Punch Line of the Day: Did you hear the one about Medicare and the Public Option?

Thursday, October 22, 2009

Proponents of the Public Option are fond of pointing to Medicare as an example of how effectively the government can provide healthcare insurance. For the sake of argument, let’s assume that Medicare is, in fact, the perfect government program with no funding or administrative issues – God’s gift to healthcare for Americans over 65. So it would seem, given that almost all of our countrymen in that age group are covered by Medicare – and that’s precisely why it’s not an argument for the Public Option.

If there was ever proof positive that a Public Option will put private sector healthcare insurance out of business, it’s Medicare.  Whatever the program’s shortcomings, it is apparently so well designed and priced that almost all Americans who are eligible subscribe to it in one form or another. The private sector, having no demand for its own Medicare-independent competitive coverage, has been relegated to the role of marketing and administering Medicare programs. These private sector programs for people 65 and older offer various additional benefits, but make no mistake about it, they’re all about Medicare.

We’ve all heard the suggestion from people frustrated by the mess that is healthcare reform legislation, “Why don’t we just lower the minimum age for Medicare to cover everyone?” And, you know, maybe it’s not such a bad idea – if you believe that private sector insurance has no place, serves no role in facilitating the delivery of quality medical services. Maybe it doesn’t. Maybe healthcare insurance should be a government service. I don’t think so, but it’s debatable. Let’s just stop pretending that a Public Option isn’t tantamount to a government takeover of the healthcare insurance market with who knows what implications for the larger healthcare services industry itself.

If a Public Option is anything like Medicare, why won’t private sector programs for Americans under 65 suffer the same fate? At the end of the day, the Public Option will be serving the vast majority of Americans. That makes the Public Option a virtual monopoly, with the power, however inadvertent and well-meaning, to remove competition from the market rather than encourage it – while wrecking havoc on the entire healthcare services industry which Public Option insurance is paying, with consequences no one can adequately foresee.

By the way, as a monopoly, the Public Option will, by definition, have no competitive basis for setting the prices of the services its insurance covers. Rather than fixing the imperfections in the market in which the prices for healthcare services are now determined, our government will have replaced that essential market mechanism with its own judgment of what those prices should be, and that is a disaster waiting to happen.

Here’s a simple, but nonetheless powerful observation: Having the government go into competition with the private sector for the purpose of encouraging competition is an oxymoron, and is neither the only or best way to cure a market that is behaving badly. Far from it. The Public Option is little more than an example of a President and Congress that lack the intellectual patience and creativity to craft more effective, far less disruptive legislative solutions.


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One response to “Punch Line of the Day: Did you hear the one about Medicare and the Public Option?

  1. Pingback: Allowing the states to opt out of the public option: Yet another reason to do away with the Senate. « WordFeeder

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