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.
“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.