Price Controls in the Public Option
There is bi-partisanship on the public option – against it – and it will not pass in the Senate.
Democratic Senators Lieberman, Nelson (NE), the other Nelson (FL), Bayh, Landrieu, Lincoln, and Pryor are not in support of the public option. There are still more Democrats, like the ones from the Dakotas, who are sitting on the fence.
The Democrats need 60 votes for cloture to vote on the bill; the Democrats hold 60 seats, but they’re still nowhere close. After the Republican win in the elections last week, Majority Leader Harry Reid would even struggle to pass this legislation using the rare and controversial method of reconciliation.
The missing link in this debate – the role of price controls – reveals why this bill is failing in the Senate and with the American people. It shows why the public option will lead to a single-payer system, and why a single-payer system would be bad for America.
Rahm Emanuel, the White House Chief of Staff, and Barney Frank, chairman of the House Financial Services Committee, have already admitted that the public option was designed to lead to a single-payer system. However, some liberals are still trying to hoodwink the American people by telling them they can keep their current insurance plans and their doctor.
The fact is – as Democrats will happily admit – this plan is designed to hurt insurance companies and will drive them out of business.
If the government demands that insurance companies cover anyone who applies without charging a higher rate, their costs will go up. Covering individuals with preexisting conditions is logically more expensive than covering a regular insured person. Insurance companies will charge everyone more to make up for these costs, raising everyone else’s rates.
Private insurance rates will go up even further because of the other price controls that the public option will induce into the market. As it is already well-known, Medicare and Medicaid pay doctors at a rate set by the federal government. This rate is set well below what private customers would pay, and in order to break even, doctors charge their private customers more to make up for the lost revenue.
The public option would multiply this practice significantly. Once the government offers a free or heavily subsidized public option, many people would rather take the free insurance over their private plan. Therefore, doctors would be forced to take the public rate from many more customers and would have no choice but to raise their private rates.
Another twist may arise when, in order to keep costs low for the public option, the federal government demands that doctors take even less for their services. In turn, they will raise the private rates even more.
The public option really isn’t an option at all. I suppose in the end you may be able to keep your private insurance – if you’re willing to pay at least two or three times more than you do now. The more likely scenario is that these government-initiated higher costs of private insurance will force us all onto the government plan and drive private insurance out of business.
Once we’re all on the government program, the big problem once again is price controls. If everyone is covered by the federal government, bureaucrats and politicians, just like in our current Medicare/Medicaid system now, would set all the prices for doctors’ services and medicine.
Most politicians believe that doctors and drug companies make too much money. Profit is a four-letter word to these people. Once the politicians control the prices, they will undoubtedly try to purge this “evil.”
This is one reason that government has never been effective at guessing market prices. The government does not know how to allocate resources the way prices do in a free market system. Doctors have high salaries for a reason. Medical school and other training takes time and lots of money. However, many people remain willing to go to medical school because of the financial security the profession offers.
Who in their right mind is going to go to medical school and fork over $100K in tuition (plus what they paid for their undergraduate degree) to make a government salary? We already have a shortage of doctors today, and when the government begins to pay doctors even less, the shortage will worsen and quality will fall. At this point, rationing will be inevitable.
The same is true for pharmaceutical companies. Above and beyond the profit required of them by their shareholders, the risky investment required to do research for new drugs and groundbreaking procedures is not cheap. When the government removes the profit motive for these services, we will see a dramatic fall in medical technology.
This problem will not only hurt Americans: it will affect everyone. No longer will socialized Europe be able to lean on our medical technology. If we, by socializing our system, stop developing medicine, to whom will the world turn?
Free prices create competition, lowering prices and raising quality. Government mandates and price controls create a monopoly, raising costs and lowering quality. Americans are and should be rejecting a government takeover of health-care.
