Private firms backed for welfare

The Productivity Commission has rejected calls for private, for-profit companies to be barred from providing government-subsidised welfare services in its Reforms to Human Services Inquiry report.

In the 500-page report released this week, the commission recommended the Federal Government facilitate greater choice for Australians accessing Department of Human Services resources.

However, the commission said it “held a different view” to those who made submissions stating “that for-profit providers should be excluded from delivering human services arguing, among other things, that providers incentivised by profit are not suited to offer high-quality services to vulnerable people”.

In the report, it responded: “Human services are currently provided by a mix of government, not-for-profit and for-profit organisations. Experience shows that no one type of provider has a monopoly over good service provision and each has had successes and failures.”

It did, though, add that governments should focus on the capabilities and attributes of service providers when designing service arrangements and selecting providers – not simply the form of an organisation.

Also rejected by the commission was Anglicare Australia’s views that increasing competition in the delivery of human services was not a driver of efficiency.

The not-for-profit organisation had argued against a number of assumptions, including that “the innovation that comes with competition between providers is of benefit to service users; or that it is appropriate to equate individual consumer choice with agency and wellbeing”.

“The commission does not agree,” the report said. But it did concede that problems could emerge if “competition and contestability are poorly implemented and governments need to learn from the lessons of the past.”

Among the issues raised by those concerned about competition was that it damaged collaboration between providers, created funding uncertainty and forced providers to focus on writing tender applications at the expense of their core business.

However, the commission said it supported increased competition, not less, in part because it enabled service users to have more provider choice.

“This inquiry is about finding ways to put the people who use human services at the heart of service provision,” the commission said. “This matters because everyone will use human services in their lifetime and change is needed to enable people to have a stronger voice in shaping the services they receive, and who provides them.”

The report was first presented to the Government in October and it is still awaiting a formal response.

Broadly, it covered the areas of end-of-life care services; social housing; family and community services; services in remote Indigenous communities; patient choice over referred health services; and public dental services.

On the topic of palliative care, it said that more emphasis should be given to allowing people nearing the end of their lives to be accommodated in a way that more closely reflects their preferences.

It added that an expansion of community palliative care and improvements to the standards of residential aged care would be a step towards creating a better environment for those who are terminally ill.

Medical patients should be given more choice over who their health care provider is in order to feel as though they were being treated more in accordance with their preferences.

“A simple legislative change would help … public information is needed to support choice and encourage self-improvement by providers.”

The commission highlighted public dental care as an area that in particular needed to promote more patient choice. It said most services were focused on urgent needs and not enough was being done to promote preventative dental care.

The commission also said that “social housing was broken”. It recommended that financial assistance and tenancy support services should be “portable” across the private and social rental market.

Opinion: Too much choice could ruin welfare service delivery

Increasing consumer choice is a noble sentiment, except when there are too many options and it becomes overwhelming, increasing the risk that a bad choice will be made.

The Productivity Commission’s Reforms to Human Services Inquiry report clearly champions giving recipients of welfare and health resources a bigger say in how and from whom they receive services.

But is this any guarantee that hand-picked services will be any better than what is already on offer? If increasing competition for delivery of government-subsidised services is the end game and private companies that survive on profit are increasingly lured into the services sector, then we all know what will happen … quality of service will decline as costs are cut and bigger margins are delivered to the bottom line, to then be divvied up among stakeholders.

Anglicare, and other organisations who submitted their views on the issue, are right to sound a warning bell about the lack of evidence that increasing competition in the human services delivery sector will improve outcomes for recipients.

A system that regularly puts delivery of human services out to tender will inevitably benefit large companies with the resources to ‘fight’ in a cut-and-thrust competition. Smaller, not-for-profit groups do not have the same resources.

As opponents to extra competition wrote, it will wreck collaboration between providers, create funding uncertainty and force providers to focus on writing tender applications at the expense of their core business.

Consumer Action Law Centre (CALC) echoed those concerns in its own submission.

Yesterday, CALC chief executive Gerard Brody told YourLifeChoices there were other instances where the Federal Government had opened up a services sector to external competition with catastrophic consequences.

“This is what happened in the vocational training industry several years back. A whole lot of shonks got into it and lured unsuspecting students to take out huge VET loans and then failed to deliver adequate training,” Mr Brody said.

“Many students didn’t even realise they were incurring large debts thanks to the unscrupulous practice by some training organisations.

“We hope the commission’s report won’t be seen as a green light to bring contestability to more human services without adequate consumer protection in place first.”

Mr Brody said he was encouraged by the report’s call for governments to provide good stewardship over any expansion of service delivery and he hoped that lawmakers would heed that recommendation.

But back to the issue of choice. Often the people who need to avail themselves of subsidised services are not those best placed to distinguish between a plethora of options because they are either sick or frail, or disadvantaged in some other way.

Why, even those of us who have no impediments to sound judgement struggle with making decisions when confronted by too much choice.

This point was well-documented by The Australia Institute (TAI) a while back in a paper called Choice Overload, where it reported than consumers presented with too many options made for substandard decisions. 

Author Josh Fear wrote: “As the extent of choice grows in many facets of modern life – and particularly in the market place – it can become increasingly difficult for people to properly assess each option. Abundant choice creates what psychologist Barry Schwartz calls ‘a seemingly intractable information problem’, in which the ‘cost of thinking’ is simply too high.”

The thinking goes that rather than tackle a difficult selection, consumers disengage and switch to wanting to have the whole process done and dusted.

“Clearly, choice is not the uniformly positive attribute advocated by economic theory and celebrated in popular culture. Instead, choice can be good, bad or neither, depending on the context,” Mr Fear wrote.

One hopes governments do not push the delivery of human services towards that cliff.

Do you think more human services should be option to extra competition among providers? Is it fair for governments to pay wealthy companies to deliver services, while pocketing profits?

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Written by Olga Galacho

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