One of my favorite features of the Edwards' health care plan is its promise to "drive down costs by making private insurers compete with a public plan." That's good stuff, and a slice of rhetoric you hear often from health care collectivists like myself. But I'm a bit worried about such a plan when it doesn't break employer control over health care. Were we in a perfect world where all the different plans would compete on grounds of cost and quality, it would be fine. But in that world, we could also ride our unicorns to the rainbow road to pick up our prescriptions. More likely, we'll end up with something like the college loan scandal, where a public option competed with private offerings, and the private options showed surprising success by competing on grounds entirely unrelated to cost or quality. Jon Chait explains:
Only it now turns out that the private lenders' success came not through superior efficiency but through superior graft. The emerging college-loan kickback scandal is a vast scheme by private lenders to bribe colleges into foisting their services onto students. Lenders plied college-loan officers with meals, cruises, and other gifts. Some loan officers were given lucrative stock offers. Columbia's director of undergraduate financial aid purchased stock in Student Loan Xpress--which became one of that school's preferred lenders--for $1 per share and sold it two years later for $10 per share. Some lenders offered millions to the universities themselves to drop out of the direct-lending program.
When plans are chosen by HR directors, they can be "persuaded" of the benefits of the free market in precisely the way the student loan officers were convinced. In a world where each individual chooses their own plan, there are simply too many of us to bribe. Any plan that creates competition between the public and private options will have to be constructed with an eye towards making that competition worthwhile, rather than just encouraging graft and kickbacks. Maybe the Edwards' folks have very smart ideas on how to do this. But in a system with as many identifiable, self-interested gatekeepers as employer-based health care, I wonder if it's even possible, and if folks are thinking about it.
