Public services and competition

Competition in medical services is turning more and more against the unfortunate. In Portugal during Christmas week a public hospital had to get extraordinary funds to pay for doctors from a private provider as there were not enough available in the free market. This is a consequence of having several private hospitals also providing emergency service which also need doctors. But the poor cannot pay those private services and end up waiting several hours to see a GP.

Trains and train lines – usually part of a public service – are also decreasing in Portugal (and Europe) due to bigger competition from private airlines and bus companies.

People complaint for higher prices of medical services and increasing prices of public transport.

In Switzerland it has been proved that where more medical private practice exists, higher are the total costs of medicine. Competition among private hospitals to become “the best” center has made them to invest on expensive machinery. To recover the investment they need to use these machines and not required treatments (in terms of benefit vs cost) are prescribed.

Still in Switzerland, no private bus companies can compete with the excellent but expensive train and postal bus system which deserves all villages. If the state would allow competition the trains would lose passengers in the profitable axes and not being able to keep running at loss smaller lines.

Another example is the postal service. The people expect the state to provide postal distribution and services (payments, expedition) all over a country. But when competition exists in part of the postal service (packet distribution or postal service in main cities), then the public provider will have less resources from the high profit zones to invest on loss in distant areas, where there is no profit.

This is why public services and competition do not combine. It is very difficult – if not impossible – to have a light regulated private sector in the areas where the state is expected to provide public service. The consequences are:
– no public transport in remote areas. They are feeding with few passengers other public transport which in turn will also be non-profitable and which is important for tourism
– no profitable “mandatory” public service like postal, energy, communication
– remove the access to poors – “access to all” – to public services

The solution in my opinion is to set a minimum group of public services where the state highly regulates and avoids almost any competition. Medical services, transports, postal services, utilities (electricity, water, sewage, telecommunication) is the absolute minimum. This is the only way the access to all can be preserved. These public services will always be run at loss in big parts of a state. Only cities and major axes can compensate this loss by having a profit and at the end become even.

Miguel Anjo, 04.january.2015

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