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by C. William Chattin
Clive Cook has an excellent article up at the Financial Times on the implication of the so-called “public option” of ObamaCare. The “public option” would be a federally-funded public health insurance carrier (not unlike Medicare) that would “compete” with private health care insurance companies. In comments Monday, President Obama assured members of the American Medical Association that the public option would not be a “Trojan horse for a single-payer system.”
Clive Cook disagrees:
A significant minority of more conservative Democrats are sceptical. They worry that a public plan would crowd out private insurers and that the US would end up with a national government-run health plan: in effect, Medicare, the existing programme for the elderly, widened to cover everybody.
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A less obvious objection [to the public option for all] is that a healthy private insurance market is worth preserving. The seething hatred many Democrats – and many other Americans of no fixed ideology – feel for private health insurers ignores the value they bring – and the extra value they could add if their incentives were better designed and their customers had the information they needed to make intelligent choices.
If competition is a good thing, competition among insurance providers is a good thing too. [A]bolishing it [would] abolish pressures for innovation and other kinds of cost reduction. In other industries, competition pays for itself in spite of the apparent waste of marketing and other forms of duplicated effort.
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Shutting it down is not the purpose of the public plan, say its Democratic supporters: the public plan is just one more choice. This is disingenuous. If the public plan had to compete on truly level terms with private plans, how would it be able “to keep them honest”? If it is going to exert the pressure it is intended to and really make a difference, it will have to flex its political muscle, its ability to attract subsidy and its superior buying power: “accept this lower reimbursement or no Medicare patients for you”. A public plan cannot be just another competitor: it is anti-competitive, and meant to be.
Government “competition” is never fair, in the sense that government never plays by the same rules applied to private industry. Government doesn’t need to concern itself with turning a profit, and, indeed, when losses to government-run enterprises mount, the government simply funds the losing enterprise with more tax-payer-supplied dollars. Cook is absolutely right that government-run enterprise is uniquely anti-competitive by nature.
In April of this year, the Lewin Group (an independent health care consulting firm) issued a report about how implementing the public option, as currently conceived, would affect the 170 million Americans who currently have private health insurance. It found premiums for the public option would be 30 to 40 percent lower than private insurance plans – savings achieved by imposing price controls on doctors.
The Lewin Group concluded the public option would not only attract 28 million new Americans who currently are not covered by health insurance, but would also cause 120 million Americans to leave (or get booted from) their private insurance in favor of the public option — leaving only 50 million Americans in private insurance.
When the anti-competitive advantages of this public option are combined with the near-infinite scale of the enterprise, the result would be a government-created Walmart for health care — or Medicare on steroids. How private industry could fairly compete with such a monster no rational person has explained.
Jason Fodeman weighs in on the fiscal insanity of converting 80% of the American health care system to Medicare:
Since Medicare became law in 1965, real per capita health-care expenditures have increased almost six fold. Medicare has not stood idly while costs have escalated either. Medicare has as much blood on its hands as anyone. Medicare has 36 trillion dollars in unfunded liabilities. The system is broke.
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Medicare’s inadequacies are no surprise. It possesses the same deficiencies the public has become accustomed to from all forms of government. For a reminder, just take a trip to the DMV.
On a final note, it’s imparative that sincere advocates of an improved American health care system stop framing the arguments in terms of the number of millions (currently, 48 million) of Americans who do not have health insurance — either through private carriers or via access to Medicare or Medicaid boondoggles. Health insurance and access to health care (and, in particular, good health care) are very different things.
What’s most important for Americans moving forward is access to affordable and effective health care — whether its by virtue of employer-subsidized private insurance or some other means of access. In future posts, we’ll discuss the best way for Americans to reduce the cost of health care, while making access universally available.
