People love to debate this question, particularly when it comes to health care. If you’re among them, read Eduardo Porter’s recent NYT article, in which he discusses The Org: The Underlying Logic of the Office, by Ray Fisman and Tim Sullivan. Porter quotes Fisman,
If I can write a perfect contract in which I pay for a concrete observable outcome, can rule out cream-skimming and can ensure the measure is not gamed, there is no reason that the private sector can’t do it better.
Is this a fair test? What’s its sensitivity and specificity? Does it rule in or out health care or health insurance?