Friday, August 14, 2009

When the Government Competes, We lose.

Below is a link to an article that I found very interesting. While it might be a bit long, give it a read. It is great. More and more I'm wondering how people can actually think that a government program would 1.) be any good for America (look at Medicare's expensive troubles) and 2.) would at all be "fair" competition. I am not a supporter of the status quo, I just believe that Obama's plan is not the answer.

"How a Public Health Plan Will Erode Private Care"
(by Robert E. Moffitt of The Heritage Foundation).

Below are some excerpts I found to be of particular interest:

"... But while [a new government plan] might look like a prescription for consumer choice and competition, the reality is very different.... In the new public plan, as is the case for Medicare and Medicaid, costs would doubtless be controlled by cutting payments for medical goods and services, thus reducing their availability.


"...Given the structure, function, and dynamics of such a combination of proposals, the result would surely be a rapid evolution toward either a single-payer system of national health insurance or, at the very least, a highly regulated and painfully sluggish, centrally controlled system of health care in which private health plans and private medical practice are private in name only."


"[A]ny serious market competition would require a level playing field for the competitors. In order to create and maintain this level playing field, any benefit standard established in the public plan would also be applied to private health plans.

Congress, therefore, would have to mandate an equality of benefits at some level between the public plan and the private plans, and that would require either adding or subtracting benefits or fixing the prices for these benefits by legislative action to keep the contest at least superficially fair. As Michael Tanner, a senior fellow at the Cato Institute, has observed, "Private insurance companies would still exist, but they would operate much like public utilities with the government involved in deciding what benefits they offer, what they can charge, and how they operate."


"If the rules and standards, financing and benefits, reserve and solvency requirements, and consumer protections and guarantees are all the same for competing private plans and the public plan, then, logically, why should there be a public plan at all? A common set of market rules for insurers would be sufficient to achieve whatever public good is envisioned to ensure affordable coverage and fair competition. Otherwise, it would seem that the only reason to create a public plan would be simply to have a public plan--a meaningless exercise, unless the goal is public monopoly."


"Artificially low government payments by Medicare and Medicaid to doctors and hospitals guarantee that the true costs are shifted back to the private sector and generate even higher premiums for individuals and families in their private and employment-based health insurance."


"Champions of the government health plan often claim to be sincerely committed to "fair" competition between private health plans and their proposed public plan, but it is impossible to have a functioning national market in which pricing in one portion of the market (private plans) is driven by free-market conditions of supply and demand and pricing in the other (the public plan) is dictated by the government, either in the form of administrative pricing or through a system of price controls. To establish a level playing field, Congress would have to refrain from trying to set prices for thousands of medical treatments and procedures, as it does today for Medicare, and let the market determine those prices equally for the public plan and the private plans that are supposed to compete with it. The government plan and its managers would have to succeed, and therefore profit from their success in offering consumers what they want and need, or fail, lose market share, and absorb losses on their own--in which event, unlike other government-sponsored enterprises, the public plan should be permitted to go out of business without another taxpayer bailout: admittedly an unlikely scenario."


"Taxpayers are also being promised that health care reform will somehow pay for itself, based on fanciful projections of future savings from various delivery initiatives. These savings will probably never materialize. Based on a rich history of failed government predictions with respect to health care costs, especially in Medicare, the projected costs of government health programs are almost always much greater than the government officials promise."

1 comment:

  1. I love how the government imposes unnecessary regulations on industries and when the industry has problems, government blames the industry. The private sector couldn't compete with the government because the government can operate at a loss indefinately.