Wednesday, September 30, 2009

No Public Option for Healthcare Insurance!!

It's been fun watching the healthcare reform circus as the months have rolled by. It's also been disappointing. I view the notion that the government can "compete" with private companies in any market as preposterous. Ridiculous. Nonsense.

Government "competition" with private industry is not within the definition of a free market, and therefore a free-market optimum result or equilibrium cannot be attained. However the public-option proponents imagine things will play out, I can guarantee it won't happen that way. That's because they are basically hoping for an outcome that contradicts human nature, and the fundamental mathematics of markets and incentives systems. To me it looks as ridiculous as expecting water to run uphill.

We can refer to my earlier post about market regulation and the ice rink analogy. As applied here, medical insurance companies are the skaters and the government is the rink owner. The goverment can define the playing surface in a proper, free market, but it can't "compete", by definition. That's because if the rink owner plays, it will always win. It controls the game.

Or imagine a football game where one team includes the referees and the stadium owner, and millions of dollars are at stake. Oh, and the refs can change the rules anytime during the game. Who will win? I'll bet on the team with the refs. Do you want to take the other side of the bet?

In the medical insurance market, the government specifies the market parameters, has infinite resources, is subject to massive political incentives from the electorate (who are also insurance customers) and has the power to tax all of the other insurance companies. Again I ask "who will win?"

At the very best, as an outlier case one could imagine the federal government running its public option as a wise, benevolent despot. That is, it would undermine the private insurance options just enough to squeeze profits a little and force increases in efficiencies, and then stop. In this scenario it would be self-limiting, and forbear on many actions it could take. This won't happen. Please take an honest and critical look at any other program the government has undertaken. The contitutional limits on government exist for reasons based in experience and wisdom.