CT News Junkie | OP-ED | The Economics of People, Part II

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OP-ED | The Economics of People, Part II

by | Jul 31, 2013 10:01pm
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Posted to: Opinion

Brian O'Shaughnessy photo The following is the second of a three-part series that explores the enormous economic value in maximizing the productivity of all Connecticut citizens. The first part, entitled “Don’t Make Government Smaller,” can be accessed here.

Government Needs the Private Sector

Government does several things very well. One of those things is excluding the private sector. A goal with perhaps virtuous origins, this policy now breeds silly results.

History is replete with norms indefensible in retrospect. At what point do they transform from accepted to anachronism? When do we say, “That makes no sense?” There are examples that span all facets of life: civil rights (slavery, woman’s suffrage), economics (unregulated security markets), or even fashion (leisure suits). Personally, I would add to this list the cultural aversion of government to the private sector.

In an effort to present an image of government as incorruptible, we have created a culture that shuns cooperation with the private sector. This culture of isolation has created an entity with an intentionally handicapped ability to leverage the considerable assets of our state. As a result, we have created one accepted avenue for cooperation between government and the private sector:  lobbyists.  Is that how we want the private sector and government to interact? We know the answer to that question. There must be a better way. 

Connecticut is a state with great universities, substantial wealth, a highly educated workforce, several renowned Fortune 500 headquarters, and proximity between two vibrant economic regions. We have access to a huge amount of knowledge and expertise. We should encourage government to embrace the private sector in a meaningful and transparent manner. To be truly effective and long lasting, the partnership between government and the private sector should not be the initiative of one administration. We need a cultural change where the best interest of the state is the guiding principle. This is not an insurmountable task.

Excluding the private sector is not in our state’s best interest. Being blind to the technical and financial innovation existing within our borders can cost us dearly, as government becomes the land that time forgot in pursuit of some pyrrhic ideal. Government should believe it has the freedom to embrace innovation and facilitate interaction with the private sector. This cultural change can unleash dramatic benefits in a state searching for solutions to persistent problems. Let’s examine two examples to highlight the issue.

First, innovation: Diagnosis-related groups, or DRGs, were developed in New Haven at Yale University during the early 1980s. A cost-based approach to providing healthcare, DRGs have tremendous potential to quantify the appropriate amount of funds that should be spent on treating specific medical conditions. DRGs are viewed nationally as a tool to spend an appropriate amount of money in light of specific medical conditions — financial and medical triage combined, if you will.

After being developed in Connecticut at Yale, DRGs were first adopted in New Jersey. Subsequently, they were adopted nationally with very positive results. Thirty years later, they have still to be adopted within Connecticut. This will likely change as a result of incentives built into the Affordable Care Act and initiatives admirably taken at DSS.  For some reason, however, DRGs were never adopted in the state where they were developed. This is good for insurance companies because it maximizes the aggregate amount of money paid for Medicaid. However, it was not a good result for Connecticut taxpayers as our Medicaid costs are always one of the highest in the nation. 

Next, the private sector: The WorkPlace in Bridgeport is one of our state’s five workforce development boards. A quasi-public agency, they created a great program that supports the retraining and reintegration of the long-term unemployed. The Platform2Employment (P2E) program stops the economic bleeding created by long-term unemployment and creates economic benefit to both the state and the private sector by creating qualified, motivated, and loyal employees. The Harvard Business School Alumni Association of Fairfield County has done a financial analysis of P2E to illustrate the savings that accrue to the state. The P2E program has received national support and press coverage, being featured on 60 Minutes and a variety of national media.

P2E is now in development in no less than 20 communities nationally. Unfortunately, P2E receives no support from the state of Connecticut and is entirely funded by a private sector that sees the obvious economic value.

The impediments are cultural, not legal. For example, CT21 is a truly bi-partisan public/private entity that consistently articulates common-sense economic approaches that would have a huge impact if implemented. Everyone listens politely to passionate presentations, but the recommendations are ignored for all practical purposes. No one intentionally says, “ignore this wonderful report.” But the culture says, “look, but don’t touch.”

There are reasons to be encouraged. The special jobs session in October 2011 created something of a framework for greater public/private partnerships in both capital and workforce projects. In a nod to the spirit of the P2E program, our state created the Step Up program that funds the initial training and integration costs incurred in the hiring of new employees. This program successfully introduces the unemployed and returning veterans to the workforce and will pay for itself with the avoidance of later social service needs.

Our country is exploding with a data revolution that facilitates the design of products to address specific needs. These tools are perfect for both the private sector and government. The private sector can help in this effort because they are already doing it as standard operating procedure. Our state issues are economic and we should employ the best tools available to make our state more competitive. Addressing economic issues, especially in our cities, could have an extraordinary financial impact on our state by increasing revenue and decreasing need.

There is an unnaturally skittish reaction to these concepts. This is not the dreaded “privatization” of government functions, but rather the realization of true participatory government. At the risk of sounding hokey, this is government of the people by the people. There is presently an unnatural separation between the private sector and government that is in the best interest of neither — so let’s change it.

The general public respects the private sector and the private sector wants to help. As long as there is adequate disclosure, this assistance should be welcomed. There will be acceptance from the general public, not suspicion. However, if government is really scared they could do a Quinnipiac poll. I am sure the folks in Hamden would be happy to help.

Brian O’Shaughnessy of New Haven is a principal in the firm Community Impact Strategies Ltd.

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