The 'Public Option' Health Care Scam

Why Obama's plan won't work

Steve Chapman

Some statements are inherently unbelievable. Such as: "I am an official of the government of Nigeria, and I would like to deposit $60 million in your bank account." Or: "I'm Barry Bonds, and I thought it was flaxseed oil." And this new one: "I'm Barack Obama, and I favor more competition in health insurance."

That, however, is the claim behind his support of a government-run health insurance plan to give consumers one more choice. The president says a "public option" would improve the functioning of the market because it would "force the insurance companies to compete and keep them honest."

He has indicated that while he is willing to discuss a variety of remedies as part of health insurance reform, this one is non-negotiable. House Democrats, not surprisingly, included the government plan in the 1,000-page bill they unveiled Tuesday.

It will come as a surprise to private health insurance providers that they have not had to compete up till now. Nationally, there are some 1,300 companies battling for customers. Critics say in many states, one or two insurers enjoy a dominant position. But market dominance doesn't necessarily mean insufficient competition.

Microsoft's dominance of software didn't prevent the rise of Google, and Google's dominance of search engine traffic didn't prevent Microsoft from offering Bing. If a few health insurance providers were suppressing competition at the expense of consumers, you'd expect to see obscene profits. But net profit margins in the business run about 3 percent, only slightly above the median for all industries.

There are reasons, though, to think that the president's real enthusiasm is not for competition but for government expansion. Free-market advocates want to foster competition by letting consumers in one state buy coverage offered in other states. If WellPoint has more than half the business in Indiana, why not let Indiana residents or companies go to California or Minnesota to see if they can find options that are cheaper or better? READ MORE