Contemplating Health Care Reform

Saturday, October 31, 2009

Why the public option will become mandatory

Michael Tanner at Cato has a critical piece about the outcome of health insurance under a so-called public option, Putting Private Insurance Out of Business.

Of note:

The lower cost means that businesses, in particular, would have every incentive to dump workers from their current health insurance plan into the government plan. And, if other provisions of the bill make insurance more expensive, as is likely, the incentive for employers to shift workers to the government plan would be even greater. Estimates suggest that nearly 90 million workers could eventually be forced into the government plan.

It is an economic misconception (or deliberate misrepresentation, depending on your level of skepticism) that introducing a “competing” public plan will somehow achieve lowered costs, but not drive out private providers.

Government-run programs are not subject to regular economic forces, and do not have the same operating constraints borne by private sector enterprises, allowing them to do exactly as Mr. Tanner suggests. To believe otherwise is to live in economic fantasyland.

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