Saturday, June 27, 2009

The Public Option for Insurance

Prof. Mankiw of Harvard has a column in tomorrow's Times (yes, for once I'm getting a jump on the news) on the case against the "public option" in a national health care program; running a government health care insurance program alongside the private programs.

He's much better educated than I, so I should not disagree with him. But that only sometimes has stopped me from voicing opinions.

I'd point out to the good professor that the US has already run an experiment of having private insurance plans and government plans side by side. And what happened? Was the professor's prediction that the government would be "virtually the only game in town" fulfilled?

No. We've had parallel crop insurance programs ever since the FCIC was created towards the end of the New Deal because it was felt private insurance plans didn't do the job. And government did not drive out the private companies; today there is no government insurance operation, just private plans, albeit heavily subsidized by the government.

Mankiw's mistake is to assume there would be a straight competition on economic grounds between the private and government options. Not so. There would be a continuing political/economic struggle in which the private companies would have the advantage. Once the push for national health care is over, the public will lose interest and focus and the role and power of the special interests will return to the fore. In that struggle, government will be the loser.

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