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Why the Public Plan Is a Fundamentally Conservative Idea

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.

But this deal won't be around forever. The public plan is an effort to institute reforms through a market mechanism. But if it fails, and the health industry doesn't manage to bend the cost curve on its own, it's fairly likely that it will end up on the business end of some serious new regulations. And at the point that costs become a crisis, those regulations will need to work fast. That means they'll be implemented in the government's way, not the market's way.

By Ezra Klein  |  June 4, 2009; 1:55 PM ET
Categories:  Health Reform  
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Comments

Conservatives aren't for free markets, they're for capital holders. To pretend otherwise is to buy into their myths. Its why they're upset about car dealerships being kicked to the curb no matter how antiquated the system is but are demanding constant reworking of union contracts.

Posted by: endaround | June 4, 2009 2:22 PM | Report abuse

Well said, and well-framed.

Just because the phrase is *public option*, too many anti-reform people seize on the word "public" and get themselves all knotted-up with their reflexive entitlement-hatred and general disdain for anything and everything Gummint.

What the public option actually represents is the insurance industry's last chance to get their acts together and serve their paying customers fairly and well. If Big Insurance cannot manage that--if the players therein are too firmly wed to the old model wherein people can like it (pay their premiums and accept their capricious denials, delays, and cancellations) or lump it (try finding coverage elsewhere, sucka!)--they will now learn the same lessons every small businessperson learns right away: treat your customers well, or someone else will.

In this case, if Someone Else winds up getting all the business because Big Insurance couldn't bring itself to care about all those customers so...*comprehensively*, well, they will eventually lose their customer base and we'll in effect have ourselves a Single Payer system in the US anyway.

Just like a number of other (extremely) civilized nations (with healthier citizens) do.

Posted by: litbrit | June 4, 2009 2:31 PM | Report abuse

It really depends on how the public plan is structured. If the public plan really is cost neutral for the federal government to operate, it provides a reasonably-priced insurance option for older and/or individuals with pre-conditions, and it provides a true competitor for private plans, I agree with Mr. Klein. I think it is deeply unlikely all of this will happen though. My best guess is that the public plan, if it comes to fruition, will end up being heavily subsidized from general revenues. An unfortunate outcome given how large the present and forecasted future budget deficits are.

Posted by: Dellis2 | June 4, 2009 2:33 PM | Report abuse

You're right, Ezra.

Unfortunately, conservative "thought" has deteriorated to the point that they have trouble going beyond established cliches to rethink how they can apply conservative values and ideas to contemporary problems and opportunities.

Political expedience, rigid preservation of the status quo, and conformity drive conservative thought today. Which is too bad because conservativism could be about building and maintaining a healthy society. Instead we've got the cartoonish defense of torture, bigotry, and concentrated wealth.

Posted by: jefft1225 | June 4, 2009 2:38 PM | Report abuse

EK: "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."

If it were that easy to lower costs, private providers would be doing so already. The advantage that the public entities have is their access to public funds.

Posted by: tomtildrum | June 4, 2009 2:47 PM | Report abuse

I tend toward the conservative on economic issues, but healthcare is one (of several) areas where I part company with so many of those folks who call themselves conservatives.

For some time now, I've watched with not a little amusement as these folks have argued out one side of their mouths how inefficient any government involvement in healthcare is, and out the other side how a public plan would drive more "legitimate" private insurers out of business. Presumably, they would die as a result of some gross inefficiency in the public plan. I'm still trying to get my head around this dichotomy, but so far it isn't working.

If Mr Gawande is right, this part of the debate may not have a tremendous impact out of the gate. But at least is something of a start. Having a structure that makes it possible to impact point of delivery issues down the road can only help.

Anyway, I have to agree with Ezra that including a public plan *is* the conservative position, even though it will be opposed tooth-and-nail by the "conservatives."

Posted by: J-NC | June 4, 2009 2:51 PM | Report abuse

There ya go again, Ezra, thinking that people act in rational interest.

First, pain tomorrow is always better than pain today. The CEOs of the healthcare biz will be long into retirement before they would have to really fear government action if they fail.

Second, the stockholders of their companies are overwhelmingly big holders and all they care about is very short term increase in profits and revenues. They will move on to another segment if healthcare's cash cow gives no more milk.

Third, neither the private insurers nor their congressional supporters really fear a major change either now or down the road. There is no prospect of a liberal/progressive/social solution passing the Congress and no prospect of a House/Senate majority of a party composed of those who think this is a good idea being in control. And even if their was, Obama will be gone someday, and the Repubs may get another Reagan zombie to veto it.

Finally, dont' forget the 'drown the government in the bathtub' crowd. They want a government out of money to do anything, so curing the budget crisis isn't a priority for them. They will be happy with paying for just defense and interest on the debt.

So much for rational self interest: it reinforces doing just what they have been doing, viewed from their perspective.

Posted by: JimPortlandOR | June 4, 2009 2:51 PM | Report abuse


Yeah, I further think that private insurers/conservatives 'want' a public plan as a place to dump providers in areas that are unprofitable (rural and poor urban). They just want a weak one that won't steal business away from the profitable markets.

Posted by: ThomasEN | June 4, 2009 3:06 PM | Report abuse

If private insurers had access to public funds, lower taxes and less regulation then I'm quite certain they would be able to lower their costs. Any public option would have unfair advantages over private insurers. It would be like Fannie and Freddie in the mortgage finance industry. They had an unfair access to cheap capital and less stringent regulations that allowed them to dominate the market and that didn't work out so well. Do we really want another Government behometh?

It seems most players in this health care debate are more concerned with scoring points for either the blue team or the red team and less interested in actually figuring out the best solution. Politics poisons everything it touches. I don't think it's likely to provide the best antidote.

Posted by: fallsmeadjc | June 4, 2009 3:42 PM | Report abuse

Why do we expect medical knowledge (which doubles every 10 years) to provide us with ever more and ever better health care (neverendingly) but don't want to give up our granite kitchen counters and 5000 pound SUVs to pay for it all?

I had a doctor in my cab who told me that in his other career he is a Navy helicopter pilot. He said everyone understands why a new Black Hawk costs so much more than the old Huey with three engines and 60 miles of wiring -- but when they go to a hospital all they see is the bed.

I was just diagnosed with Type II diabetes. I am on a new (miracle) drug Byetta which mimics the action a hormone already in your body (GLP-1) for a much longer period, which slows digestion (and glucose peaking), limits glucose release during digestion, raises insulin release during digestion (also preserves insulin making cells from more damage) and -- perhaps most important of all -- curbs appetite, causing me to lose weight like I had cancer (which in turn will probably cure the diabetes!).

All for three thousand a year -- I sure would not want to go back to the medicine of 10 years ago which would slowly lose its effect (allowing excess glucose to poison all my organs) while typically raising my weight. I am willing to see you pay more taxes for my Byetta. :-)

Posted by: DenisDrew | June 4, 2009 5:04 PM | Report abuse

"The idea here is that the public plan will adopt effective reforms that will then lower its costs and improve its quality."

This is such an obvious idea that there must be many examples of its successful application, given that private insurance companies always opt for higher costs (lower profit) and worse care. Anyone care to cite some?

Posted by: lfstevens | June 4, 2009 5:20 PM | Report abuse

Silly Ezra. Conservatives do not care about saving money, or reforming the system to make it more humane. They care about the shareholders of the insurance companies.

Posted by: scott1959 | June 4, 2009 5:28 PM | Report abuse

Great idea: I'm sure the new GM (Government Motors) will finally get Toyota and Honda to lower their costs and increase their quality.

But seriously, conservatives have a better way to reform health care. It's called the "private option". The government returns the share of our wages that it confiscates from us and gives to our employers to buy health benefits that they choose. Instead, we take that money and buy health insurance that we choose, which is portable from job to job.

Will Obama and Baucus put this "private option" on the table? Unlikely, because they want more government and corporate power, not more individual choice.

Posted by: marincanuck | June 4, 2009 6:49 PM | Report abuse

Politics isn't poison, it is how things get done. And we need some political oomph on the side of a public insurance plan because we are losing our competitive advantage, our health, and our standing in the world while looking increasingly like some kind of hyperScrooge nation of uncaring selfish sociopaths and social Darwinists.

Posted by: sparkplug1 | June 4, 2009 6:56 PM | Report abuse

fallsmeadjc said:

"If private insurers had access to [unlimited] public funds, lower taxes and less regulation then I'm quite certain they would be able to lower their costs."

You are so right. And if private insurers were able to pay providers Medicare/Medicaid rates (and to force providers to accept them), wow, would private insurance be cheap.

But they can't. So to require a private plan to compete with a public plan is an unfair competition with a completely stacked deck in favor of the public plan.

And when have you EVER heard of CMS being on the cutting edge of reform?

Posted by: Policywonk14 | June 5, 2009 12:45 PM | Report abuse

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