No. 642
August 6, 2009
Fannie Med?
Why a "Public Option" Is Hazardous to Your Health
by Michael F. Cannon
Executive Summary
A health insurance "exchange," where con-
resident Obama and other leading Demo-
sumers choose between private health plans with
crats have proposed creating a new government
artificially high premiums and a government pro-
health insurance program as an option for
gram with artificially low premiums, would not
Americans under the age of 65, within the context
increase competition. Instead, it would reduce
of a new, federally regulated market--typically
competition by driving lower-cost private health
described as a "National Health Insurance
plans out of business. President Obama's vision of
Exchange." Supporters claim that a new govern-
a health insurance exchange is not a market, but a
ment program could deliver higher-quality
prelude to a government takeover of the health
health care at a lower cost than private insurance,
care sector. In the process, millions of Americans
and that competition from a government pro-
would be ousted from their existing health plans.
gram would force private insurers to improve.
If Congress wants to make health care more
A full accounting shows that government
efficient and increase competition in health
programs cost more and deliver lower-quality
insurance markets, there are far better options.
care than private insurance. The central problem
Congress should reject proposals to create a
with proposals to create a new government pro-
new government health insurance program--not
gram, however, is not that government is less
for the sake of private insurers, who would be
efficient than private insurers, but that govern-
subject to unfair competition, but for the sake of
ment can hide its inefficiencies and draw con-
sumers away from private insurance, despite
American patients, who would be subject to
offering an inferior product.
unnecessary morbidity and mortality.
Michael F. Cannon is director of health policy studies at the Cato Institute and coauthor of Healthy
Competition: What's Holding Back Health Care and How to Free It.