In medicine, the primary rule that is the Hippocratic Oath is “First Do No Harm”. The new healthcare public sector initiative that Congress is proposing violates openly this standard.
As the health care reform debate rages in Congress, the establishment of a new publicly funded medical insurance provider now seems to be on center stage. With their monopoly on power in Washington, the Democrats are fully intent on creating yet another new government agency to handle this function. This is hardly shocking; the Democrats have always represented growth in government.
But what is interesting and new is the argument being used that the creation of such entity will keep the private sector competitive and on its toes. This novel idea represents a first. Where, one is tempted to ask, has the public sector ever provided honest competition to the private sector?
The fact of the matter is that it is always the other way around. Governments around the world are trying to privatize state owned entities to make them more competitive and self sustaining. Proponents of privatization have always pointed out that state owned enterprises are usually slow, inefficient and consistently devoid of innovation. Not even the opponents of privatization have ever claimed that state owned enterprises are more efficient and competitive.
One is hard pressed to think of a single instance where a government enterprise has out performed the private sector. Certainly this was not the case with Fannie Mae and Freddie Mac, Amtrak, TVA, the Export-Import Bank, etc.
The public sector has rarely, if ever…
…successfully competed with the private sector. Recognizing this, governments are thus forced to provide state owned enterprises with monopoly powers, as for example, with NH’s state liquor sales. Another prop that is given to state owned entities is the subsidy that comes through the lower cost of capital that governments often enjoy. Moreover, they often use the argument that since they “don’t have to make a profit” they are cheaper service than the private sector. In point of fact, that profit is usually a measure of the value added that any enterprise offers society.
These artificial props and subsidies are the reason that in those countries where there is a very large public sector, the private sector never gets a foothold. They are consistently crowded out at the cost of long term development and growth.
On the whole, governments are usually quite bad at providing goods and services. This is not government’s strength and wherever this has been tried, the government’s efforts are usually second rate. The much better role of government is to provide the proper “enabling environment” (security, the rule of law, a level playing field, proper regulation, etc.) and let the private sector play to its strength – the provision of societal goods and services.
The much better way to approach this problem is to return to an idea that America invented: public-private-partnership. Where government wants to encourage the provision of a societal good or service, it should contract the private sector to provide it. With the appropriate incentives to promote competition and with the appropriate checks and balances, this can be readily accomplished – as we have in the electric power industry.
There is no doubt that health care reform is much needed in America. Our present system is a mess with all the wrong incentives. As a result, Americans pay almost twice as much as many industrialized countries, while the quality of our health care is ranked in the mid-twenties. But delegating this task to the public sector is not the right answer.
World history has proven this point over and over again. Let’s not repeat the mistakes of the past in something this important.