Rethinking the Welfare State: The prospects for ... - e-Library

Legal aid 87
agent? The problem of supplier-induced demand in professional services
arises precisely because of the difficulty of answering these questions. 50
Bevan considers that the operative issue (one which Matthews, in using a less
sophisticated and more colloquial definition of supplier-induced demand, overlooks) is
information asymmetry. Supplier-induced demand is only possible when the client lacks
sufficient information to properly identify the value and costs of different aspects of legal
services. Therefore, as Bevan points out, supplier-induced demand actually “occurs when
the agent supplies more services than [the] principal would pay for if the principal had
the agent’s knowledge.” 51
The impact of supplier-induced demand in a context in which impartial and detailed
information about the value of legal services is not widely available is considerable.
According to Blankenberg, for instance, “the relatively high expenditures of the Legal
Aid Board [in Great Britain] have more than doubled since 1990” due in no small part to
“British solicitors’ ability to draw a considerable income from the scheme.” 52 Research
conducted in England and Wales by Gray et al. found a high degree of “professional
autonomy” in the market for legal services; namely, the tendency on the part of solicitors
“to manipulate the volume of […] cases (especially civil ones), and to choose the level of
input, independently from [sic] the preferences of either their clients or the Legal Aid
Board, in its capacity as a third party reimburser.” 53 The authors conclude that “the
prevailing methods of remunerating legal work [namely, judicare certificates] did provide
solicitors with incentives and opportunities to protect their incomes, notably when their
residential conveyancing income fell sharply during the late 1980s.” 54 It is important to
note that the incidence of supplier-induced demand can be manipulated to some degree
by the payment structure that is utilized. For example, in a system in which lawyers are
remunerated solely on an hourly basis, there will be a significant incentive to engage in
behaviours that create supplier-induced demand. The use of fixed fees will mitigate the
tendency to engage in such behaviours by ensuring that there is, “no financial incentive to
work additional hours” 55 than are required by the case. However, fixed fees “do not
remove the incentive to get new clients into the legal aid system.” 56 The most promising
method of payment for reducing the incidence of supplier-induced demand is an hourly
rate that is capped at a particular number of hours, depending on the type of case,
although there will then be incentives to truncate service once the limit or cap has been
reached.
Gray et al. consider that the problem of professional autonomy is intractable enough
that simply changing delivery mechanisms may not resolve it.
[Professional autonomy] is not, by its nature, going to disappear with a
change in the payment mechanism […] If subsidized services are paid for
prospectively, there will still be an incentive for professionals to look to a
combination of public and private work in order to maximize profits. This
may lead them to find ways of minimizing effort on public work in order
to maximize income from private work. 57
Consequently, in jurisdictions where judicare programs are otherwise preferable to the
alternatives, the problem of professional autonomy is not reason enough to change the