In light of the most recent apparent scandal (which really isn’t a scandal as I will show) involving the Department of Veterans Affairs, we are once again reminded forcefully of the perils not only of the expansion of the scope of government but also of the organization of government services through bureaucratic means.  I said above that this was not a scandal, and for this reason, that since all large bureaucratic organizational forms seem to operate the same way, how can we choose just this one as scandalous.  If we do they are all scandalous–well, maybe they are.  This is not to say the results of this particular and predictable situation are not worse–they are.  But the same basic outcome can be seen everywhere.  Think about a trip to your local Department of Motor Vehicles (or whatever it is called where you live), especially in a large urban area.  What do you often experience?  Waiting, and waiting, and then being told you haven’t brought the correct paperwork or that you have filled out the wrong forms, or brought the wrong ID, or……  Same issues as the VA, only with less catastrophic consequences.  This is why they tell you the best time to visit the DMV is between 10 AM and 2 PM, the least busy time.  Extrapolate that to the VA and the best time to visit may be never.  You certainly do have to wait, and wait, for treatment, and in that case,sadly, you may well die.  On top of that, no one may ever know why you died, since it seems the administrators hid important facts from patients and their families.  You died because you had to wait, whereas you probably won’t die because you waited at the DMV.  

So now, sticking with the VA as our example, why did this “scandal” happen?  Why was a secret list implemented?  Why didn’t patients receive prompt treatment?  Why didn’t administrators at lower or higher levels say something or do something?  And why is treatment at a VA hospital generally inferior to that at other hospitals?  I think I can answer these questions.

Fact number one.  VA hospitals are part of a vast bureaucratic organization called the Department of Veterans Affairs, a public agency funded by Congress, controlled by the executive branch and administered by legions of bureaucrats, from minor clerks to upper level managers.  The agency actually has roughly 300, 000 employees and a budget of about $100 billion.  It is, as expected, organized into a giant hierarchy with regional offices answering to the central office in Washington, DC.  As a hierarchical arrangement, it looks like a pyramid, with each level having both superiors and subordinates, and the number of superiors getting smaller as one nears the top of the agency.  Information flows up the “chain of command” and orders flow down.  

Fact number two.  This fact is crucial.  The VA is not a private organization.  Therefore it does not rely on the typical information available to private organizations to measure quantity and quality of service.The VA makes no formal profit (though it does take in revenue) which can be measured and assessed for trends, up or down or flat.  Remember that in the market profit tells a firm whether it is performing well or is offering something people really want.  The VA can send out surveys asking “customers: about their service, but (and here is another major fact) because it has no real competitor, it can safely ignore criticism of its services, at least until the outcry becomes too great to ignore.  The VA doesn’t rely on prices, in the normal sense of that word, to receive signals from its users about its services.  In the private sector, with competition, when firms in a market see the prices of their products going up, they know people want more of them and are willing to pay, and people express their desire for the service by paying more.  If prices are going down, everyone knows less is wanted or people don’t like the quality of the product, and so less will be produced or quality will be increased to get demand back up.  In fact, importantly, when a single private firm sees less demand for its products, measured by fewer people buying it, it will usually respond with efforts to increase quality to customers–or it will be forced to go out of business.  In the meantime it will also lower its prices hopefully to draw back lost customers.  We see none of this at work in the VA because it is not a private firm and because it has no effective competitor for veterans issues.  The VA simply doesn’t respond to any information about its services because it either doesn’t receive any or because it can safely ignore what it does receive or because the information received is distorted as it is passed up the chain of command.

Fact number three.  The way the VA is organized has much to do with why it works so poorly.  Remember it is one large and centralized bureaucracy, without usual pricing and without usual competition.  So how does one at least try to ensure employees will do their jobs well, or at least adequately?  A private firm can see something going on pretty quickly when people complain and stop buying its products.  And it has a powerful incentive to correct the problem–people will continue to stop buying and the firm will go out of business.  The VA uses elaborate rules and procedures to try to circumscribe the actions of its employees.  However, the employees also have some powerful incentives to hide information from superiors, to enhance their chances for promotion or higher salaries or bonuses.  And it is also very difficult to fire a Federal employee.  So VA officials may well pass on only favorable information to superiors, while at the same time engaging in suspicious activities themselves.  The bigger the organization the easier it is to do this, and the VA is pretty big.  Moreover, superiors, if they do find out what is happening, have little incentive to do anything. That might expose their own shortcomings.  So they may become willing accomplices in bad behavior.  This can go all the way to the top.

Combine what I said above with an apparent lack of any political will to do something and, because of the Affordable Care Act, few alternative options for veterans, the situation is not being addressed with anything near the urgency it would have been had this occurred in some private market situation.  The real solution to the problem would be to abolish the hospital function of the VA and simply allow veterans to go where they wish.  We as taxpayers would be willing to foot the bill for them, I am convinced, and they would receive far better care (generally), at a lower overall cost to the taxpayer.

Large public bureaucracy can be terrible waste, but in some cases a terrible travesty.  Perhaps this situation may serve to awaken us just a little to the dangers of large public agencies with little or no accountability but with huge authority and/or scope for actions. When will we learn?  We probably should learn pretty soon or we will find ourselves going farther down this road to “soft despotism.” The results will not be pretty.