sick leave between surgical and non-surgical patients. The welfare analysis indicates that prioritization of the kind that the FRW scheme represents is not as straightforward as one would expect. Rokkansenteret