Human services inquiry: how to ensure clients are the winners

By Stephen Easton

Friday June 17, 2016

What kinds of human services would improve with more competition between providers and how can government encourage such markets to develop? And most importantly, what will government need to do to make sure increased choice benefits users of the services?

These are the key questions the Productivity Commission will address through a public inquiry that follows up on some of the Harper competition policy review’s recommendations. It will be handled by a new commissioner, Stephen King, a Monash University economics professor and former member of the Australian Competition and Consumer Commission who joins the PC on July 1.

Social service agencies and regulators might need to change or whole new agencies could emerge, as the role of government as a market steward continues to evolve.

Stephen King
Stephen King

Submissions are open till July 25 ahead of an initial study report, due in October and focused on the more basic questions about the current lay of the land in human services, future trends and any past reforms aimed at enhancing competition anywhere in the world. The full inquiry report will elucidate the more complex matter of how to increase “competition, contestability and user choice” in whichever human service areas are identified as most appropriate.

To inform submissions, the PC released an issues paper yesterday which starts from the Harper recommendation that governments should put user choice “at the heart” of the human services it funds, just as the PC recommended several years ago for the aged care and disability support sectors. More competition, however, does not mean leaving it all to companies and nonprofits:

“The [Harper] Review panel recognised that governments cannot distance themselves from the quality of human services and that they will continue to have an important role as market stewards, including through policy and funding decisions, but also in fostering service models that best meet the needs of individuals and the broader community.”

The discussion paper outlines a wide range of information the commission is seeking about different kinds of services to help it work out how the Harper review’s vision could be practically applied. It defines competition as between either public or private service providers, and contestability as the lowering of barriers to entry. According to the PC:

“In a contestable market, the credible threat of competition can deliver some of, or even many of, the same benefits as effective competition.”

This could involve putting the provision of a particular service out to tender, creating that “credible threat” even when the existing market is too small to support multiple providers.

No blanket model

While the typically free-market focused PC is pretty strong on the potential benefits of competition, contestability and user choice, it also acknowledges “only some” human services would be suited to them. And in some cases, policies to encourage competition could also have the opposite of the desired effect:

“Increasing competition could lead to some service providers contracting or withdrawing from the market, or changing the way they deliver services, leading to a loss of connection for some service users.

“Redesigning the provision of human services can involve adjustment costs for service users, governments and providers, and the costs of complying with new requirements.”

Among the potential costs to be considered are those that would fall to government from changes to its “stewardship” role in human services markets, as they become more competitive. The PC suggests “modifications to the functions of regulators and other government agencies, and possibly the establishment of new bodies” might be required.

The issues paper suggests one example could simply be the introduction or expansion of information campaigns so consumers know about their new options:

“This could include developing uniform standards for measuring service characteristics, legislating mandatory reporting requirements for service providers, and providing comparison services for consumers (such as the myschools and myhospitals websites).”

Markets with more providers would also require more resources for regulators that oversee service quality, and “more intensive” monitoring might be required because price competition could lead to corners being cut in ways that are hard for consumers to see before they make their choice.

General consumer protection laws may need to be amended to make sure people accessing human services are covered, as their “vigilant enforcement” is a necessity if the idea of choice “empowering service recipients and driving outcomes” is to become a reality.

By degrees, from direct decision to no choice at all

The commission also sets out some of the unique and different ways choice can manifest in human services: clients can make direct decisions about what they need and where they will source it, but equally they might make choices via an agent or intermediary, or be denied choice, as in the case of court-ordered drug rehabilitation. Providers or government agencies might also make choices on behalf of users, but taking their “needs and preferances” into account.

The PC wants respondents’ views on the proposition that five generic aspects of human services — quality, equity, efficiency, responsiveness and accountability — can be used to gauge how good they are, and how such factors can be assessed. The issues paper points out:

“It might not be possible to improve all of these attributes at the same rate, or in equal measure, for all service recipients. Reform options that do not, however, generally offer improvements across this range of attributes might well need to be rejected.”

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