Working Party on National Accounts, OECD – 4-6 November 2009 Update on PPP programme and new data set for health expenditure Paul Schreyer OECD

Introduction The Eurostat-OECD PPP Programme is an on-going programme Purpose of this presentation: –Give an update on the Eurostat-OECD PPP programme –To present the latest methodological changes in the domains of education (implemented) and health (forthcoming)

Update on the Eurostat-OECD PPP programme (1) PPPs for OECD countries are calculated every three years Preliminary results for the Round 2008 will be calculated end Countries which have not yet sent the detailed PPP national accounts questionnaire are invited to do it in the coming weeks. Publication of detailed results foreseen end of 2010.

Update on the Eurostat-OECD PPP Programme (2) Country coverage goes beyond OECD with 46 countries participating in the Programme: –37 countries (27 EU Member States, 3 Candidate Countries, 3 EFTA countries, 4 Western-Balkan countries) coordinated by Eurostat –9 countries (7 OECD Member States, plus Russia and Israel) coordinated by OECD –Chile will join the Programme in 2011

Main methodological changes for non market services The major methodological changes have been presented already last year. Final draft of handbook: TOWARDS MEASURING THE VOLUME OF HEALTH AND EDUCATION SERVICES Handbook will be published by the end of the year and we would like to thank all countries for their constructive comments.

Education – output based approach to measure volumes of education (1) Approach: Direct estimation of volumes Stratification by level of education Unit of output: pupil-hour (teaching received) Primary and secondary education: explicit quality adjustment with PISA scores, corrected for socio-economic variables.

Education –output based approach to measure volumes of education (2) Substantial improvement over input cost approach –Better theoretical justification –More plausible results The method will be implemented for all OECD countries for the Round 2008 (for Eurostat countries method already implemented for two years)

Education –output based approach to measure volumes of education (3)

Education –output based approach to measure volumes of education (4) )

Health – Toward specific PPPs for health based on output based approach Progress on the work of the PPP health task force – presentation last year of the first results. 4 th TF Meeting was held in October Approach –Focus on hospital services –Disease-based approach –Use of secondary datasets Study design Current status of the project Challenge ahead – New expenditure classification

PPPs for hospital services – Study design Product identification: products are defined in terms of the types of services that hospitals produce (called case types. Use of Diagnosis Related Groups ) Product measurement: case types quantities are measured through electronic coded information available at hospitalization level Place a value on products: a unit cost/quasi price by case type is estimated using available results from cost finding studies/price lists

PPPs for hospital services – Study design Case types identification -examples

Current status of the project Second round of pilot studies conducted this year with 14 countries Feasibility confirmed: first set of results reasonable Still need to investigate measurement issues and to refine methodology (revise the list of case types, with a focus on inpatient services; identification of length of stay outliers; cost finding methodology)

Proposal for a new PPP expenditure classification for health (1) From prices to volume…. Health PPPs need to be accompanied by consistent expenditure data Current expenditure information from NA not appropriate to deflate « new »health PPPs

Proposal for a new PPP expenditure classification for health (2) Expenditure classifications by purpose do not match disease-based approach for new health PPPs Hospital services in COICOP and COFOG also comprise residential care and nursing homes NPISH classification provides no breakdown for health Health services directly provided by government are classified according to inputs

Proposal for a new PPP expenditure classification for health (3) New classification needed Build the new classification from information in System of health accounts (SHA) SHA provides expenditure breakdown by health provider Provider-based classification HP1 – HP4 Hospitals (HP1) Nursing and residential care facilities (HP2) Providers of ambulatory health care (HP3) Retail sale and other suppliers of medical goods (HP4)

Proposal for a new PPP expenditure classification for health (4) Close correspondence of provider classification with ISIC but provider classfication cuts across national accounts sectors Proposal : Use total health expenditure from NA Apply structure of HP1 – HP4 from SHA to allocate expenditure Computation of Health PPPs for health as a whole Strong assumption : same structure for each sector but less of a problem when actual individual consumption is measured

Conclusions – PPP 2008 Round well underway – New methods for education and health PPPs coming up – Thanks for providing expenditure data and liaising with price statisticians