When it comes to providing quality services at the lowest cost, private firms are very different from government bureaucracies. A private firm has to compete in an open marketplace where consumers are free to shop around for the best deal. So a private firm has to provide more quality at a lower price or consumers will take their business to a competitor! And the owners and employees share in the profits or losses. They have an incentive to cut costs, raise quality and lower prices. They have a stake in pleasing the customer.
But what about government? Do they have competitors that pressure them lower costs and raise quality? Do the people who run the government benefit financially if they please customers? Do employees of the government benefit if they please customers? Do customers have the freedom to buy from someone else if they are not happy with the price or quality of government services?
Consider this Washington Times story. (H/T John Stossel via ECM)
Excerpt:
An audit of the government’s legal aid program for the poor concluded Monday that the purchase of more than $188,000 worth of imported Italian stone to decorate one of the program’s office buildings in Texas was unnecessary and excessive…
The inspector general of the Legal Services Corp.(LSC) said the stone, which adorns three full stories of a newly remodeled Fort Worth office building, “appears only to be decorative in nature” and does not constitute a “reasonable and necessary” expense.
If a private firm wasted money like this, they would go out of business. The directors and employees who run private firms never waste money like this! If they did, the private firm would go out of business. But the government wastes money like this all the time. It’s not their money, after all – it’s your money. Why should they spend it wisely? What’s in it for them?
And they’re aren’t exactly accountable when they get caught wasting taxpayer money, either.
The inspector general quoted officials involved with the Texas program as defending the purchase, saying the high-end imported stone was selected for its beautiful finish and installed as a decorative flourish.
And this applies to government-run health care, too. Why should be expect government to cut health care costs when they have no incentive to be efficient? Private firms have an incentive – to keep their jobs, to be promoted, to get raises, etc. Government has no incentive to be efficient.
WINTERY KNIGHT 
although the theory is correct in most cases, I personally don’t believe it applies to healthcare. for the following reasons:
1. Training costs are exorbitantly high for doctors. Privatization will reduce the licensing and training leading to higher medical errors, lawsuits, lower quality care.
2. Most people cannot afford the total cost of healthcare, and require subsidies to foot bill.
3. Low staff to high patient demand ratio, means that doctors will price gouge patients. (training for more staff is limited due to pt1), and leave healthcare available to the rich and not the poor.
4. Monetary profit incentives will drive healthcare providers to provide “no service” rather than “service” because it will save cost. (this is seen in health insurance in the US)
5. Overtime globalisation and privatization will shift the market overseas to low labour cost countries. (i.e. like what is seen in manufacturing) where less stringent regulation, licenzing and quality standards are required, increasing risks in medical procedures.
By normal accounts, privatization would work, but the healthcare sector has not reached a critical mass or tipping point yet, due to the restricted training spots regulated by medical associations and limited efficacy of treatments. It would be disastrous if privatized too quickly. Although if we had maybe 10times the number of doctors/specialists and infrastrucuture the private structure would be ideal.
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