The leaderships of the Executive Branch and of both houses of the Legislative Branch have proposed enacting a government-sponsored health insurance company, or ‘public option,’ to compete with private insurers to ensure that all U.S. citizens have access to healthcare. The best way to lower healthcare costs, they claim, is to create a private organization, supervised by Congress, to offer low-priced health insurance to all, and thus force private insurers to lower their prices.
The problem with this proposal is that administrators in the Executive Branch, unaccountable to anyone but the private interests that lobby them (such as health insurance companies), do not tend to disengage themselves from the programs Congress charges them with implementing.
Congress, too, often cannot stop itself from interfering in the operations of ‘government-sponsored enterprises.’ The two government-sponsored enterprises in the mortgage finance market, Fannie Mae and Freddie Mac, achieved near-duopoly status over the past seven decades in that market, thanks to subsidies from Congress.
In its quest to achieve universal health insurance coverage, Congress is sure to subsidise a government-sponsored health insurance enterprise, in order to lower the premium prices the enterprise offers to consumers. Unfortunately, this would also have the effect of driving private insurers to drop coverage for their most expensive policy-holders in order to artificially lower their costs — thus forcing the public option to cover these people, leading to an increase in costs for the public option.
As Congress would not want insurance premiums to rise in concert with the rising costs facing the public option, it would force the public option to keep its prices low while compensating it for its losses by giving it an even larger subsidy. The public option, however, would have no incentive to cut its rising costs, since it would not be paying for the increases in costs. Thus the subsidy would grow and grow as costs kept spiraling upwards and as Congress continued to mandate low prices — and the bill, of course, would be footed by taxpayers.
Moreover, by subsidizing the public option in order to lower prices, Congress would be enabling it to drive out all of its private competitors, who would not have the same access to subsidies. This would create a government-sponsored and privately-operated monopoly in health insurance, just as the subsidies for Fannie Mae and Freddie Mac created a government-sponsored and privately-operated duopoly in mortgage finance.
Rather than reject these claims, however, many of the public option’s supporters embrace them, and advocate a socialized, state-run system for health insurance. Citing the examples of European nations’ lower-cost socialised healthcare systems, they argue that socializing the healthcare industries would lead to decreased costs and increased efficiency.
Ignoring the obvious question — how can political bodies possibly be as motivated in lowering costs as private organizations driven by the profit motive in a competitive market are — let’s examine France’s healthcare system, which in 2001 was rated the world’s best by the World Health Organization.
In France, every citizen has an account with Securite Sociale, the French government’s social services program. This account reimburses each citizen for a certain number of different medical procedures. This allows the French government to pay for a minimal level of healthcare for each of its citizens without determining how this healthcare will be provided.
The result of this policy, according to health economist Paul V. Dutton, is that ‘the vast majority’ of physicians are in private practice; patients have significant choice among doctors and hospitals; and that ‘nearly 90 percent of the French population’ possesses health insurance coverage above the amount covered by Securite Sociale, for which there is ‘a booming (and competitive) private health insurance market.’
France’s healthcare system is highly cost-effective because it is highly competitive, and it is highly competitive because it is very lightly-regulated. In contrast, the United States’ healthcare industries are regulated very tightly by states, and thus are monopolistic and inefficient. The way towards lower costs, and increased access, is through unfettered competition on a national scale, and not through government control.
