Reform and privatise public health and other human services, says Productivity Commission

The Productivity Commission of the Australian Government has recommended the privatisation of human services in order to increase diversity in the system. The commission cites greater consumer choice and control, along with “incentives for service providers to be more responsive to users’ needs”, as the reasons for this proposition. The recommended reforms have been compiled in a preliminary report released last week as part of an ongoing inquiry into human services reforms.

The inquiry aims at examining the benefits of reforming human services through the introduction of competition and user choice to the system. The preliminary findings report is included in the first stage of this inquiry, which will identify the services that are most likely to benefit from being open to competition, user choice, and contestability. This will be followed by the second stage which will put forth appropriate reforms for each service in order to improve its efficiency, effectiveness, and sustainability.

It focuses on six areas of human services that will benefit from reform: social housing, public hospital services, specialist palliative care, public dental services, human services in remote Indigenous communities, and grant-based family and community services. It also examines various trends affecting human services, such as an ageing population and digital technologies.

The preliminary report highlights the benefits of greater competition and contestability in improving the system. It emphasises the ability of competition and contestability to result in a more effective delivery of services to fulfil user needs, as well as the improvements in quality and innovation resulting from competition. It can also broaden the scope of people who can access such services, as well as reduce costs for both the government and private providers, thereby reducing costs for users and taxpayers. This makes privatisation, done in an astute and efficient manner, an ideal solution to solve the growing issues associated with the human services sector.   

Historic cases of privatisation have also been examined in the report. It states that non-government provision of human services have been associated with increased access and quality, as evident with private education and childcare, due to consumers having greater choice on the service and the provider. In cases where privatisation has been ineffective, the report says that better systems and an intelligent approach to privatisation would have been appropriate. The commission uses NSW Disability Council’s statement regarding the National Disability Insurance Scheme to support its case:

                  “Choice is empowering and can facilitate greater independence and improve overall quality of life, particularly  for people with disability that may have been denied choice and opportunities for self-determination.”

Increased user choice through competition in social housing will lead to greater quality and  allow the user to influence the choice, attributes that the current system lacks. Similarly, the report states that public hospital services do not allow user preferences to be considered. Greater competition in this will lead to increased service quality and decreased costs, along with greater efficiency.

The Commission, however, stresses the importance of a continued role of the government in human services. This is in order to ensure that “human services meet standards of quality, suitability and accessibility, giving people the support they need to make choices, ensuring that appropriate consumer safeguards are in place, and encouraging and adopting ongoing improvements to service provision” (Source: Introducing Competition and Informed User Choice into Human Services: Identifying Sectors for Reform, Preliminary Findings Report).

Furthermore, it states that the government can delegate “contestable arrangements to select providers” in order to imitate a competitive environment in cases where competition between various private providers is not appropriate. It believes that, for those cases, this sort of contestability will still be able to provide the benefits of competition. Also, the commission concedes that outright competition may be ineffective, or even regressive, in some areas such as “thin markets in remote and regional areas”, in which case the commission recommends a mixed delivery of services as described earlier.

The commission stresses the need to privatise human services in a smart and efficient manner, and rightly so. A rationale for the role of the government and an analysis of the suitability of various markets are advised in the report. The final report is to be presented to the Australian Government in October 2017.

Source: Productivity Commission 2016, Introducing Competition and Informed User Choice into Human Services: Identifying Sectors for Reform, Preliminary Findings Report, Canberra.