The New York Times has a sensible editorial on the public insurance option today. Their conclusion, in particular, strikes the right tone. "A new public plan is neither the cornerstone of health care reform nor the death knell of private insurance," they write. "It should be tried as one element of comprehensive reform. If, over time, a vast majority decides the government plan is superior, so be it." That's basically my conclusion as well. But I'd be remiss not to publish a counterargument a centrist expert made to me last week. Originally, he said, he didn't think the public plan a particularly important piece of the reform puzzle. But recent work had convinced him otherwise. The public plan, he'd concluded, was key to preventing cartel or semi-cartel behavior among the insurers. The pricing inside the health insurance exchange was going to rely on insurer bids (the price, in other words, that they say it costs to cover someone). If they all bid, say, 20 percent higher than was necessary, that could equal out to hundreds of billions in wasted taxpayer dollars. The presence of the public plan, even if no one ever entered it, would discourage high bidding, because there would be an honest bidder. If the public insurer cost 20 percent less than the private insurers for the same benefit package, the public insurer would dominate the market. As such, the inclusion of a public insurer was not a threat to a "level playing field." Rather, its exclusion would threaten fair competition and allow private insurers to construct an unlevel playing field -- but for their benefit.
