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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.
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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.
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