The Public Plan: Dissents To The Dissent

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26 Jun 2009 09:48 am

This dissent produced quite the backlash. A sample of some of the better dissents to the dissent:

I am an antitrust lawyer with an economics degree, so analysis of monopolies is a big part of what I trained for and my job. The e-mail is mostly content-less gibberish. It shifts back and forth using the same “monopoly” label to describe three separate and analytically very different concepts, which are “monopoly” “exercise of monopoly power” and “monopsony.” If a public option plan eventually turns into a single-payer system because it gets the best prices or is subsidized, what we will have is a monopsony in the market for covered medical services, which unlike the exercise of monopoly power does not generally harm the public.

The talk about “suboptimal” amounts of medical coverage also makes no sense, because there is never a way an imperfect market can determine what the “optimum,” is, and even a perfect market will require us to adopt one of the typical definitions of “optimum” such as Pareto or Kaldor-Hicks, which I am happy to but many moral traditions would not agree with.
You can most clearly see the reasoning in the e-mail is faulty by thinking about current “single-payer” markets. Right now the government is the only domestic buyer of fighter jets and interstate overpasses. Can we therefore conclude using the same logic that the number of fighter jets and interstate overpasses produced is somehow “suboptimal”?
I’m not arguing for single-payer here. Rather I am arguing that people who attempt to make a priori arguments about economic policy using vague memories of freshman econ concepts are sprouting nonsense. Even the most general rules like “price controls don’t work” and “price-fixing always hurts consumers” are riddled with exceptions which require careful research to identify.

Another reader adds:

Your reader's dissent of the day regarding public option seems misinformed. His argument depends entirely on his false belief that the public option is advantaged by some government subsidy that isn't available to the multitude of private options. This is simply wrong. Proponents of the public option ranging from Senator Schumer to Jacob Hacker explicitly recommend against any special subsidy. Instead, all plans--private and public--would be funded by premiums.
Now, it might be possible to argue that a public plan is "subsidized" by not having to produce profits. This is absurd. Opponents of government programs often argue that private corporations have certain indispensable advantages--nimbleness, responsiveness to demand, innovation, etc. These supposed advantages don't magically disappear, do they? So the point is not whether a public or private insurer has a competitive advantage; it's whether those advantages benefit consumers and society. The best way to answer that question is to let competition for customers in a vigorous market decide. That's what the public option offers and that, in the end, is exactly what its opponents hope desperately to avoid.

Yet another reader:

Your reader dissent on the public option mischaracterizes the subsidy, and in doing so, fails to make a valid point. The public option is not what will be subsidized, but instead low- to middle-income individuals' purchase of health insurance. Effectively, under all the public option proposals floating around, those who can't afford coverage will receive a subsidy from the government (whether as a voucher or tax rebate) to buy health insurance on the market. They can buy the public option with their subsidy. They can buy a private plan with their subsidy. Whether the public plan will out-compete the private plans is a separate question, but your reader's description of the subsidy, and the corresponding analysis is fundamentally flawed.
Robert Reich makes this point (and others) at TPM.

Another:

The public plan won't be subsidized by taxpayer money. Sure, implementation of a public option would require some seed capital to set up the infrastructure for such an endeavor. But beyond that it should not receive any subsidies nor have I seen evidence to suggest it would. The reality is that the system is not competitive today and having a public option that's focused on cost containment and quality rather than profit margins would provide genuine competition to a market that badly needs it.
If we do not have a public option then any rules we put in place to contain costs will be routed around by insurers. If we say they can't charge more in premiums they'll raise out of pocket costs. If we say they can't raise out of pocket costs they'll cut benefits. It becomes this cat and mouse game where ultimately the costs are not contained in any meaningful way. Having a mandate will just make the situation worse by pumping more cash into a broken system without any means to insure that costs are ultimately reduced.
On the other hand, if we have a public option then we can actually deregulate the private insurers to a large extent. We can give them free reign to price their plans as they wish. We'd just have some requirements that prevented them from discriminating based on preexisting conditions and clearly disclose their pricing and coverage. As such they can raise premiums, lower premiums, offer different benefits packages, etc, and the government doesn't get put into a position of needing to regulate this. They just have to compete against what the public option is offering and they'll live or die based on the merits.

Second to last:

My brother runs a large multi-specialty (but mostly primary care) physician practice in a rural state.Their group is already on the verge of opting out of Medicare because of the low fee schedule, and because they are comfortable they have earned enough patient loyalty and other goodwill to survive as non-participating providers. If their group (representing about a third of the primary care physicians in the area) opted out of a “public option” plan it would be pretty difficult to sell that “public option” plan in that area. If the second large primary care practice in the area also opted out, then only the most price-conscious consumers would even consider buying the “public option” plan.
People are willing to pay more to have access to their own doctors, especially when the alternative is long waits for appointments and, often, lower quality care. If premium price savings come at the expense of quality and availability of care, then many consumers will base their buying decision on factors other than just the lowest premium. This would give the private insurers an opportunity to compete with the public option by courting providers (through higher reimbursement, risk sharing, etc.) to enable them to promise greater choice and higher quality. If anyone doubts the strength of these market forces, consider the continued existence of fee-for-service plans (usually higher cost) notwithstanding the advent of HMOs (lower cost but more restrictions on access to care).
Your dissenter might point out the large barriers to care. But ours is a wealthy country. If a "public option" actually got and used monopoly power in a way that led to the horrific rationing and degradation of care your dissenter anticipates, you can be sure a competing insurance company would be able to raise enough capital to enter (or re-enter) the market.

Last one:

You can make a (mostly) non-ideological argument against the public plan as follows - if it's so much better, everyone will choose it, and eventually there won't be any other providers. At that point /public sentiment/ will have been changed such that further political decisions are made (such as moving completely to single-payer, or preventing private companies from ever re-entering the market) that will eventually be disastrous and irrevocable.

Of course, that argument has an awful lot of ifs, and it pre-supposes that future politicians won't be able to make coherent arguments when necessary. Sure, it's POSSIBLE, but that's an awful lot to hang virulent opposition to the concept of a public plan.

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