by Charles Brecher and Sheila Spiezio

Foreword

American politics in 1995 seems to have one overarching theme: get government off the backs of people. Americans have had it pounded into them that their government is, if not the source of all evil, at least a major contributor to just about everything that is wrong. This explanation of what ails us is not merely the stuff of right-wing radio talk show hosts; it is the common fare of our popular culture, including movies, television, and increasingly, print journalism.

In this environment, politicians of every political flavor are leading the charge against the very governments they serve. In New York City as elsewhere, the favored remedy is to privatize anything that can be sold or handed off to profit-seeking businesses.

What seems to have been forgotten in this drive to get rid of costly public "businesses" is that many of these important services, such as subways and commuter railroads, are public precisely because private investors found that they could not operate them at a profit. Should we now shut them down? True, there are some public services that might be profitable if access were restricted to those who could pay full freight. Central Park, Stuyvesant High School, Jones Beach, and the Statue of Liberty might all command handsome prices. But what sort of community would be left if we privatized them?

A generation or two ago, most New Yorkers took public services like CUNY, the New York Public Library, Bellevue Hospital, and Peter Cooper Village for granted; and many took advantage of them. But today, for a large segment of modern New Yorkers, privatization is already well under way. The problems that have made life tougher for all New Yorkers have led lawyers, bankers, executives, and other high-income families to deal with the decline in public services by privatizing on their own. Their children go to private schools. Their residences and favorite restaurants pay for special refuse collection. They have private security in their buildings--and even in their neighborhoods. They rely on black car or limousine service for transportation. They depend on private health insurance and private hospitals. For those who can afford it, the private purchase of formerly public services has become routine.

In addition, many social services have been contracted out to nongovernmental--but also nonprofit--agencies. There is widespread agreement that the idea of throwing more public services into a market environment should be explored. It is worth repeating that the advantages of the marketplace are a consequence of the existence of competitive markets (the source of the efficiency gains) and the availability of reasonably complete information, which allows consumers to make informed choices. Moreover, markets work best when entrepreneurs and investors can earn a profit.

In the pages that follow, Charles Brecher and Sheila Spiezio consider the merits of privatizing one of the most expensive and most visible public services provided by New York City: its uniquely extensive public hospital system. The issues raised by health care delivery in the city are enormously complex. Real reform should emerge from a keen sense of current needs and the history behind the development of the current arrangements.

The final section of this report provides the essential background for understanding the factors and events that led to the present structure of the Health and Hospitals Corporation that controls these public institutions. In addition the rapid evolution of health care, including important changes in private insurance programs, the growth of HMOs, and the continuing likelihood of alterations in federal programs such as Medicaid complicate the task of restructuring here and elsewhere.

The authors also point out that, while still meeting the obligation of providing access to health care for the poor, it is entirely possible that the number of facilities now in operation could be reduced. They assert the importance of establishing that the means first be found to pay the private sector to pick up the slack. The authors are tough-minded about privatization, judging it finally not in terms of political power bases or hot campaign slogans, but rather asking how it can be justified, in this case, on the merits. In general, they are negative about privatization only when they conclude that there is simply a good chance that it will not deliver the goods: higher quality for lower cost without reneging on the commitment to care for the indigent.

Decisions about health care have to be different from other, cost/benefit-driven analyses of public versus private systems--different because most of us still claim America is shaped by values, including caring for the less fortunate. In this sense, health care reform is about easing pain and saving lives, not merely about downsizing government and saving money.

Finally, for all the power of our market-driven economy and all the good reasons that we favor it, the authors remind us that it should not be the sole determinant of what we, as a society, do or don't do. Nor should it be seen as the only mechanism that produces good results. When it comes to public health care, the imperatives of political responsiveness and public accountability, as well as the dictates of professional standards and personal principles (in this case those of the medical professional) are often more than a match for the results produced by the pursuit of profit.

On behalf of the Twentieth Century Fund, I thank Charles Brecher and Sheila Spiezio for clarifying the issues involved in privatizing public hospitals in New York City.

RICHARD C. LEONE, President
The Twentieth Century Fund
May 1995