Opinion: Daily Journal

Next Time, Get The Details Right

RALEIGH – Let’s play a game. Call it Pin the Tail on the Wonky. I’ll describe a health-care system. You decide whether it is likely to be applauded by the Left or Right.

The system I’m thinking of delivers services to the disadvantaged through an array of public and private providers. Local counties determine eligibility for services and help beneficiaries identify appropriate providers, but do not provide most services directly. Patients and their families retain the ability to choose their doctors and hospitals. The state determines reimbursement rates and creates incentives for patients to use lower-cost, preventive services up front to reduce costly hospitalizations. Taxpayers foot the overwhelming majority of the cost.

I am, of course, describing the Medicaid program. Left-wing activists say they want to expand this model to include larger and larger chunks of the population. Many, indeed, favor a government-run health-insurance monopoly along these lines. They are careful to distinguish this single-payer system from socialized medicine, which they define as public employment of doctors and direct governmental control of medical providers. Instead, they want to socialize health insurance but direct the dollars, via contracts and patient choice, to independent, competing providers.

However, my above description could also apply, in large measure, to the mental-health system that North Carolina lawmakers thought they were creating in 2001 – a system that many of Medicaid’s fondest admirers decry as an evil, privatized monstrosity. It has also been the subject of a pathbreaking series of investigative pieces in the Raleigh News & Observer.

Although activists of all stripes would like to stuff the N&O’s sprawling series into some tiny propaganda box – bearing a label such as “privatization is bad” or “Mike Easley is an idiot” – it just won’t fit. The stories depict a system that was poorly designed, inadequately tested in local settings before expanded statewide, and mismanaged in a number of foreseen and unforeseen ways. Yes, many private mental-health providers appear to have been paid far too much to deliver services to far too many North Carolinians with far too little medical benefit. But the N&O also spotlighted massive, sometimes deadly problems within the state-run system of psychiatric hospitals that reformers in the General Assembly and Easley administration had previously recognized and were seeking to ameliorate in part by moving mental patients into community-based care.

As with so many other issues, the political class in Raleigh would benefit greatly from a little humility and perspective here. It’s not as though deinstitutionalization, competitive contracting, and separating case management from service provision were ideas that Rep. Verla Insko, former Health & Human Services Secretary Carmen Hooker Odom, or other North Carolina policymakers invented out of whole cloth. These are policies already in place, to a greater or less extent, in many other states across the country. Some states have had better success implementing them than North Carolina has obviously had. Some have even had worse implementation problems.

To observe the flaws in North Carolina’s reform process is not to make a compelling argument for the previous system, which relied on county monopolies and fared poorly in interstate comparisons. Nor is it rational to interpret the N&O series as an indictment of the concept of privatization. Large chunks of federal, state, and local government would simply be impossible to deliver without tapping the expertise, facilities, and economies of scale available among private vendors. Virtually no one would seriously argue that governments shouldn’t make judicious use of contractors to build roads and schools, make uniforms and equipment for law enforcement and the armed services, provide computing and telecommunication services to government offices, and carry out a variety of other key functions.

Privatization is a means for accomplishing an end. It is a complex process, one in which public-sector managers must be careful in their bid requests, vigilant in their oversight, and flexible in responding to problems rapidly and effectively. Problems with government contracts are commonplace, not least in the three examples I provided earlier (bricks and mortar, defense, and IT). The true choice for policymakers is not between an inherently flawed contracting model and a perfect monopoly model. It is between an inherently flawed contracting model and an inherently flawed monopoly model.

There could well be particular jurisdictions, smaller communities on the wrong end of the economy of scale, where private providers are unlikely to be numerous and capable of acting as the mental-health safety net. On the other hand, unless we want to think of that safety net as more akin to the county jail than to Medicaid, the state should certainly continue to try to offer patients and their families multiple choices of providers that best meet their needs, as well as the public’s need for order, which happens to be the proper justification for state expenditure in the first place.

The problems with North Carolina’s mental-health reforms enumerated by the N&O primarily stemmed from getting the details wrong – the timetables, the reimbursement rates, and the eligibility guidelines. They can and should be addressed. Meanwhile, the political class in Raleigh should avoid playing two other childhood games. One is an attempt to contort the mental-health story into a larger indictment of competitive contracting and private-sector solutions. Let’s call that one Twister. The other is to keep trying to shift the blame to someone else for the system’s woeful mismanagement. Let’s call that one Musical Chairs.

Hood is president of the John Locke Foundation.