Fannie Med? Why a “Public Option” Is Hazardous to Your Health (Policy Analysis)

Alex Beehler Contributor

President Obama and other leading Democrats

have proposed creating a new government

health insurance program as an option for

Americans under the age of 65, within the context

of a new, federally regulated market — typically

described as a “National Health Insurance

Exchange.” Supporters claim that a new government

program could deliver higher-quality

health care at a lower cost than private insurance,

and that competition from a government program

would force private insurers to improve.

A full accounting shows that government

programs cost more and deliver lower-quality

care than private insurance. The central problem

with proposals to create a new government program,

however, is not that government is less

efficient than private insurers, but that government

can hide its inefficiencies and draw consumers

away from private insurance, despite

offering an inferior product.

A health insurance “exchange,” where consumers

choose between private health plans with

artificially high premiums and a government program

with artificially low premiums, would not

increase competition. Instead, it would reduce

competition by driving lower-cost private health

plans out of business. President Obama’s vision of

a health insurance exchange is not a market, but a

prelude to a government takeover of the health

care sector. In the process, millions of Americans

would be ousted from their existing health plans.

If Congress wants to make health care more

efficient and increase competition in health

insurance markets, there are far better options.

Congress should reject proposals to create a

new government health insurance program — not

for the sake of private insurers, who would be

subject to unfair competition, but for the sake of

American patients, who would be subject to

unnecessary morbidity and mortality.

President Obama and other leading Democrats

have proposed creating a new government

health insurance program as an option for

Americans under the age of 65, within the context

of a new, federally regulated market — typically

described as a “National Health Insurance

Exchange.” Supporters claim that a new government

program could deliver higher-quality

health care at a lower cost than private insurance,

and that competition from a government program

would force private insurers to improve.

A full accounting shows that government

programs cost more and deliver lower-quality

care than private insurance. The central problem

with proposals to create a new government program,

however, is not that government is less

efficient than private insurers, but that government

can hide its inefficiencies and draw consumers

away from private insurance, despite

offering an inferior product.

A health insurance “exchange,” where consumers

choose between private health plans with

artificially high premiums and a government program

with artificially low premiums, would not

increase competition. Instead, it would reduce

competition by driving lower-cost private health

plans out of business. President Obama’s vision of

a health insurance exchange is not a market, but a

prelude to a government takeover of the health

care sector. In the process, millions of Americans

would be ousted from their existing health plans.

If Congress wants to make health care more

efficient and increase competition in health

insurance markets, there are far better options.

Congress should reject proposals to create a

new government health insurance program — not

for the sake of private insurers, who would be

subject to unfair competition, but for the sake of

American patients, who would be subject to

unnecessary morbidity and mortality.

Michael F. Cannon is director of health policy studies at the Cato Institute and coauthor of Healthy Competition: What’s Holding Back Health Care and How to Free It.