A Global Perspective of Public Policy The Economic Development Upsides of Policy Modernization

1

• A Global Perspective of Public Policy The
  Economic Development Upsides of Policy
  Modernization

PRESENTATION TO BRIE Conference Regina June
8, 2007
By Peter Holle
FRONTIER CENTRE FOR PUBLIC POLICY
2
TODAYS DISCUSSION

• The future is high performance policy
• Healthcare and education frontiers
• Technology impacts on public policy

3
PUBLIC SECTOR AS WE KNOW IT IS WANING

• DECLINING INFLUENCE OF POLITICIANS IN WORLD OF
  OPEN BORDERS, NEW TECHNOLOGY.
• 1996 IMF STUDY SUGGESTS THAT OPTIMUM SIZE OF
  GOVERNMENT IS 30 OF GDP.

• THE KREMLINS FORMER TOP ADVISOR ANDREI
  ILLARIONOV SUGGESTS 13 OF GDP.
• PUBLIC SECTOR CONSUMES 40 OF ECONOMY IN CANADA
  (vs 32 IN UNITED STATES)

• SUBSTANTIAL ROOM FOR RE-ENGINEERING GOVERNMENT
  WITHOUT DECLINE IN LIVING STANDARDS

4
THREE PRINCIPLES OF HIGH PERFORMANCE PUBLIC
POLICY

• TRANSPARENCY
• NEUTRALITY
• SEPARATION

5
TRANSPARENCY

• MEASURE OUTPUTS AND INPUTS
• OBJECTIVE FRAMEWORK FOR COMPARING DELIVERY
  METHODS
• CREATE BASIS FOR REWARDING EFFECTIVE USE OF
  RESOURCES
• TOOLS
• ACCRUAL ACCOUNTING
• ACTIVITY BASED COSTING

6
NEUTRALITY

• USE LEAST COST/BEST QUALITY METHODS
• BUY SERVICE FROM INTERNAL OR EXTERNAL SUPPLIER
• OBJECTIVE CHOICE OF BEST PROVIDER
• LEVEL THE PLAYING FIELD WITH FULL COSTING
• CAPITAL CHARGES
• PUBLIC OPERATORS PAYS TAXES (CANADA EXEMPTS
  PUBLIC SECTOR FROM GST)

7
CREATING SEPARATION

• 1) POLITICAL SEPARATION
• GOOD CORPORATE GOVERNANCE
• POLITICIANS SET POLICY OUTCOMES/CEO DELIVERS
  OUTCOMES
• REMOVE ELECTED OFFICIALS FROM OPERATIONS AND
  ADMINISTRATION
• 2) ADMINISTRATIVE SEPARATION
• INTERNAL FIREWALL (LEVEL PLAYING FIELD)
• SEPARATE UNIT RESPONSIBLE FOR BUYING FROM
  INTERNAL PROVIDER PURCHASER-PROVIDER SPLIT

8
NEW ZEALAND PUBLIC SECTOR REFORMS
PERFORMANCE-BASED GOVERNMENT

• FOCUS ON RESULTS (OUTPUTS) NOT SPENDING MONEY
  (INPUTS)
• LEGISLATED COMPETITION (PURCHASER-PROVIDER SPLIT)
• PERFORMANCE CONTRACTS/OPEN STAFFING
• GAAP/PRIVATE SECTOR ACCOUNTING ALLOWS MEASUREMENT
• DEPARTMENTS PAY TAXES AND COST OF CAPITAL MANAGE
  AND CONTROL ASSETS (NO HIDDEN SUBSIDIES TO
  INTERNAL PROVIDERS)
• MAJOR SAVINGS WITHOUT SERVICE REDUCTIONS

9

• FROM LOW TO HIGH
• PERFORMANCE GOVERNMENT

• HIGH PERFORMANCE
• A CORE OF SMALLER POLICY MINISTRIES, WITH
  OPERATIONS AND SERVICES PROVIDED AT ARM'S LENGTH
  FROM DAY TO DAY POLITICAL OVERVIEW
• PURCHASE OF SUPPORT SERVICES FROM PUBLIC AND
  PRIVATE SUPPLIERS ON A COMPETITIVE BASIS

• LOW PERFORMANCE
• CLASSIC PUBLIC BUREAUCRACIES REPORTING TO CABINET
  MINISTERS WITH POLICY AND OPERATIONS COMBINED
• PROVISION OF SUPPORT SERVICES BY CENTRAL AGENCIES
  WITHIN THE GOVERNMENT SYSTEM

10

• THE INDIANAPOLIS EXPERIENCE
• WITH MANAGED COMPETITION

• HUNDREDS OF MILLIONS IN EFFICIENCY SAVINGS
  RE-INVESTED IN INFRASTRUCTURE UPGRADES
• 100 SERVICES OPENED TO COMPETITION - ABOUT HALF
  CONTRACTED OUT
• PUBLIC EMPLOYEES CAN COMPETE
• FOCUS ON CUTTING OVERHEADS CUTTING MANAGEMENT
• (ABC) Activity-based Costing

COMPETITION SAVES MONEY
11

• CREATING HIGH PERFORMANCE GOVERNMENT
• BEST PRACTICES

• NEW ZEALAND PERFORMANCE FRAMEWORK
• ACCRUAL ACCOUNTING
• COMPETITIVE VS MONOPOLY DELIVERY
• ELECTED OFFICIALS SEPARATED FROM SERVICE DELIVERY
• PHOENIX MODEL (INDIANAPOLIS)
• IN-HOUSE PERSONNEL COMPETE
• ACTIVITY BASED COSTING
• SEPARATE ELECTED OFFICIALS FROM OPERATIONS

12

• GOVERNMENTS CHALLENGE
• MAKING THE TRANSITION

• HIGH PERFORMANCE MODEL
• RESULTS (OUTPUT) ORIENTED
• COMPETITIVE DELIVERY
• CUSTOMER FOCUSED
• RESULTS ORIENTED
• VALUE FOR MONEY
• SPEND SMARTER TO GET MORE
• SOPHISTICATED COSTING
• BUY (EXTERNAL PURCHASE)
• CORE BUSINESS IS NARROW
• STEER

• LOW PERFORMANCE MODEL
• SPENDING (INPUT) ORIENTED
• COST PLUS MONOPOLY
• PROVIDER FOCUSED
• PROCESS ORIENTED
• SPEND IT OR LOSE IT
• SPEND MORE TO GET MORE
• NO COST INFORMATION
• MAKE (INTERNAL PROVISION)
• CORE BUSINESS IS WIDE
• ROW

13
Public Sector Performance Reforms are Development
Drivers

• Public sector becomes results-driven
• Education as export industry
• Healthcare technology and exports
• High speed internet leveling economic and
  service opportunities

14
Canada A World Class Education

• OECD Program for International Student Assessment
  2000 ranked Canadian 15-year-old students among
  the top 6 of 32 countries in reading, science,
  and mathematics.
• In reading, second only to Finland
• 6th in mathematics and 5th in science
• Canada among a few countries that scored near
  the top in all three subjects

15
EDUCATION AS EXPORT SECTORLow Tuition Fees

• All schools, whether public or private, charge
  tuition fees to international students
• International students enrolled in public schools
  pay 10,000 per year.
• This is one of the lowest rates in the country,
  in keeping with lower cost of living.
• Prairies - the best location in Canada in terms
  of education value for money.

16
Average Costs for International Students by
Receiving Country, 1998-1999
17

• 21ST CENTURY EDUCATION SYSTEM SIMPLIFIED,
  RESPONSIVE, MORE CHOICE

• TO BECOME MAJOR PLAYER IN INTERNATIONAL SCHOOLING
• UPGRADE QUALITY/PERFORMANCE
• MEASURE RESULTS THROUGH STANDARDS TESTING
• SITE BASED MANAGEMENT
• MASTER TEACHERS, SKILLS BASED COMPENSATION
• ADOPT EUROPEAN FUNDING MODELS
• FUNDING FOLLOWS STUDENT
• END SCHOOL BOARDS
• REPLACE PROPERTY TAX FUNDING

DUTCH MODEL DANISH MODEL SWEDISH MODEL
18
HEALTH POLICY LANDSCAPE
19
(No Transcript)
20
KIRBY REPORTStructural Reform in Single Payer
Healthcare Model

• Not focused on resource reform like Romanow
  Report
• Advocates the creation of internal markets
• End Global Budgets
• Revamp the way hospitals are funded, breaking out
  the costs of different services in order that
  competing providers might bid for government
  contracts
• Public funding in a system of competing public
  and private providers purchaser/provider split
• Better information systems to measure outcomes
  and costs
• Use of the Internet to empower consumers

21
SWEDEN PURCHASER/PROVIDER SPLIT IN HEALTHCARE

• PUBLIC FINANCE/COMPETITIVE PRODUCTION
• GOVERNMENT BUYS SERVICES FROM COMPETING SUPPLIERS
  (PUBLIC PRIVATE)
• CONSUMER FOCUS WAITING LIST TIMES AND QUALITY
  INFO ON INTERNET
• 73 REDUCTION IN WAITING LISTS
• HIGHER SALARIES FOR HEALTHCARE PROVIDERS (26
  higher nurse salaries)
• UNIONS SUPPORT/PROMOTE COMPETITIVE MODEL

Frontier Centre Advisor Johan Hjertqvist involved
in Stockholm reforms
22
SWEDISH ELECTIONSModerates Replace Social
Democrats, September 17, 2006

• Remaining hospitals set up as businesses
• Reforms to move outside of Stockholm
• New entrepreneurs profit sharing private
  clinics.
• Better information

23
END OF MEDICINE

• Medical Imaging Technology meets Moores Law
• Computer power doubling every 18 months
• Medical imaging resolution scaling Silicon Valley
  style
• 39 MRI?
• Transform medicine from chronic care to early
  detection and cures.
• Telemedicine
• Medical Tourism Healthcare Guarantee
  Europe/Canada?
• Disruption of Medical Marketplace will overwhelm
  politicians
• Government to vacate production in favour of
  funding via MSAs?

24
Moores Law overwhelms the Hospital Industrial
Complex?
25
Moores Law Computing Power Doubles Every 18
months
26
(No Transcript)
27
MEDICAL SAVINGS ACCOUNTS

• Singapore, China, South Africa and more
• Money remains with individual who purchases
  insurance and services in the competitive
  marketplace.
• Providers free to innovate and serve customer
• Savings accrue to individual and become part of
  family estate
• Special fund to cover low income or chronic
  patients

28
TECHNOLOGY EMPOWERING RURAL CANADA

• Rural high speed wireless internet is leveling
  the playing field outside urban areas
• Lone Eagles information professionals working
  remotely, teleworkers
• Downshifting Cashing out of high priced city
  housing
• Quality of life, no commutes, less stress, low
  crime, lower cost of living.

29
RURAL RENAISSANCE HUGE OPPORTUNITY FOR
SASKATCHEWAN

• For the first time in history, rural regions have
  as much information as cities.
• The cost of storing one megabit of information,
  or enough for a 320 page book, fell from more
  than 5000 in 1975 to fraction of a cent today.
• Peter Drucker
• In the new mental geography created by the
  railroad, humanity mastered distance. In the
  mental geography of e commerce, distance has been
  eliminated. There is only one economy and only
  one market Atlantic Monthly, 1999

30
IMPLICATIONS FOR ECONOMIC DEVELOPMENT STRATEGY

• Stop chasing smokestacks, target knowledge
  workers
• Importance of Environmental Quality
• Quality of life
• Regions and landscapes with river valleys, lakes,
  wetlands, wildlife areas and forests prime
  habitat for lone eagles
• Expand cottage development
• High Speed Rural Internet is Absolutely Critical
• Demand driven rural areas with higher
  populations market development
• Supply driven some assistance for establishing
  infrastructure

31
WI-MAX AND HIGH SPEED WIRELESS INTERNET WILL
CLOSE LAST GAP

• Dealing with the proverbial last mile
• Alternative to DSL and cable
• High speed wireless wi-fi with up to 30 mile
  range
• 2007 targeted for introduction

32
THE FUTURE PUBLIC SECTORDynamic and innovative

• GOVERNMENTS CORE BUSINESS WILL NARROW
• SET POLICY AND REGULATE
• CLARIFY ROLES POLITICIANS VS MANAGERS
• FOCUS ON RESULTS AND PERFORMANCE
• PURCHASER NOT PRODUCER OF SERVICES
• FUND SERVICE CONSUMERS NOT SERVICE PRODUCERS
• MEASUREMENT OF RESULTS/ INCENTIVES FOR RESULTS
• COMPETITION VS MONOPOLY (VS PUBLIC VS PRIVATE)
• NEW MARKETS
• NEW PROVIDERS
• TECHNOLOGY REVOLUTION
• HIGH SPEED INTERNET
• 24/7 ONLINE SERVICE
• TELEMEDICINE, LONG DISTANCE LEARNING MUCH MORE

33
www.fcpp.org