When Liberals Love Privatization

by John Hood

Remember Where’s Waldo? Imagine for a moment that he had the word “privatization” stitched on his colorful little cap, and see if you can spot him in this word picture:

North Carolina spends billions of dollars a year funding a critical service. But rather than deliver the service directly, the state allows North Carolina recipients to choose among public, for-profit, and nonprofit providers to receive services paid for with tax dollars.

Did you see Waldo as a conservative legislator who wants to provide school vouchers to families of low to moderate incomes? Would that be privatization? Well, I can understand why you made the error, but notice the verb tense. I wasn’t referring to a proposed program. I was referring to a program that already exists: Medicaid. It pays for medical services. It doesn’t deliver them.

If school choice programs constitute educational privatization, then Medicaid constitutes health care privatization. Yet denizens of the Left savage the former and defend the latter. By what consistent principle do they do so?

The model of “public dollars + private providers = public service” isn’t even foreign to North Carolina education. We’ve been doing this for decades in higher education, day care, and early childhood programs. For example, the North Carolina Pre-K program (what used to be called More at Four) pays public schools, religious institutions, and for-profit centers to deliver the same set of services to at-risk preschoolers. Liberals love this program and wish to expand it. But once those four-year-olds turn five, a “successful public-private partnership” becomes a “dangerous privatization” in the liberal mind.

The incoherence about privatization extends beyond this case, however. With regard to Medicaid, North Carolina already contracts with a private vendor to coordinate the care of most Medicaid recipients. This contract wasn’t awarded by competitive bidding or consumer choice. And it allows the private vendor to make money from administering Medicaid dollars without facing any financial risk should the cost exceed projections.

If the state had negotiated such a no-bid contract to deliver any other public service — public safety, road maintenance, information technology, you name it — the Left would properly cry foul and demand a better process. But the private contractor I’m talking about, Community Care of North Carolina, receives nothing but praise from left-wing analysts who simultaneously attack Gov. Pat McCrory’s proposal to invite competitive bids for multiple Medicaid contractors. They dismiss his Partnership for a Healthy North Carolina as “privatization” while defending Medicaid’s current privatized arrangement.

The Left’s confusion about privatization is certainly not limited to North Carolina. At the national level, liberal groups detest proposals by Rep. Paul Ryan and other conservatives to involve competing private insurers and case managers in Medicare. They warn that “privatizing” Medicare would be dangerous, and want its current operations left alone.

But the current operations of Medicare are already privatized. Who actually runs the tracking, billing, and payment systems with which Medicare reimburses (mostly private) health care providers? You guessed it: private insurance companies. They are paid to process Medicare claims. What they don’t have to do is hit any particular per-patient cost target or shoulder any financial risk for cost overruns. In the absence of such incentives, costs tend to soar. Sound familiar?

In the real world of public services, privatization is ubiquitous and useful. Most people agree that government need not employ doctors, nurses, preschool teachers, college professors, textbook printers, asphalt pavers, or vehicle drivers in order to ensure the delivery of medical, educational, or transportation services. When it comes to elementary and secondary education, however, the Left wants to make an exception — while labeling anyone who disagrees as extreme.

And when it comes to the management of North Carolina’s Medicaid program, liberals are even more befuddled. They favor maintaining the current case-management contract with a single private entity rather than open up the process to competitive bids by multiple providers who would have to bear some financial risk if they want the opportunity to receive financial reward.

If you can discern a consistent philosophy of government somewhere in this crowded and baffling picture, you are a far better Waldo-spotter than I am.

John Hood is president of the John Locke Foundation and an NC Spin Panelist