Why do we assume that the public and private sectors can’t coexist in healthcare, as they do in housing, broadcasting, and other areas of American life? I argue below that creating a public insurance option will offer real alternatives for Americans who fall through the cracks of the existing system. The free market has given us a stultifying oligopoly in commercial radio; if you want something other than Britney Spears or Rush Limbaugh, though, you can switch the station to National Public Radio (NPR), a lightly subsidized, nonprofit alternative. Similarly, the public option would create greater variety in insurance markets that badly need it.
Critics of President Obama’s healthcare reform have made some wild claims against the proposal, most which have nothing to do with the bills under consideration in Congress. The lurid fantasies of insurance industry lobbyists and town hall protesters tend toward the macabre: the elderly and veterans are said to be targets for ruthless, cost-cutting government bureaucrats. Like me, you might be surprised to hear that government bureaucrats were suddenly concerned about efficiency. But when it comes to killing old ladies, I guess they just can’t resist.
Americans of good faith, though, have raised legitimate concerns about these proposals. Some have questioned whether the creation of a “public option” – a government health insurance program, similar to Medicare, but available to anyone who wants to “buy in” to it – would bankrupt the public treasury and drive the private insurance industry out of business. Supporters of the public option say that it would be cheaper than private insurance, putting basic healthcare within reach for small businesses, freelancers, and those who are simply not poor enough to qualify for Medicaid, but still can’t afford the $12,000 a year price tag for family coverage. The plan would be cheaper because it would not turn a profit; it would produce economies of scale, covering a large pool of people nationwide; and it would spend less time and money trying to deny coverage to the insured. Most of us pay our insurance companies, through premiums, to pay people to spend the day figuring out how not to pay for our care when we do get sick. In contrast, Medicare has dramatically lower administrative costs than private insurers.
Critics say this price advantage will make it impossible for insurance companies to compete with it. In fact, they suggest that Obama is really trying to create a universal, “single-payer” system by stealth. My dentist told me the other day that the public option would instantly warp the playing field in the healthcare industry. Most employers would switch their employees over to it, since it would (presumably) be cheaper than private insurance, or employers would simply stop offering coverage and force their workers on to the public plan. Iowa Senator Charles Grassley captured the conservative mood recently when he said that government was not a competitor with private industry, but a predator.
Why do we assume that a public alternative would squelch private enterprise? These allegations ignore the many examples of coexisting private and public services – the city’s swimming pool does not make the YMCA’s business untenable. A city golf course doesn’t kill the country club. Similarly, PBS and NPR were created in the 1960s as needed additions to the menu of broadcasting choices. The FCC chair Newton Minnow famously described television as a “vast wasteland” in 1961; the idealists of the early 1950s, who dreamed that TV would be a tool for bringing high culture the public, were disappointed to see Ozzie and Harriet instead of opera on the air.
The dreamers always had a touch of elitism, but there was no denying that commercial TV had produced a lot of garbage. Minnow saw “mayhem, violence, sadism, murder… cartoons… and endlessly commercials — many screaming, cajoling, and offending. And most of all, boredom.” With a little support from the government, new alternatives were created to provide the kind of programming that the private market did not produce. Hawaii Five-O and The Gong Show benefited from the company of Big Bird and Jim Lehrer. One did not drive the other into extinction, and the public option in broadcasting furnished sources of high quality news and entertainment that might never have survived in the commercial market. In this way, small groups of viewers whose interests might be ignored by the biggest networks got fare that was suited to them.
NPR is freely available to the public. It has a place on the radio dial next to Top 40 stations and right-wing talk. It offers jazz, classical, and independent music that might not survive on a for-profit basis. It receives a small amount of funding from the government, and has to be a responsible steward of its resources. Studies have shown that its listeners do better on factual tests about current events than the viewers of Fox News. And its programs are actually popular: more people listen to All Things Considered than watch Good Morning America, but public broadcasting has not strangled corporate media.
Unfortunately, President Obama has ignored these examples, instead using an incredibly self-defeating argument to defend his health plan. “UPS and FedEx are doing just fine,” he told a town hall audience. “It’s the Post Office that’s always having problems.” This is supposed to be an argument for the public option? It is as if Obama wants to bolster those critics who threaten that public insurance would make seeing your doctor like going to the DMV. The Postal Service does not even directly compete with UPS on letter delivery. It would be better to find an analogy that clearly shows that introducing a public option to the marketplace would improve the resources available to Americans, without undermining the ones already in place.
Like public housing, public healthcare would serve those who are not well served by the market. The market is good at producing inessential, but very desirable, products like iPods at ever lower prices. The market is also good at turning out $400,000 houses for people with money to burn. But it is not especially good at creating decent housing that a single parent of three making $25,000 a year can afford. It just doesn’t pay to build adequate, safe housing for the person who works the register at Burger King. Contractors and developers understandably devote their resources to the most profitable projects, like the latest luxurious subdivision, so fewer modest homes get built. The person making minimum wage still deserves a place to live as the person who can buy the McMansion.
This is why we have a “public option” in housing: the government rents apartments and houses, and offers subsidies for the poor to rent private units. Although imperfect, some of these programs work fairly well. Most importantly, they make shelter possible for those who can’t afford what the market turns out.
In healthcare, programs like Medicaid, Medicare, and S-CHIP help people whose needs do not match up well with what the market profitably offers (the poor, the elderly, and children, respectively). However, there are also small business owners who can’t afford to buy insurance for their employees or even for themselves. They are not poor enough for Medicaid, and they lack the buying power that a large employer like IBM can leverage to get insurance at affordable rates. The newly unemployed find that stopgap solutions like COBRA are very costly and very temporary.
In typical American form, we have tried to respond to specific problems in piecemeal, pragmatic fashion, creating a cobweb of social programs that leave many unprotected. In fits and starts, we have tried to deal with healthcare for the elderly, the very poor, the disabled, veterans, children, and so on, resisting the sort of sweeping solutions chosen by Canada or the United Kingdom. This pragmatism is our virtue and our curse. We get to experiment with programs tailor-made to specific problems, on the local and national level; San Francisco, for instance, recently began its own public insurance plan, open to all San Franciscans, and the early results seem to be better care and lower costs. New York offers Child Health Plus and Family Health Plus, public insurance programs that are available to those who can’t receive Medicaid but who still make very little money. The nation can look to such programs as models of what works and doesn’t work. However, when it comes to the uninsured, and the ballooning costs of healthcare, it’s fair to say that we are tinkering while Rome burns.
The availability of a public alternative would mean that citizens and businesses anywhere in the country could choose a health plan that would enjoy large economies of scale and remain portable from job to job. If a private plan offers better prices or friendlier, faster service, a person can join that plan or a business can offer it to employees. The better-off will inevitably do so. For whatever reason, parents send their kids to costly private colleges even though a heavily-subsidized option exists in the public university system. Both options serve different people with different resources and different interests.
What is shameful right now is that the wonderful free market offers no product that 40+ million uninsured Americans can afford. The government is there to offer what people need but the market cannot provide. This is why we have public libraries, schools, nursing homes, Medicare, roads, national defense, and so on. Research shows that insurance companies in many parts of the company face next to no competition currently. In North Dakota, for instance, Blue Cross Blue Shield holds 91% of the market. Why wouldn’t they increase their premiums through the roof? Healthcare is one of those goods where economists would say demand is very “inelastic.” If the price of a stick of chewing gum rises to $20, you will readily decide to forgo the gum. If your physical survival is on the line, though, you are more likely to pay whatever price – which explains why insurance companies, oligopolistic at best, have been free to double their premiums in the last ten years.
Now is the time to institute a real choice to Americans all over the country, so we are no longer hostage to the insurance monopolies. We shouldn’t have to live in fear that catastrophic illness will bankrupt us, turning our final days into a morass of frustration and neglect. Every American is one diagnosis and one job away from abject poverty – unless that person happens to be a senior or a veteran, and can count on government insurance. The rest of us deserve a real choice. And history shows that public and private choices can prosper together.