I remember years ago watching a program by Stossel talking about how basically the government sucks at everything. It's always better to have things done in the private sector. Why? Because they care about efficiency, because it affects their profits. A public sector employee doesn't care if he wastes money. That's just more money that the taxpayer covers. It's no skin off his nose. So you lose all that efficiency when you go with public sector workers. I guess I bought that argument. So we need to privatize our schools, are garbage disposal, postal service, whatever else we can, and reap the rewards.
But here's something Stossel didn't mention. For profit companies have to pay owners, usually stock holders. In the case of stock holders, these are not people contributing to the production process. It's kind of like an added weight around your neck. Also unlike the government you usually have a lot of effort towards marketing. Then CEO and upper management salaries tend to be pretty high in the private sector. These are offsetting factors. Maybe these losses exceed the efficiency gains. If so then privatization is a bad idea.
You'd have to look at actual data to evaluate the effects, and as I frequently note at this blog this is not something conservatives often do.
I was reminded of this issue as I watched this YouTube video that addressed the costs associated with Obama Care and how those costs are covered. The poor get subsidized insurance on Obama Care and that's a cost. In the video it is claimed that some of this cost is paid for by modifications to a program called Medicare Advantage. What's Medicare Advantage, you ask?
Back in 2003 the Bush administration was selling the Stossel line that things done by the private sector are just more efficient. So why not have the private sector administer Medicare for those that choose to go that route. If these private companies can meet the needs of their elderly and can do it for less, Bush's Medicare bill says they get to keep the difference. Sounds like a good plan, right?
In the video it's stated as if it's an uncontroversial fact that it just didn't work out that way. It was costing as much as 14 cents on every dollar more to cover seniors under Medicare Advantage than it did under publicly administered Medicare. Why? Those reasons mentioned above. Stockholders want their cut, CEO's are costly, and so is marketing. Congress through the years has simply passed measures to cover these costs. It's basically corporate welfare. They can't compete with Medicare, so we give them an extra 14% and now the stock holders and CEO's get the share that they expect.
Obama Care ends this arrangement. Medicare Advantage will have to meet the low overhead rates Medicare manages to hit, and if they can't then that's tough. The result, according to the video, is a savings of $136 billion over 10 years. Not bad.
I have to admit I'd never heard of Medicare Advantage, so I did some Googling in an attempt to verify this claim. Dean Baker links to this report from the CBO which generally aligns with what is claimed in the YouTube video.
With this information one might think that these results would generalize. What about defense contractors? They also have to pay stock holders and CEO bonuses. What if we replaced them with civil servants and did the same for other government contractors? Could we save some money that way? Yeah, a little. Only $300 billion per year. That's the cost associated with the real parasites taking your tax dollars and keeping it for themselves. Stock holders, CEO's, and marketing staff. If you want to talk about welfare, why not first talk about the largest share of welfare that exists. The part that's going to the rich.