Is The “Public Plan” True Market Competition?by Brad Warbiany
I’m not sure if this is a case of drinking too early in the day or willful dishonesty, but I can’t quite understand why Ezra Klein would misrepresent his opposition this badly:
I’ve been trying to figure out how to make this sound like more than a cute argument, because I think it’s actually a point my conservative friends should seriously consider.
In general, there are two ways for firms to adopt an idea. The government solution — the socialist solution — is to impose it on them by legislative fiat. An example would be Congress passing a law that makes selling New Coke illegal. The other path is through market competition. Plummeting revenue and rising market share for Pepsi convince the Coca Cola company that selling New Coke is a bad plan and they should cut it out.
It is perhaps evidence of the triumph of market-based ideas that the public plan falls pretty decisively on the right edge of that spectrum. The idea here is that the public plan will adopt effective reforms that will then lower its costs and improve its quality. In response, the private market will follow suit.
The conservative argument against a public plan is NOT that the plan will be too effective, too efficient, and too low cost for private insurers to compete.
The argument is that government will unfairly stack the deck against private insurers through outright subsidies or disparate regulatory regimes, while artificially presenting a lower end-user cost to the insured. Essentially we think they’ll keep premiums low by subsidizing the program on the back end through tax dollars.
The government has proven time and time again that it doesn’t like to compete on fair terms. When you can tax your competitors and take revenues out of their profits to subsidize your costs, you don’t have to compete on fair terms.