Monday, March 27, 2017

Public Sector vs. Private Sector Efficiency and Jared Kushner's "SWAT team"

Among the many reasonable-sounding propositions that both the modern left and modern right subscribe to, by and large, is the premise that the private sector is more efficient (and features less "bureaucracy") than the public sector.  A friend of mine who is, generally speaking, anti-Trump nonetheless expressed positive hopes that First Son-in-law Jared Kushner's new "SWAT team" would take on needless government bureaucracy - that of course business people would do a good job streamlining government bureaucracy, which is, by its very nature, bloated.  Right?

Allow me to rain on that particular parade.

Beyond "common wisdom" and assorted anecdotes, there isn't an overwhelming body of evidence that the private sector is more "efficient" than the government in general.

First of all, it's well-known that both Medicare and Veterans Administration (VA) are much more cost-efficient than their private sector counterparts, offering comparable or at times superior care for lower cost.

The VA has already been subjected to private sector "improvements" with telling results (emphases added mine):

On top of that, Trump’s preferred option of giving veterans the choice of VA or private care has already been implemented, with interesting lessons. After the backlog scandal, Congress passed a reform bill co-authored by Bernie Sanders, and as part of it, a pilot program gave veterans a Choice Card to use at private facilities if their local VA hospital is more than 40 miles away, or if the wait time is over 30 days. This theoretically ensures that no veteran has to wait for or be inconvenienced by seeking medical care. (Fiscal Times)

Sounds good so far!
The rollout has been shaky, mainly because the 90-day deadline Congress demanded for setting up the system meant that the VA had to turn to private contractors with a history of botching health care management. This has led to a secondary waitlist for those seeking difficult-to-access private care, along with numerous billing errors and questions of eligibility. There was also no setup for integrating care between VA and non-VA providers, which meant veterans skipping between the two could get duplicative or substandard care. While some have predictably used this to label the VA as incompetent, it says more about the hurdles to delivering a public/private hybrid.

Republicans have responded by advocating for a permanent Choice Card, allowing veterans to go to anywhere they want (oddly, they haven’t offered the same kind of single-payer card for the nation’s other 300 million-odd citizens to present at any medical facility). That mirrors the Trump plan of a “public/private option.” But that would further strain a hobbled scheme private contractors couldn’t figure out for a much smaller universe of patients. It would also double the costs of the current VA. (Fiscal Times)


The Project on Government Oversight (POGO) addressed the use of government contractors in a study released in 2013.  The findings are not good for "private sector efficiency" (emphases not mine):
  • Specifically, the federal government approves service contract billing rates—deemed fair and reasonable—that pay contractors 1.83 times more than the government pays federal employees in total compensation (including benefits), and more than 2 times the total compensation paid in the private sector for comparable services.
  • Federal employees were less expensive than contractors in 33 of the 35 occupational classifications POGO reviewed;
  • In one instance, contractor billing rates were nearly 5 times more than the full compensation paid to federal employees performing comparable services; and 
  • Private sector compensation was lower than contractor billing rates in all 35 occupational classifications we reviewed. (POGO)
Those are just some highlights.  The POGO study is not for the short of attention span and is quite dry, but it's worth your time.

I guess you could make the argument that there's so much private contractor graft because the government which hires these contractors simply doesn't pay attention:

If the government is serious about reining in federal spending, three simple questions about federal and contractor employees must be asked: (1) Who is performing services?; (2) What are they doing?; and (3) How much do they cost?

Still, the thinking that leads to the hiring of private contractors in the first place is "the private sector is more efficient / has less bureaucracy, duh".  In fact, it appears that when private contractors are employed, the opposite is true.

The United Nations Development Programme (you know - one world government filthy commies) has a good study out that alleges that the private sector might just not be more efficient than the public sector period - or, more accurately, that no one can prove this is the case, and that we should all, hence slow our roll.

The study is a bit TL;DR for most but contains a lot of interesting conclusions.  Consider this, for instance (emphases added mine):

One study compared the efficiency of state-owned enterprises with private enterprises in Spain, before and after privatisation (Arocena & Oliveros, 2012). The study found that prior to privatisation there were no significant differences in effciency between state-owned enterprises and their private counterparts. After privatisation the effciency of newly privatised firms significantly increased, while the original (private) competitors showed no significant improvement during the same period. The study also notes that the state-owned enterprises that had higher efficiency levels before privatisation were the same enterprises showing higher increase of efficiency after privatisation. (UNDP Study)
Don't get me wrong - I'm not necessarily hostile to the premise that the private sector is "innately" more efficient than the private sector.  I've worked for both the public and private sectors in the past six years, at two different organizations.  I could give you anecdotes both ways as to which organization is more "efficient" on the whole. It is much easier to book travel here at my private sector job; I had much faster and more reliable copy machines at my public sector job.  There are motivated and lazy people in support positions found in both organizations in roughly equal numbers, percentage-wise.  The high-end folks at my private sector job have a little more zip and energy, which makes sense, because they own equity in the firm - a situation you can't really duplicate among true civil servants.

I'm just not privy to much non-anecdotal hard evidence that the private sector is, on the whole, more efficient than government "bureaucracy".  I was certainly raised to think this is the case, as I suspect most Americans were.  But could this simply be myth, dating from the time of the Cold War?  Something we've internalized so completely that we accept it as fact?  Because the Soviet system was such a disaster, it follows logically that bureaucracy is always bad and should always be cut back, right?

Let me conclude (for now): I am certainly not telling you that the government is always more efficient than the private sector.  I am simply doing my best to disabuse you of the opposite theory.  The private sector has brought us the smartphone and the driverless car and that sort of thing.  And that's grand!  It's also given us this and this and this and of course this.

So let's be cautious of Kushner's little "SWAT team", and any glib claim that of course the private sector is more efficient than the public sector, duh!  The "duh" may be on us.

No comments:

Post a Comment