- Competing With The Public Option

Of all the deceptive and misleading talk around the Healthcare debate, nothing is a more distorted than the discussion of using a ‘public option’ as part of a “Market Based Solution” to keeping costs down. I don’t know if it’s intentional distortion or simple ignorance, but the discussion between politicians and the talking heads has wandered far from the truth. So let me clear it up for you a little.

When there is an actual market, it’s based on consumers of like products making a free choice between them. A market uses the price of each choice to communicate it’s value to the consumer... choices that cost more provide greater value, and choices that cost less provide less value. Then with each person deciding for themselves which values are worth their cost and which aren’t, the ‘best’ options will become the most popular.

This is how any free market works, be it in apples, or crude oil futures, or used cars. This is a simple concept …economics 101. The only time it doesn’t work is if you refuse to allow consumers to make a free choice, or refuse to allow providers to set their prices as they see fit. Those are precisely the two things that government does when it tries to ‘fix’ something, and it's doing both in the healthcare industry right now. This makes the market for healthcare inherently less efficient than it would otherwise be.

For instance, when the law mandates that the people getting the benefit of a particular choice and the people paying the bill for it are two different people, the market fails to function correctly. In a situation like that the person getting the benefit wants the most expensive option because it includes the best benefits. Cost is irrelevant to them because they aren’t going to be paying it. Meanwhile the person paying the bill wants the cheapest option because … well because it’s cheapest. To them it’s the quality of the product or service that’s irrelevant because it isn’t them who will be receiving it. When you add a negotiation between the purchaser and consumer, it might still be possible for a market to work all that out. But if it does mange to do so, it will be a much less efficient process than an actual free market would be.

This is the current state of affairs in the healthcare industry in america today. Employers pay the bill, and employees receive the service. Employers care only about cost, and employees care only about quality. The market works more or less, and American’s attitudes toward their current health plans reflect that. But even at its best it’s a horribly inefficient system. And its government’s participation in the system that makes it inefficient. Government isn’t improving the market for healthcare it’s doing all it can to prevent it from functioning correctly. It’s making sure that the value for consumers and the price for purchasers have as little to do with one another as possible.

When we add ‘a public option’ to all that, we don’t get more choices and a more efficient market, we get fewer choices and a less efficient market. Why? Because a public option includes a taxpayer subsidy designed to artficially lower its price. The public option may cost more overall to produce than the best private plan, but since it’s price won’t reflect that cost, the purchasers of the plan will have no way of knowing it. And in an already distorted market where purchasers and consumers are two different people, this would be a recipe for disaster.

Since the price of the public plan will be artificially low compared to similar private plans, most employers will choose it regardless of the value it provides. So the consumers of the plan will have a choice of taking a public option, or paying for their own insurance. But taxes are not optional… we will all be required to pay our share of ‘the public option’ whether we use it or not.

So anyone who wants to buy their own medical insurance will be paying those taxes plus the cost of whatever private insurance they buy. Their total cost for healthcare will be something like twice the cost of the public plan. And since it’s a rare company that can charge twice the price for a similar product and manage to stay in business, eventually the ‘public option’ will drive the private medical industry out of business.

That’s how it works. That’s the real world… not the world of politics. Anyone who says it won’t be that way is either hopelessly ignorant, or is lying to you.

In the world of leftist politics they believe that the inefficiency in the healthcare market comes from ‘profits’, but that isn’t really an issue. ‘Profit’ is just the tiny sliver, pennies on the dollar in the best of times; that a company has left over after they pay everyone else they owe money to. In Nancy Pelosi's world of unicorns and rainbows, eliminating the profit will mean a dramatic 'savings' for Americans. But as I said, this is either dishonest, or ignorant.

But if congressional Democrats are really concerned about removing profit, all they have to do is deregulate the healthcare industry and the market will take care of that for them. A company with a tighter profit margin can charge less for the same service than a company with a fat one. If their price communicates that to consumers, then they’ll act accordingly. It’s a mistake to say that the market for healthcare is currently broken and only government can fix it. The fact is, it’s the government that’s broken the market for healthcare, and only eliminating the government participation can fix it.

The president talks about the status quo bankrupting our country, but it isn't the private medical industry that's doing that it's medicare. Medicare has promised 54 Trillion dollars in benefits to present and future retirees that they can't possibly hope to pay. that's where the real problem with the healthcare market lies. They know they can't afford to borrow that money anymore, and they dont' want to say no to the people promised the benfit. So they want hide the mismanagement by sucking the rest of the industry down into the hole with it.

It isn't the healthcare industry that needs fixing but the government participation in it. It's medicare that needs reforming, not the private sector. and the solution to that is not to force more people to accept a government plan as their medical care provider.

There will be no competing with a public option, and the Democrat description of ‘a market for healthcare’ is disingenuous. It’s just another shameless power grab by political class that believes that you’re too stupid to make your own choices.