Towards a better measure of non market output

1. Towards a better measure ofnon market output The OECD non market project Report of the joint OECD/UK/Norway workshop (London, October, 3-5, 2006) 10th NBS-OECD workshop on national accounts Session 7 - Alain GALLAIS

2. 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 2006 -> 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. Next workshop in Paris, 7-8 June 2007. • Possibility of a « transatlantic gap » : the US and Canada still apply input measures. Impact of 0.25% of GDP growth/year ? 10th NBS-OECD workshop on national accounts Session 7 - Alain GALLAIS

3. The context : SNA 93 • 16.134. «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. » • 16.138. «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.  » 10th NBS-OECD workshop on national accounts Session 7 - Alain GALLAIS

4. The context : the European handbook pupil-hours or number of pupils • 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 ». 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 10th NBS-OECD workshop on national accounts Session 7 - Alain GALLAIS

5. 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 10th NBS-OECD workshop on national accounts Session 7 - Alain GALLAIS

6. 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. Model of class size. NA can only be one-dimensional The London workshop : scares and hopes about output methods 10th NBS-OECD workshop on national accounts Session 7 - Alain GALLAIS

7. The London workshop : education for PPP Proposal of an output deduced from outcome indicators. 10th NBS-OECD workshop on national accounts Session 7 - Alain GALLAIS

8. Education : draft framework for PPP (M + NM) 10th NBS-OECD workshop on national accounts Session 7 - Alain GALLAIS

9. Proposals (complaints) of DHfor 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 = Quality-Adjusted Life years) instead of cost weights. • Use of mortality rates and waiting times. • Use of « value weight » for statins : prevention better than curative care. • Patient experience. • Nothing in British NA yet. DRGs not fully convenient. 10th NBS-OECD workshop on national accounts Session 7 - Alain GALLAIS

10. New : Paris Health accounts meeting,6th of October, 2006 • « Cost of illness » has been compared among a dozen of European countries, and Eurostat finds the results homogeneous and plausible. Diseases 1st, providers 2nd. • « 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 alternative framework (no methodology yet). • But few data on QALY (main idea for quality adjustment). 10th NBS-OECD workshop on national accounts Session 7 - Alain GALLAIS

11. 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) • Definitions, principles, terminology • Review of (best) stratification and quantity indicators • Review of best quality indicators • Verification of consistency between market and non-market methods • Temporal formulas • Spatial framework and formulas • Suggestions for further developments For September 2007 10th NBS-OECD workshop on national accounts Session 7 - Alain GALLAIS