Exactly. There is something about government waste that angers us.
I started this thread based on that premise. I couldn’t help but imagine if a government run waste service operated like the collection of 5 companies (using S1 instead of S2). There would be massive waste, inefficiencies, and redundancies. All of that would be a waste of our tax dollars.
But in a free market, providing an undifferentiable product, we have that same (or comparable) level of waste and redundancy. But it exists between the companies, not within them.
Waste is waste. The costs have to come from somewhere.
I think that this level of intracompany waste (a term I just coined) gets neglected or ignored by proponents of free market solutions. They see the savings and innovations offered by competition, but fail to see the cost of overlap.
If the private sector is cheaper than the government service then it is more efficient. The idea of government “forcing” efficiency is a fantasy shared by all and experienced by none.
I think the most common answer to that is that there is nothing that limits government waste while competition will tend to minimize waste. Now that doesn’t mean that government can’t do things better than the private sector if your goals are not the natural results of a free market.
For example a free market does not educate all children, it doesn’t even educate all smart children. It will tend to educate all rich children. So if you think educating all children to some minimum level is important, you will not be able to rely on the free market and the government will have to step in, they don’t actually have to run the schools but they do have to collect taxes and fund the schools and then you can have all sorts of policy debate and make all sorts of value judgments how that funding works.
Similarly the free market will not provide health care to all Americans, and the current state of the private sector is even worse because the overhead associated with underwriting, claims adjustment and executive compensation accounts for 30 cents of every health care dollar that runs through health insurance companies while government health care (medicare, medicaid, and VA) only consumes about 2% of all claims it processes. We don’t have to run all the hospitals but we do have to tax and fund the system, you can have policy debates and make value judgments about how that funding will work.
Not exactly the same thing but most airline traffic falls into this pattern.
Markets tend to strive for efficeincy without government encouragement. It when the market cuts corners to achieve that efficiency that the government usually has to step in. One area where government involvement can CREATE efficiency is in health care where we can replace health insurance companies that have 30% overhead.
Yes, there are ways government can intervene in things like health care. Bulk purchase of drugs is one of them. The purchase of drug patents is another. Then you have to add back in the bureaucracy. Unfortunately, there are no comparative models between private and universal health care because governments ration it down to an apples and oranges comparison.
Right. With a lot of the previous discussions about private vs public, the apples vs oranges part bogs down the real comparison.
Which is why trash removal provides such a fascinating data point, it’s either picked up or it isn’t. I find it hard to say one company picks up trash better/worse than another as long as it gets picked up. Since the service provided is undifferentiated there isn’t much for comparison other than costs.
There isn’t much point opening it up to private industry, since market forces will create the redundancies we see here, we’re no better off. Trash removal is one of those services we all need, sure you could nitpick the hell out of that point, but why? We’re all producing trash, it has to go somewhere.
From here we can start to re-examine social services. As I mentioned a few posts ago, having 5 companies offering public transit would be a mess. 5 buses all serving the same profitable street at the same profitable time, no buses serving the unprofitable ones. A case could be made that society is worse off for it, since we’ve got 5 times the buses bogging down traffic.
We’ve also looked at power, water, sewage, and natural gas. Why should any of those be different?
I don’t know enough about cellular service in the US to really comment, but it’s one thing to have 5 companies offering phones and accessories, but then we look at the real service provided to see it’s hard to differentiate. We have a minimum acceptable standard when it comes to service, “did my call go through yes/no.”
And then gas stations, we have a standard for what is sold as gas, other than that companies compete based on the size of the softdrinks offered. So private means gas stations are where they’re profitable, but not where they are needed.
So can we work our way up from this towards health care? Is there a minimum acceptable standard, a commodity level of service in the health care industry?
Obviously when it comes to plastic surgery there is significant variation in the service provided. But what about other medical services. An appendectomy has become pretty routine, now defined as, “did they get it out yes/no.”
Could we establish a public/private system where government provides the commodity level services (those needed by everyone, perhaps family medicine and ERs) and allow private industry to compete where there is variation (services people will choose to pay for like chiropractic)?
The study of Medicare efficiency vs private insurance is not complete until you look at the amount of fraud that takes place under Medicare. Most of the 30% of overhead in the insurance industry is ultimately about the prevention of fraud.
What you’re proposing is a planned economy. It doesn’t work. We have a history of it in the United States that shows how quickly it falls apart as you increase the size of the group. It’s not the efficiency of labor that kills the attempt but rather the absence of reward for the people doing all the work. As we speak, we have a state where the doctors are threatening to pull out of Medicaid because of the low payment received by the government. That’s a whole thread by itself.
We lean toward limiting government utilities to services requiring a physical right-of-way. It’s grossly impractical to have multiple sewer systems running down a street. The same goes for phone lines, utility poles, water lines and roads. All that has to travel through public and private land. It’s chaos to have a road torn up for 1 utility line.
Efficiency is not the goal in these situations. It’s practicality. We depend on public utility commissions to keep private charter prices in line. As we can see in California, that doesn’t always work when politicians stick their nose in it. When utilities are purely a government venture we don’t even have the benefit of a utility commission to ride shotgun over prices. It is VERY common in my state for public employees to double dip their salaries (retire and get rehired for double the pay). This maintains the highest wage rates instead of the efficiency of a revolving work force where salaries start lower and build higher. It also screws the employment workforce.
Can a government efficiently run a service directly? It’s technically possible civil service jobs and unions drag the likelihood of that down. Better it is done at the very least by private charter utility and regulated by politically insulated PUC’s.
Right, there is no question a 100% planned economy fails 100% of the time. What I’ve started to notice is that a 0% planned economy also fails 100% of the time.
I mentioned mail delivery in my contrast with garbage collection. In terms of improving efficiency, USPS requires all the mail boxes to be on one side of the street. Imagine the improvement for garbage collection if the individual 5 companies could make demands like that. Instead of two trips for each street, they could make one.
Some planning can make dramatic improvements–be it lowering costs, or increasing practicality. But the free market (individual companies) can’t take advantage of that planning.
Not quite 100 billion. If you believe this 60 Minutes special report, it’s about 60 billion per year. But that puts the overhead of medicare right in the ballpark with private insurance. The only difference is that the government can absorb the fraud and then either borrow money to pay for it or charge it to the taxpayer. Insurance companies can’t do that, so they have to spend more money up front to prevent it.
Well lets compare apples to apples then. Lets take overhead costs PLUS fraud costs. How much insurance fraud is there in the private insurance market using the same metric used to come up with that 60 billion number?
I will add that a little bit of enforcement goes a long way. Obama has put some money into it and it has yielded hundreds fo dollars in savings for every dollar spent.
Much of the overhead for insurance companies falls into three categories. Underwriting (weeding out sick people), claims adjustment (not paying claims and kicking out sick people, and executive compensation. Medicare simply won’t have underwriting costs, they should probably spend more money on claims adjustment and the executive compensation for medicare is ridiculously low compared to insurance companies. I think the entire medicare payroll is smaller than the payroll at just one insurance company.