The Case FOR Bureaucracy

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Why do Americans spend so much on health care but not get superior care? There are several reasons. One is that doctors tend to make more in the U.S. than in other countries, and another is that governments in other countries negotiate better deals with pharmaceutical companies on drug prices. But the other major reason is that our private, multi-payer system is much less efficient than the public single-payer systems in other countries. Consider this: the New England Journal of Medicine estimates that administrative costs take 31 cents out of every health care dollar in the U.S., compared to only 17 cents in Canada.13 Why is this the case? Private insurance companies spend much more on paperwork and administrative overhead. The sheer number of people that are working in these private insurance bureaucracies far outstrips those required in government-funded programs. In Massachusetts alone, Blue Cross/Blue Shield employs 6,682 workers to cover 2.7 million subscribers. This is more people than work in all of Canada’s provincial health care plans, which cover over 25 million people.14 Why do insurance companies need so many workers? One reason, as Paul Krugman explains, is that millions of health insurance personnel in the U.S. are employed not to help deliver health care at all, but to try to get someone else to pay the bills instead of their company.

Another source of administrative inefficiency in our private multi-payer health care system is the enormous amount of overlap between companies. Each insurance company must maintain its own records and develop its own billing processes. This is much more expensive than using a single government administrative structure. Moreover, our multi-payer system drives up the administrative costs for doctors and hospitals. They must deal with dozens of different insurance plans, each with their own coverage, payment rules, etc. We then need to add to all of this excessive overhead the need for private insurers to make a profit – something that government needn’t do. This makes our private system become more expensive. It has been estimated that higher overhead and the need for profit together add from 15% to 25% to the costs of private insurance plans, while the overhead for the government-run Medicare program is a mere 3%. Given all this, it should not come as a shock to find that a 2004 study by researchers at Harvard Medical School and Public Citizen concluded that the U.S. could save up to $286 billion a year on paperwork if we switched to a single-payer, national health insurance program.15 This money saved from eliminating the private health care bureaucracy would be more than enough to offset the costs of extending coverage to the millions of Americans who now have no health insurance at all. (Unfortunately, this single-payer plan was blocked by Republicans and conservative Democrats in the 2010 health care reform bill.)

To sum up, government-funded universal health care plans provide better care to more people at a lower cost. This one example by itself should be enough to explode the myth that business and privatization are always better than government bureaucracy in providing vital services to the public.

Myth No. 3: We Want the Government to Act Like a Business

The astronaut John Glenn tells a story about his first trip into space. As he sat in the capsule, waiting nervously on the launching pad, he couldn’t stop thinking about the fact that NASA had given the contract for the rocket to the lowest bidder. This raises another important point about government bureaucracies: we don’t always want them to act like businesses. Conservatives are constantly saying that we would all be better off if government were run like a business. But would we? Businesses are obsessed with their bottom lines and are always looking for the cheapest way to make a product or deliver a service. But in many cases, we don’t want government services to be as cheap as possible. Often, with government, the main concern is the quality of the service, not its costs. For example, do we really want to spend the least amount of money possible on our air traffic control system? Obviously not – the main goal should be maximizing the safety of the aviation system. Also, do we want the cheapest possible workforce in charge of security at our airports? Again, of course not – and this point was even acknowledged by Republicans when they agreed to abandon private security companies in favor of a federalized system in the wake of the 9/11 tragedy. Private security had certainly cost less, but it is clearly better to have a federal program that spends more money on training personnel and pays higher salaries to attract employees who are more capable.

Similarly, we don’t really want the cheapest system for dispensing justice in our society. We could certainly save a lot on court costs if we didn’t pay for lawyers for those who can’t afford them and if we got rid of jury trials and lengthy appeal processes. But this would undermine the main goal of providing justice. The point here is clear: unlike businesses, public agencies are not just concerned with the bottom line. We expect our government organizations to pursue a wide variety of important goals, and often cost is not the most important consideration. In this sense, it is unfair to expect many government bureaucracies to be as cheap to run as businesses.

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