Free Markets, Free People

Public Option Questions

The reasoning behind the much ballyhooed, on-again, off-again “Public Option” has never made much sense to me, but lately I’ve noticed a few things that make it even less understandable.

For example, as Bruce highlighted below, Rep. Eddie Bernice Johnson (D-Texas) said the following about it on Sunday:

“The only way we can be sure that very low-income people and persons who work for companies that don’t offer insurance have access to it, is through an option that would give the private insurance companies a little competition,” she said.

Johnson added that House liberals have already told Speaker Nancy Pelosi (D-Calif.) that she should insist on White House support for a public option.

How does a public plan offer competition to insurance companies by covering people who don’t have access to insurance? Apparently, these are people who insurance companies aren’t interested in catering to, so there is no competition to gain them as clients. Giving them “free” health insurance from the government isn’t going to change that. Instead, it’s just going to cost more taxpayer money.

Here’s another head-scratcher from Susie Madrak:

Oh, the Republicans have been having a field day with this mantra – that employers would shunt their employees into the public plan. But they’re really upset for the same reason Sebelius mentioned as a positive: Job lock. Above all else, the Republican party stands for cheap, disposable labor with no rights or protections. God forbid you should have a public option – you could up and leave your job anytime you wanted!

While I agree that we would all be better off if health insurance was decoupled from our jobs, I’m not sure that the public option prevents “job lock”. Presumably, what keeps most of us from “up and leaving” our employment on a whim is the paycheck we receive and not the health care insurance. And even if we do, COBRA is already in place to help maintain coverage, and HIPAA prevents insurance companies from refusing to cover any pre-existing conditions. Moreover, if having a public option encourages people to cease being productive members of society (i.e. working at a job), that would be a net negative for society, and would surely cause a loss of tax revenues (which we would need a lot more of in order to pay for all that “free” health care). I just don’t see how a public option can prevent “job lock” any more than we already have now, and even if it did, I’m not sure that’s a good thing.

And then there is this little ditty from Publius that requires the suspension of an enormous amount of disbelief to even begin pondering:

In terms of broader perspective, Jacob Hacker has one of the best defenses of the public option that I’ve seen. One important point he raises is that it’s actually a way to prevent overreliance on excessive regulations and bureaucracy.

The argument is fairly simple. Any type of reform is going to require a lot of regulatory oversight. That means detailed regulations, lots of regulators, etc. If, however, the country had a public option, the insurers would suddenly have a market incentive to comply with these requirements without so much regulatory coercion and administrative costs.

In this respect, the public option actually reduces the need for government — and reduces the threat of agency capture and other public choice-ish problems (especially at the state level).

First of all, has there ever been any government program that didn’t have a slew of regulators accompanying it, much less one so massive as to cover the entire nation?

Secondly, if you go and read Jacob Hacker’s post, you will see that the whole point of the public plan (in his view) is to make all the private plans that may be left (i.e. those accepted to be offered within the insurance exchange run by the government) act just like the public plan. Yet the private plans will never be able to function the same way that the Public Option does, and so the chances are that such plans will go bankrupt trying.

In essence, there would be three types of plans: Public Option, Inside the Exchange, and Outside the Exchange. The Outside plans would be prohibited from signing up new insureds, so they will eventually die off. The Inside plans will be forced to compete against the Public Option for new customers as well as for keeping the ones it already has. Because the Public Option will be unchallengeable — that is, immune from lawsuit by competitors — and financed by the deepest pockets in the world, the Inside plans will be at a grave disadvantage. Not only will the Public Option be able to offer lower cost plans at the expense of taxpayers, it will also have the ability to hide administrative costs thus making itself appear much more efficient than the Inside plans. The Inside plans, therefore, will have to compete against a much better capitalized, immune from lawsuit, more efficient on paper Public Option without any of the Public Option’s benefits or access. There is simply no way for them to act like a better government plan than the real thing, and they will eventually collapse.

How does that make anything better, much less cheaper, if the Public Option drives all the competition out of the market, leaving taxpayers holding the bag for everyone’s health care?

It is this competition that Hacker thinks will force the Inside plans to behave pursuant to the laws and regulation granting them access to the exchange, and which Publius thinks will save money on regulatory costs, etc. Yet those laws are going to have to be policed, and the regulations will still have to be promulgated to carry out the Act. While the Inside plans may have a little extra incentive to behave in the way that the government wants (Hacker’s example is using across-the-board community rating so that everyone pays the same premium for insurance) by having to compete against the Public Option, they would still have to comply with Act if there were no Public Option. Moreover, what would make the regulators jobs even easier is that each of Inside plans would be more than happy to rat out a plan that doesn’t behave, thus possibly reducing competition and grabbing a larger slice of the exchange market for itself.

In short, there is simply no way that having a Public Option is going shrink the government or save any money in regulatory costs. To believe so, one has to ignore all history of government and disregard how market competition under a regulatory regime actually works.

Those are just of few of the questions I’ve had about why a Public Option is so gosh darn important. The fact of the matter is that, other than the hardcore progressives, no one will say the real reason that they want the Public Option: so that all profit incentive is wrung out of the delivery of health care. It’s a stupid reason to want government run health care, but I think it’s pretty clear that’s the real reason. All these other excuses are lame attempts to hide the ball. Which is probably why they don’t make any sense.

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11 Responses to Public Option Questions

  • HIPPA only prevents the denial of pre-existing condition coverage if you move to another employer with group coverage.  If you stop working, or become self-employed, the insurance company can deny coverage of the pre-existing conditions.  Insurance should not, and never should have been, tied to a job.  It’s by far the stupidest thing going in health insurance.

  • The chief reason their explanations don’t make sense are in sync with the reason you shouldn’t ask me how to use the trigonometric parallax and the diameter of the Earth’s orbit around the sun to calculate the distance to C61 Cygni.
    To whit, while I sorta of understand what it is you’re trying to do I don’t REALLY have clue  how to go about doing it.
     
    Neither does Eddie Bernice Johnson or Susie Madrak.
     
    Slight difference between us is I’ll TELL you I don’t know. Eddie Bernice Johnson couldn’t possibly admit she doesn’t really know. Worse yet, the formula for the C61 Cyngi problem is known, and only address one question. Their question is actually Legion in nature.
     
    So they answer these questions using a mechanism closely akin to Corporate Mission Statement Generation mechanisms from the 90’s. A lot of words that sound good, and sort of relate to the subject are strung together for a sound bite to ‘answer’ your question, and then we move along to “next question!”.   Up until recently they’ve been able to rely on the manners of people, or hand picked audiences of nodding heads, to not press the point on the fact that what they’ve said is either not logical, or actually seems to be a string of nonsense in toto.
     
    Realistically speaking the most sensible answer to many of the questions at these town halls should be – give me your name, and I’ll get back to you with an answer on that question. The fact that they, armed only with unwritten bills, bills still in committee, and certainly bills the haven’t themselves read, will pretend to be knowledgeable will instantly demonstrate they’re full of garbage.
     
    How many of the readers here, could, in detail, address questions pertaining to the intricacies of a system that is described in a 1000 pages of documentation? We’re foolish to allow them to pretend they can do so, even with a FINISHED bill available for their review.
     

  • As for the cost savings in the plan I haven’t heard anyone talk about how provisions in ‘the bill’ have a huge hidden cost that even the projections do not cover.

    For just one example, It’s outlined in passages like Section 440 and Section 1904 of the House bill (page 838) under the heading: “Home visitation programs for families with young children and families expecting children,” which would provide (via grants to states) for home visitation programs to educate parents on child behavior and parenting skills.

    This one provision would make the existing Child Protective Services agency open a case file on every single person with children or pregenant. That would take a huge increase in the budget for this one agency in order to comply with ‘the bill’ if made a law. This increase in the budget would be added to the existing agency and so not be added into the cost of Obomacare.

  • “God forbid you should have a public option – you could up and leave your job anytime you wanted!”

    Absolutely. Why, I’d quit TOMORROW if I could keep my health insurance! Oh, and somebody would give me a paycheck so I could afford my mortgage. And my student loans. Gas for my car. Food…

    Why are liberals so stupid?

    • “Why are liberals so stupid?”

      Two reasons: most of them have been brain dead since birth (I should know: most of my family has the problem, and I have seen it firsthand), and, potentially, tight shorts, which cuts off the circulation to the peabrains in between their ears.

      However, liberals are not just stupid; they are also dangerous. Very, very dangerous.

  • What is now clear and apparent is that “the Public Option” is dead as dead can be. There are less than 45 votes in the Senate for it, and, without it, some 100 liberal Democrats in the House will vote against it.

    I called a friend this evening and bet him $100 that the health care debacle is now nearly finished and will soon crash and burn, seen only in recent times when ClintonCare crashed and burned in 1993-94. And we all do remember what happened next: the GOP won a sh!tload of seats in the House and Newt Gingrich became the Speaker. And the GOP held the House for the next 12 years.

    I am more confident tonight, after hearing my favorite Communist, Maxine Waters, say on CNN that she called her friends in the House and they will vote against any health care bill without a “public option,” that this thing will soon be finished. And if such a “public option” is in the bill, it will fail in the Senate.

    So, folks, to sum up: we are near the finish line. As Jim DeMint said, if we can kill ObamaCare℠ it will The Clown’s™ Waterloo, and with that down, down, down will go his administration. And he will take down his fellow Demwits with him in 2010 and 2012. Because the liberals, who saw their huge majorities in the House and Senate as their last chance to foist this crappola on the American people, will not forgive their party for not following through, an they are a testy bunch. Watching their circular firing squad will be one funny piece of entertainment.

  • Presumably, what keeps most of us from “up and leaving” our employment on a whim is the paycheck we receive and not the health care insurance. And even if we do, COBRA is already in place to help maintain coverage….
    You’re joking, right? Have you ever had to rely on COBRA? Nah. You couldn’t have. If you had, you would know it’s prohibitively expensive and no answer to the problem of maintaining coverage at all.
    Moreover, if having a public option encourages people to cease being productive members of society (i.e. working at a job), that would be a net negative for society,…
    Ummm, didn’t you just get through saying that people work for a paycheck and not health insurance?

  • The very first sentence, saying that the only way the poor can get covered is with a public option is false.  If the government helped to reduce costs by allowing insurance companies to offer a very basic no frills catastrophic care package, they could then simply pay the premiums for those who could not afford it.
     
    That would be expensive, but a hell of a lot cheaper than the scheme being proposed.

  • You’re joking, right? Have you ever had to rely on COBRA? Nah. You couldn’t have. If you had, you would know it’s prohibitively expensive and no answer to the problem of maintaining coverage at all.

    Actually I have had to use it, and quickly found it was cheaper to buy my own policy instead of paying COBRA rates to maintain my old one.  Either way, keeping the health insurance I had was not part of the calculus in whether I remained at my job or not.

    Ummm, didn’t you just get through saying that people work for a paycheck and not health insurance?

    Ummm, yes I did.  I’m not sure why you’re confused here, but the sentence you cited was merely accepting the flawed premise of the argument I countered and showing how it logically leads to a net negative on society (i.e. fewer workers, less tax money taken in, more people on public health dole, more tax money out).

  • Why can’t just those why pay taxes get health benefits…how b’out that Obama and the rest of the health care reform starters??? NO seriously, this I could be in favor of, but not just letting any old person that comes to America, even the illegal’s to get health care and our taxes go up the roof???? No, sure, I will cont. to fight this…