Wednesday, February 24, 2010

On That Public Option

Now that Obama has submitted his own health care reform proposal (HCR) it might be a good time to talk more about that vanishing Cheshire Cat of a public option and the reasons why that kitty (who isn't even leaving a grin behind) should not have been kicked out of the house but should have been brought in and offered a nice platter of health insurance mice to eat.

That is, after all, one of its important jobs and the fear that it would indeed perform that job is perhaps why it was kicked out of our house and turned into a feral. Of course the wingnuts also want it out of the house because to them it smells of communism, long, gray corridors with open buckets of vomit and drill-sergeanty medical providers who are really government bureaucrats in disguise. Somehow none of that applies to Medicare, Medicaid or the Veterans' Administration; all existing public options.

Note, first, that many (if not most) Americans do want a public option. That this doesn't get through to the Congress has much to do with who is paying for election campaigns and whose livelihood is threatened here.

Note, second, that the individual mandate without a public option means that all individuals not covered by employer-provided group plans will be at the mercy of those insurance exchanges. The intention is that they will be market-places where individuals shop for the best policies while all the different firms compete vigorously and fairly. But will this happen? Can this happen when the information required from the consumers is tremendously complicated and when the insurance industry still is exempt from antitrust legislation*?

Granted, all the HCR proposals would prohibit the denial of coverage on the basis of pre-existing conditions, for example, and the Obama proposal also advocates federal government powers to block excessive premium increases. But I'm skeptical of the ability of the health care markets to act in a truly competitive manner without strong regulatory oversight, and I doubt that we will get that oversight. As I have written elsewhere, the health care markets are often the best textbook examples of sick markets and we should not place our confidence on a purely market-ridden solution.

A public option could help to keep the markets honest, because it would not have the same profit motive to raise prices or to drop customers. In this way its mere presence in the exchange would benefit not only those who would choose the public option but even those who would never personally want to buy their insurance through the government.
*This footnote was added later: The exemption may be ending.