- The Progressive Pulse - http://pulse.ncpolicywatch.org -

Before you shed a tear for the insurance companies

[1]It seems that opposition to a public health care plan is built around the assumption that the public option would drive private insurers out of business and force us all into a system of socialized medicine.

There are basically two thoughts about how this would happen. One is that President Obama was born outside of the United States and harbors secret socialist fantasies. He will work, so the theory goes, to undermine private insurers. Promoters of this theory point out that Obama once said that if the U.S. were starting [2] from scratch he would favor a single-payer health system.

This is the same point The Economist magazine made recently [3]:

If he were starting from scratch, there would be a strong case (even to a newspaper as economically liberal as this one) for a system based mostly around publicly funded health care.

Of course, the U.S. is not starting from scratch and Obama has said that he wants a system of public and private insurers offering a choice of health plans much like the options available to members of Congress. Obama has also appointed people to powerful positions, like Zeke Emanuel, who think that even if the U.S. were rebuilding a health system from the studs, single-payer would not work well.

The second theory is that the government plan would not compete fairly against private industry and large insurance companies would go out of business with all of the federal favoritism.

The trouble with this argument, as the Urban Institute has noted [4], is that Congress often favors private industry over government programs. The feds have paid private Medicare Advantage plans more per enrollee than it pays traditional Medicare to give a boost to private companies. And the federal government hasn’t shown much interest in allowing private industries to collapse (see banking and auto sectors).

Obama says that he wants competition. That means that if the public plan is failing because of adverse selection it will probably get some federal funds. And if private industry is failing because of an inability to compete, it will also get funding. That’s the only way to preserve competition.

It is also bizarre that private insurance companies say they won’t be able to compete against the public plan. Even if the public plan is less expensive, private insurers say they provide superior service and that the public plan will require long wait times and other horrors. So, that means people will overlook the price tag of the public plan and continue buying private insurance.

I know that everyone reading this desperately wants Blue Cross and Blue Shield of North Carolina to survive as it behaves like a model corporate citizen. Well, I can assure you that Bob Greczyn isn’t going anywhere. Congress wants the competition.