Privatization May Drive Down Costs on Maui

by Aaron Lief, Grassroot Institute, April 21, 2016

Dr. Keli’i Akina sat down with Leonard Gilroy of the Reason Foundation to discuss healthcare privatization. The interview was recorded  as part of the Grassroot Institute with Dr. Keli’i Akina, a radio show on KAOI 1110AM Maui and KKNE 940AM Oahu.

Until recently, hospital labor on Maui was given exclusively to a public labor union. As a result, 70% of the budget was spent on employees–quite an excessive amount. In 2015, Maui state hospitals were allowed to enter into a private contract with skilled labor providers, and that contract was recently awarded to Kaiser.

So, how exactly did the public sector unions drive up labor costs? “You tend to find, in the absence of competition, monopolies will do what monopolies classically do under economic theory. You tend to see high costs and less quality,” Leonard explained, “One of the reasons governments turn to public-private partnerships is to actually bring that tension into the system through competition.”

One of the arguments against privatization of services provided by the government, is the fear of using profit as a motivating force. “That’s one of the most common fears–I would really call it a myth–that profit is a bad thing when you’re talking about the public sector. I would challenge that,” Leonard said, “I don’t see a problem with a business making a profit if you’re putting that business to work in the service of the public interests. If a company is able to come in and provide what a government is looking for at the price that the government is seeking to provide it, we should not be concerned if the private entity is able to earn a return on that.”

Listen to the full interview here: