Privatization in a Publicly Funded Health Care System: The U.S. Experience

Abstract

The United States has four decades of experience with the combination of public funding and private health care management and delivery, closely analogous to reforms recently enacted or proposed in many other nations. Extensive research, herein reviewed, shows that for-profit health institutions provide inferior care at inflated prices. The U.S. experience also demonstrates that market mechanisms nurture unscrupulous medical businesses and undermine medical institutions unable or unwilling to tailor care to profitability. The commercialization of care in the United States has driven up costs by diverting money to profits and by fueling a vast increase in management and financial bureaucracy, which now consumes 31 percent of total health spending. The Veterans Health Administration system—a network of government hospitals and clinics—has emerged as the leader in quality improvement and information technology, indicating the potential for public sector excellence and innovation. The poor performance of U.S. health care is directly attributable to reliance on market mechanisms and for-profit firms, and should warn other nations from this path.