More Timely Than Ever!

Friday, June 12, 2009

Will the “Public Option” Be a Cutthroat Competitor?

President Obama says he doesn’t want the government to run health care. He just wants a “public option” to keep the private insurers “honest.” Imagine that: A government bureaucracy keeping someone else honest. Physician, heal thyself!

But would a public option keep insurers honest? People who dislike markets often spin horrifying scenarios about big companies engaging in cutthroat competition and predatory pricing to drive their rivals out of business. But none of these folks ever see this danger in government “enterprises.” A public option will have sources of revenue no private insurer has: captive taxpayers, the U.S. Treasury, and the Federal Reserve. Do you mean to tell me this won’t permit the government program to engage in cutthroat competition and predatory pricing against the private insusers? And let’s not forget that it will be government that dictates what products the private companies can sell.

2 comments:

Anonymous said...

This is not true at all. Granted I have only read the bill presented in the house, but it stipulates that those choosing the public option will be paying a premium just the same. Premiums will go to an isolated insurance account at the treasury that will be used expressly to fund claims. The government will have some regulatory power over insurers, but private insurers will have to create better plans to compete and pay out less in profits and more in health care, the way they were theoretically supposed to work in the first place! People should read the bill and realize how beautiful the health insurance exchange is. It is truly American in shape - forcing competition and innovation. The public option will, just as private insurers have to, need to adjust premiums based on the market to compete.

Sheldon Richman said...

It's called the camel's nose under the tent. Start modestly, then amend the law later. It has happened many times in the past. It will be no big deal for Congress later to "temporarily" help out the government's insurance program when it gets into trouble.

Have you heard of Fannie Mae and Freddie Mac? Officially, they weren't ever going to be bailed out either.