I think the most interesting thing in the president’s speech was this:
The insurance companies and their allies don’t like this idea. They argue that these private companies can’t fairly compete with the government. And they’d be right if taxpayers were subsidizing this public insurance option. But they won’t be. I’ve insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects. But by avoiding some of the overhead that gets eaten up at private companies by profits and excessive administrative costs and executive salaries, it could provide a good deal for consumers, and would also keep pressure on private insurers to keep their policies affordable and treat their customers better, the same way public colleges and universities provide additional choice and competition to students without in any way inhibiting a vibrant system of private colleges and universities.
If this were true, the public option would be no big deal. Of course, there are other factors that would give the government an unfair advantage (notably exemption from regulations, and the fact that the government can’t be sued without its permission), but those would be fairly minor. Moreover, they would be more than balanced by the monstrous inefficiency that government management would bring.
ASIDE: The president thinks that the government would save money by reducing excessive administrative costs, et cetera? What planet is he from? As someone who has had the job of filling out government forms to show compliance with the Paperwork Reduction Act, I can say that the very idea is laughable. But for present purposes, that is all to the good.
An unsubsidized public option would not only be acceptable, it would almost certainly be irrelevant. Like every other government enterprise, it would be expensive and poorly run, and consumers would quickly learn to have nothing to do with it.
Alas, it isn’t true. Of course the public option will be subsidized by the taxpayer. Even if we suppose that this promise is kept in the ultimate bill (which I see as vanishingly unlikely), here’s what will happen:
- The public option will offer low prices and generous benefits to attract customers, causing it to run a large deficit.
- The politicians who set this thing up will not allow it to fail, so they will bail it out with an influx of taxpayer funds. It will probably be termed a loan at first, but the loan will never be paid back.
- The public option will continue to lose money for as long as it takes to drive the private players out of business.
- At some point after that, the system will be “reformed” again. The loans will be forgiven and public financing made explicit.
- Liberals will tell us that the government has saved us from the failure of the private health insurance system.
ASIDE: If the final bill goes with co-ops, rather than a public option, exactly the same thing will happen, with the addition that the co-ops will be officially nationalized at some point (like Fannie and Freddie), probably at stage 4.
ANOTHER ASIDE: Mind you, this is assuming good faith! Sadly, that is an unjustified assumption, since a variety of Democrats have already made clear that the public option is a trojan horse intended to bring about single-payer. Most likely, the pledge will simply be dropped on the floor. But even if not, the bill will take other steps to ensure that the public option prevails, such as giving it a large initial endowment, and burying private insurers in new regulation.
What President Obama claims he will do, produce a plan with better benefits and lower prices than existing plans without running a deficit, simply can’t be done. If by any chance this isn’t obvious, health care researchers say so:
Health care policy researchers are contradicting President Obama’s claim that a government-run health insurance program would be self-sufficient and could rely on premiums, saying it’s not possible to insure up to 30 million people with better coverage and reduce costs at the same time.
“The numbers don’t hold up,” Grace Marie Turner, president of the Galen Institute, a think tank devoted to health policy, said Thursday.
Furthermore, Obama’s own example proves the point. He cites public colleges and universities as public institutions that do a good job. Indeed they do, but they do so by relying on enormous public subsidies! In fact, we have recently seen what happens when those subsidies are cut. The University of California, being left to subsist on a smaller-than-usual subsidy, is furloughing staff and faculty, prompting talk of a walkout.
POSTSCRIPT: As usual, the president is very impressed with his own supposed consistency. Is there any instance in the past in which the president has publicly “insisted” that the public option would be unsubsidized?
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