Saturday, March 07, 2009

Open to Competition?

Ever notice how some pro-market conservatives aren't really all that open to competition when such competition threatens entrenched business interests? I've noticed. For example, take an article written by AP correspondent Ricardo Alonso-Zaldivar which discusses the impact of Obama's idea for giving consumers another choice in the health care market -- this time a choice of government run health care like the kind that our elected federal representatives get at taxpayer expense.

It seems that Obama's plan would not only give consumers more health care choice, but would actually reduce the costs of health care premiums to consumers by 20% -- all simply by giving the consumer MORE CHOICE. Isn't that what conservatives always tell us? Here's Alonso-Zaldivar:

The proposal, which Obama advocated in his presidential campaign, would for the first time offer government-sponsored coverage to middle class families, as an alternative to private health plans. By some estimates, it could reduce premiums by 20 percent or more — making it much more affordable to cover the estimated 48 million people who don't have health coverage.

But insurers fear competition from a government plan could drive them out of business, and Republicans worry it would lead to a government takeover of health care. Liberals, meanwhile, are equally adamant that Americans deserve the choice of government-sponsored health care.

Such a plan could be similar to what seniors have in Medicare, which is government run. Or it might be designed like the federal employee health plan, available to members of Congress, and delivered through private insurers.
How is it, if the government is so inefficient, that a government-run plan could drive insurers out of business? Especially if consumers will always have choice between the public versus the private plans. Let me put it like this: if I don't like the restrictions or limitations that come with the government plan, then I can always choose the private plan, even if it costs a little bit more. Just like I can always send a package through UPS if I am dissatisfied with the US Postal Service.

When it comes to Social Security, I often hear conservatives advocate for allowing individuals the right to choose to invest in a private retirement account, arguing that citizens should have a choice to invest their own income either in the publicly-run retirement program (Social Security) or private ones. The argument has always been that more choice is better for consumers; and, in fact, the assumption is that private retirement investment companies would be much more competitive and attractive to consumers. When private companies think they can gain market share from the government, they and their conservative advocates ALWAYS argue for more consumer choice and freedom. But when private companies think they stand to lose market share from government competition, they and their conservative advocates ALWAYS seem to moan and groan about the unfairness and injustice of the principle of more consumer choice. If consumers were to be FORCED to buy the government plan, then maybe their gripes would have some merit. But that's not what's happening, and so conservative complaints fall flat and seem ... well ... un-conservative.

So, my challenge for conservatives is this: live up to your principles. If insurers can't compete, then they SHOULD go out of business. And if they are faced with a government-run program that is cheaper and preferred by consumers, then the creative private insurers WILL find ways to compete to regain market share. And that can only be good for consumers, right?


Eric said...

If the government is willing to limit the expenses for its healthcare plan solely to the revenues it can collect in the way of premiums (i.e., it can't use taxpayer money to shore up losses) I might go along with giving them a shot at it, if for no other reason than to show the public how miserably such an enterprise is destined to fail. The post office runs itself solely on its own revenues, so if you want to make the comparison between the two, that must be factored in. Good luck on achieving the same results when your "equal care for all" plan meets the actuarial tables.

But once the government taps into taxpayer funds to cover the expenses of insuring people for healthcare, it has employed a method that is impossible for private enterprise to compete with (unless you want to give insurance companies the right to arm themselves and show up at your home demanding money).

Given such an unfair advantage over private companies, the government will almost certainly eventually establish a near-monopoly on healthcare, with the result being the the uber-wealthy have their own private uber-expensive healthcare system that works, and the rest of us get scheduled for chemotherapy 6 months after the expiration date on our medical prognosis. I thought you Democrats hated monopolies?

Choice, while important, isn't the only factor in what makes markets work. Fair competition factors in as well, my friend.

Eric said...

Also, I think it is very appropriate that you bring up the Postal Service. Most companies I deal with demand payments of over $25K to either be wired or delivered via UPS or Fedex, because they don't trust the USPS enough to deliver important documents. Think about that for a minute.

And whose to say that, if the Postal Service and all its internal beuracracy were done away with tomorrow, we wouldn't see Fedex, UPS, or some other newcomer implement a faster,cheaper, and more efficient method of delivering documents for the masses? I certainly believe that would happen, but then I have faith in free markets.

Huck said...

Eric - I'm fine with your suggestion that the government healthcare plan compete on the same basis as private insurers face -- that is, its operating expenses are covered by the revenues it generates. But I would say that it is overly simplistic to reduce that to the amount of premiums collected, because even private insurers earn most of their profits by virtue of returns on investments. In other words, private insurers collect premiums and while they are waiting to pay out on them, invest them in the market where they earn their profits. If the government can do everything private insurers are able to do to raise operating capital, then we can talk about truly fair competition. It just makes sense that, according to actuarial practices, the larger share of folks buying into the insurance plan (i.e. the bigger the pool of premium paying members of the plan) the more spread out the risk and thus the more stable and lower the costs.

With regard to the USPS and private carriers like Fedex, UPS, etc., the reason why we have a post office is because it guarantees reasonable and affordable postal service to every customer. As you say, the USPS has to pay for itself and it still operates in competition with Fedex, UPS, DSL, etc. Why is that, Eric? Let me tell you why. Because the USPS, and all its "internal bureaucracy," offers affordable and convenient services that UPS, Fedex, etc., simply can't or won't do. As far as I know, Fedex can deliver anything that could go through the USPS. If Fedex wanted to rent space in my neighborhood and set up PO boxes, it could do so. If it wanted to deliver a letter to the remotest location in rural Oklahoma, it could do so. There is nothing about the "internal bureaucracy" of the USPS that prevents Fedex, UPS, or some other newcomer implement a competitive delivery service. They don't do it because they won't or can't -- and then those services that the USPS does offer would simply disappear. There is a reason why the state has to take on some services, because the market is not always the best servant of the public interest and the common good. Let's try privatizing national defense, flood protection programs, forest preservation, volcano-monitoring, space exploration, etc., and see how your faith in the market fares there with regard to the public interest and the common good.

MAD said...

Huck, if you buy the argument for cheaper guv'mint health care, then let me sell you the GNO bridge with your savings. Consumers will opt for ObamaMed because it will be artificially cheaper, with the taxpayers being soaked yet again for the difference in its real costs. Obama has already started his own doomed war, a war on wealth, income and productivity, and his health care fiasco is but another salvo in that war.

Huck said...

One other thing, Eric. Private insurers calculate the cushion of government-provided security into their premium rates. In a truly competitive, market-driven model, private insurers should have their risk guaranteed by any government entity. I think you are too quick to assume that private insurers don't also depend on government to protect them to some degree and to mitigate risk. If you remove any kind of government cushion, support, subsidy, secondary insurance program, etc., from their actuarial calculations, I think we'd see premiums skyrocket. And consider what would happen to private insurance premiums if the government just shut down Medicare/Medicaid tomorrow and more and more of the elderly and very sick people who could afford to put their cost/benefit situation into the actuarial tables. Don't kid yourself, Eric, government ALREADY provides significant benefits for private insurers that allow their profits to accumulate.

Huck said...

MAD - You want to see a revolution? Get rid of Medicare/Medicaid tomorrow and turn healthcare provision over to private suppliers tomorrow. Remove government from the business of keeping people alive and you're going to see a lot more death, death that could be easily (albeit expensively) preventible. The market doesn't give a damn about your kid who has a disease that is curable, but which is prohibitively expensive to do so.

Huck said...

In my second-previous comment, I said: "In a truly competitive, market-driven model, private insurers should have their risk guaranteed by any government entity." That should have read: "In a truly competitive, market-driven model, private insurers should NOT have their risk guaranteed by any government entity."

Huck said...

MAD - Hey, what's wrong with giving me the choice? You got a problem with that? Let me look at it and make my own decision. No one is telling you that you have to buy the government's plan. So, what do you care? If you think it's a poor choice, don't buy it.

mad said...

Go for it, Huck. Just don't ask me to help you pay for it.

Huck said...

mad - Well, in a sense, you already do pay for other people's health care. Or, maybe, someone is already paying for yours? Isn't that what private insurance does? Healthy people pay for sick people with the promise that when the healthy people of today get sick ten years from now some other healthy person ten years from now pays for you.

MAD said...

Can't Obama hold off a few years on this aspect of his plan to make all of us wards of Washington DC, at least until those of us that will have to pay for it can recover some of the deep losses we have experienced in this Obama-driven stock market crash.

Eric said...

Huck, get me a promise written in blood that not one tax dollar will ever be used to implement or shore up the massive financial losses that will quickly be accrued by your theoretical government insurance program, and that no business owner will ever be forced to pitch in for the premiums of their employees who have opted to sign up for this government plan, and that no citizen will ever be compelled to join it, and I'm on board, as long as the playing field is level. (Of course, we both know that Obama's plan is much different than this)

And while we're at it, just to be fair, are you willing to give me a choice to opt out of the various Federal Insurance schemes that I am currently forced to participate in, in favor of competing private plans?

Anonymous said...

Well, I'll be happy if I can just get the same health plan that all US Senators and Congresspeople have. Since they are supposed to be working for us citizens (you know, government of the people, by the people, and for the people), then as their employer, I feel I have the right to the same health plan they have. If they are happy with it, I'm sure I will be.


D-BB said...

As long as people read books like "How to Become a Schizophrenic" by John Modrow and "The Romance of Proctology" by Charles Elton Blanchard, people will continue to abuse valuable heath care givers' time just to stay home from work.

Certainly, with Obama's plan, we shall see more of these sorts of informational publications.