THE BLOG
02/05/2013 11:50 am ET | Updated Apr 07, 2013

What Happens if Public Education Is Privatized? Clues From the Health Care Fiasco

Do you ever wonder if the reporters and columnists for The New York Times read each other's columns? In January 2013, Nate Silver, the FiveThirtyEight statistical guru, Eduardo Porter, who writes an Economic Scene column, and Reed Abelson, an Economix blogger, all wrote about the high cost of medical care in the United States, but none of them includes information, or even seems to have read, what the others wrote.

My concern is primarily the future of public education in the United States. But as I put together the information from these three columns, clues drawn from their discussion of the fiasco that is America's health care "system" provides unfortunate hints into a future disaster if the U.S. public school system follows this model and is privatized.

Silver's column does a statistical analysis of the growth in federal government spending. He discovers that the major increase in spending is caused by increased government spending on Medicare, Medicaid, disability, food stamps, unemployment compensation, and other social insurance programs. His data came from a website, usgovernmentspending.com, which divides government insurance programs into three categories, welfare programs such as food stamps and unemployment insurance, retirement programs, principally Social Security, and health care where spending has been increasing at the fastest rate. Between 1972 and 2011, federal spending on health care increased at a rate of 6.7 percent per year, which is much higher than the rate of growth for gross domestic product, which grew at a rate of 2.7 percent, or in tax revenues. In addition, Silver found that the growth in health care spending was not just a government problem. Private spending on health care has increased at approximately the same rate.

Abelson's Economix blog focused on double-digit rate rises by health insurers. He found that small businesses and people who do not have employer-provided insurance and must buy insurance on their own were particularly vulnerable to the higher rates being charged by the insurance companies. In California, Aetna applied to state regulators for a 22 percent rate increases, Anthem Blue Cross requested a 26 percent increase, and Blue Shield of California asked for an additional 20 percent. In Florida and Ohio, health insurance companies have already secured rate rises by over 20 percent percent for some policyholders.

I found Eduardo Porter's Economic Scene essay, "Health Care and Profits, a Poor Mix," both the most interesting and the most frightening report on economic dysfunction when essential social services are offered by private for-profit companies.

A study by the School of Pharmacy at the University of Wisconsin-Madison discovered that patients in private for-profit nursing homes received roughly four times as much medication as patients at church-affiliated nonprofit homes. Porter cited sources that explained this phenomenon as the result of corporate pursuit of profit. The bottom line is that sedatives are cheaper than intensive patient care. Similar studies also found for-profit hospitals concentrating on more expensive and profitable procedures such as open-heart surgery rather than on less profitable services like home health care and psychiatric emergency care.

Porter reported,

from health to pensions to education, the United States relies on private enterprise more than pretty much every other advanced, industrial nation to provide essential social services. The government pays Medicare Advantage plans to deliver health care to aging Americans. It provides a tax break to encourage employers to cover workers under 65. Businesses devote almost six percent of the nation's economic output to pay for health insurance for their employees. This amounts to nine times similar private spending on health benefits across the Organization for Economic Cooperation and Development, on average. Private plans cover more than a third of pension benefits. The average for 30 countries in the O.E.C.D. is just over one-fifth.

In other industrial countries universal public health care is considered a basic citizen's right and better health care is provided at a much cheaper rate than in the United States. Great Britain, Germany and France provide universal health coverage for between 10 and 12 percent of their gross domestic product. Porter argues that the U.S. for-profit system "delivers worse value for money than every other in the developed world. We spend nearly 18 percent of the nation's economic output on health care and still manage to leave tens of millions of Americans without adequate access to care." It is projected to rise to over 20 percent of the GDP by 2021. The U.S. dysfunctional health care system also leads to high administrative costs as private health insurers try to avoid covering high-risk people and patients who are actually sick and expensive treatment plans ordered by doctors who are paid more money for every procedure they prescribe. The near religious commitment of the United States to private for-profit administration of social programs has proved to be an economic disaster. Moving Medicaid recipients into private HMOs has raised the cost of services to each beneficiary by about 12 percent while proving to discernable improvement in care.

What are the implications of the private, for-profit health care fiasco for the U.S. public school system?
• First and foremost, the market and private for-profit companies cannot be relied on to make decisions based on best educational practice or the needs of students when their bottom line is always the maximization of profit. They also cannot be relied on to deliver educational services more cheaply.
• The public needs to be weary of miracle high-tech and online solutions promoted by the American Enterprise Institute and Thomas Friedman in recent New York Times op-ed pieces. They are probably a chimera, offering hope but little in the way of improved learning results. And costs will suddenly go up as soon as they establish a niche, or worse, undermine traditional schools and colleges.
• For profit charters that weed out the low performing and at-risk children so they can show off-the-chart improvement should also raise red flags. Miracle solutions aren't miracles unless they work for everyone.
• Educational "reformers" who blame teachers for the poor performance in inner-city and minority youth rather than the social inequality that plagues the United States want to de-professionalize teaching and replace teachers with poorly trained, low paid, transients who monitor students on laptops. Does anyone really believe that resistant young people will respond better to computer screens and testing? Or will they just find ways to avoid the monitors and play online games?
• Last, the outsourcing of programs such as curriculum and assessment, staff development, teacher evaluations, and even building and grounds, will profit private companies, but probably will not lower costs or improve services.

In a recent editorial, The New York Times warned that the charter school movement had established a foothold in the United States "by asserting that independently run, publicly financed schools would outperform traditional public schools if they were exempted from onerous regulations. The charter advocates also promised that unlike traditional schools, which were allowed to fail without consequence, charter schools would be rigorously reviewed and shut down when they failed to perform." However, studies of charter school performance show that the thousands of charter schools operating in 40 states have failed to keep either of these promises. "[C]harter schools are generally no better -- and often are worse -- than their traditional counterparts." A study conducted at Stanford University by the Center for Research on Education Outcomes found that that only 17 percent of charter schools provided a better education than traditional schools and 37 percent delivered children a worse education. "For the students enrolled in these schools, this is a tragedy that must not be dismissed."

A word about words. Nate Silver uses insurance and entitlement interchangeably. Eduardo Porter is much more careful discussing insurance and rights. Words are important and they shape how we understand issues. I agree with Porter. Health insurance and education are not an entitlements. They should be social rights.

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