Newspapers and television continue to “report” that most people favor a “public option” for health care.  It would appear that eventually, enough people will go along with (what they think is) the crowd who want a public option so that Senators and Congressmen will have polls to hide behind when they vote for this provision.  The polls vary widely and you can find a poll to say most want or most don’t want a “public option.”


It is my guess that those who do want a “public option” feel that way because they believe it will be at a lower cost than their current insurance.  I think they also assume that it will be as good a program as what they now have.  I think both these assumptions are wrong.

First, I don’t think a “public option” will be cost effective.  If it is, on the surface, the real costs will be hidden, much like the case with Medicare today. Medicare can be made to look good on paper if you don’t show the cost shifting that removes much of the cost and transfers it to private payers.  By definition, government operations are supported by public money and laws written in their favor.  In the short term, some people may receive medical care under a public option for a price lower than they would get in the private sector.  In the long term, however, all taxpayers will pay the true cost of that care.  As proposed now, the bulk of that cost will shift from the government programs to the private sector.  The bulk of the taxes will be paid by those who earn the most.  As time goes on, the high income individuals will not be able to support the costs and taxation will increase on the ‘middle class.’

I also believe that quality of care will go down.  When there is little choice (like in Canada or Britain), there is little incentive to give better service than your competitor.  When that is the case, you get horror stories about not just low quality care, but, neglect.  I was recently sent an interesting report from England about the NHS.  It is a fascinating, if disturbing, report.  See it here.

I still go back to an old business school line: “Fast, Cheap, Good – Pick two.”  If we are to believe the politicians, we can have faster, cheaper, and better care if we turn it over to government control.  The evidence shows that you can’t have more than two of these things without the third suffering.   If you have ever sold something to the government, you will have seen the tons of paperwork, the many special requirements, and the layers of bureaucracy that drive the price of an item higher than one could imagine.  $84 hammers are real.  The U.S. government buys them all the time.  You can have one for about $25 at one of many competing companies who want to sell you one.  My guess is that if we had a ‘public option” in hardware, we would also have the ability to buy $84 hammers and we would also have the joy of waiting through the four month procurement process.

I hope many of the people who believe that a “Public option” will be a less expensive option will look at the numbers or check the track record of those who want them to believe.  I think they will change their minds.