Where’s Lumpy?

How many times in the past few months have we heard President Obama stump for the public option for healthcare coverage with the line “if you like your private insurance, you can keep it?”  He may truly believe that. I do not.

When private companies operate at a deficit for long enough, they go out of business.  When elected officials run up tens of trillions in debt, including current unfunded liabilities in Social Security and Medicare, they get re-elected despite (or because of) their arithmetic failures.  How could a private insurer “compete” against the government, when the latter can bleed red ink freely and without consequence?  I can imagine two possibilities:

1. Private insurers won’t be able to compete against the public option, not because they aren’t viable, but because the rules are different for one of the competitors (which is, of course, no competition at all).  One by one, the private insurers fail.  Voila, we get the back-door single-payer system that President Obama used to favor, before it became politically inexpedient.
2. The insurance industry, realizing the danger behind door #1, lobbies Congress to pass what Ayn Rand called an “Anti-Dog-Eat-Dog” act to prevent destructive “competition” by the public option.  The act would enshrine price controls and benefit caps in law, and forbids new competitors from entering the market.  For a few hundred thousand in contributions to campaign funds, it establishes a de jure healthcare cartel – this time with Uncle Sam as a founding member, to get around those pesky anti-trust laws.

These options aren’t necessarily mutually exclusive, of course.  Both lead to a single payer system, but because the cartel in the second option can claim some semblance of “choice” between insurers, it scares me more.  It boils the proverbial frog more slowly.

No apologist for the insurance lobby, I would scarcely be surprised if someone documents its rent-seeking shenanigans in Congress.  Such abuses should be brought to light and shamed.  However, to accuse them of being afraid of a little competition – when that competition is anything but fair to them – is disingenuous.  On the other hand, to expect the public option to curb corporate rent-seeking is simply naive.