Last night Sen. Charles Schumer went on the Rachel Maddow Show to say that he and Sen. Jay Rockefeller had proposed amendments to the Senate Finance Committee health care bill that would insert a public option into it, and that if the public option passed through the Finance Committee, it had a very good chance of being in the final bill that comes to a vote in Congress.
Polls have shown that most Americans support the public option, which the Obama Administration and many Democrats support as a way to "keep the insurance companies honest." Schumer, in his TV appearance last night, spoke of how the public plan would not need to spend billions on advertising and other things that private-sector companies must do to attract and keep customers, and make profits. Therefore, it should be able to provide lower-cost care and pressure private carriers to become more efficient and cheaper themselves.
And this is precisely the problem.
Private companies in all likelihood will have no hope of ever being able to compete with the government. The playing field will not be level. The government plan, if administered efficiently (and I'll grant you this is a big "if"), should ALWAYS be able to deliver cheaper, better care.
The best example of this dynamic: Fannie Mae and Freddie Mac. These two government-sponsored enterprises, while technically not owned by the government, enjoyed huge advantages over banks and other fully private mortgage lenders. Investors, thinking Fannie and Freddie were backed by the full faith and credit of the US government (because Congress had established both companies in the interest of broadening homeownership), lent them money at lower interest rates than private competitors could garner in the market. This enabled Fannie and Freddie to build gigantic mortgage portfolios that ultimately contributed to massive systemic risk and prompted the US government to bail them out.
I don't think that a public health plan would contribute to that kind of systemic financial risk, but it would have a similar, unfair, advantage over private insurers in the market. Now I'm not saying insurance companies haven't been responsible for some truly heinous behavior. Nor am I saying that our health care system does not have serious, fundamental flaws that need to be reformed. What I am saying is that you cannot force private companies to compete in the market against a government plan that does not have the same profit motive.
We must either go all the way and establish a single-payer, Medicare-for-all-type system, or find a way to achieve reform while preserving free-market competition among private insurers. Perhaps prohibiting insurers from dropping sick people and boosting safeguards against Americans losing coverage when they change jobs, among other steps, could accomplish the latter task. But we can't expect private companies to compete effectively against the government. Sometimes compromises yield really bad outcomes.
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1 comment:
Your right Justin, Health Insurers will not be able to compete with a public option. No chance. Insurance companies cringe when the government forces them to cover a new service mainly because they will have to raise premiums. Raising premiums means losing customers. NO one, not even insurance companies like to piss off and lose their customers. Insurance sometimes don't want to cover new or special services precisely they can keep the premiums affordable for the masses. It’s not all unbridled profits. The state of NJ regulates Insurance profits to 15% above premium intake. in other words NJ Health insurance companies charge a 15% commission in order to administer health insurance. This may sound like a lot, but managing health insurance and human resources is very very hands on hands and labor intensive.
I favor the government taking over catastrophic cases or basically reinsuring the insurers. This will save thousands of private jobs and will bring premiums down to a reasonable affordable rate, hopefully around $200 a month per person.
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