The DMV running your health care

October 01, 2013 | By TIMOTHY SANDEFUR

The old quip—do you want to put the folks who run the DMV in charge of your health care?—isn’t quite so funny now.

Some people think that advocates of free market alternatives are just cynical or paranoid folk who exaggerate government’s minor foibles. But the real argument against having government run health care, or education, or any other industry, is about incentives, not about nefarious motives. It isn’t that government people are evil—or any moreso than your average of people everywhere. It’s that government officials don’t have to pay the cost of getting things wrong. If a private business performs badly, fails to satisfy customers, fails to innovate, and so forth, then that business fails and is replaced by its competitors. But if government runs a crappy website, and fails to answer the phone, and fails to provide good service in a timely manner…all the people responsible still get paid. In fact, they often get paid more, since they often claim their failures are due to budget shortfalls.

Corruption, ignorance, and plain human error occur in both the private sector and the public sector—fraud and abuse aren’t really the big problem with government running things. The problem is the incentives. The reason the DMV or the Social Security Office or the Post Office doesn’t provide as good service as the AAA, or your bank, or Fed Ex, is because if the latter groups do a bad job, they will suffer out of their own pocketbook—while the former groups don’t have to face that kind of discipline. And that difference is inescapable. The question of private versus public is inherently a question between a regime in which bad decisions impose costs on decision-makers, thus leading them to make better and wiser choices, and one in which bad decisions do not impose costs on decision-makers, and give them no real reason to make things run well.