That's a pretty poor argument if you line it up against gov't waste, incompetence and corruption.
Government provided services provide the opportunity for total transparency; this is not the case in the private sector.
EDIT: @refurb: You're confusing a free market with what the United States has. A free market it ain't (especially regarding healthcare).
If one doesn't exist, I wouldn't like our system to move into that direction based upon wild speculation and pure theory. The implicit assumption in free market models is that people are rational agents, when all research shows that people are highly irrational.
Wouldn't you like see evidence of how a free market would function on the scale of the United States? Like a scientist, not like a religious zealot?
In fact, the reason government sucks right now is that corporations/wealthy have rigged the game by buying representation average citizens can't compete with (legalized corruption = lobbying).
In addition, comparing the government with the private sector is pretty silly. They have different goals. Private companies try to maximize profit, even if it comes with massive externalities (which, barring regulations, they happily pass on to others). Governments aim to serve their citizens, even if it comes at the expense of efficiency. This means that any given problem will be handled very differently by the private sector compared to the government. The route we pick really depends on our priorities as a society.