Government, by Definition, Cannot Compete Fairly

September 18, 2009 • Commentary
This article appeared in the Los Angeles Times on September 18, 2009.

This article is the second of a three part series.
Part I | Part II | Part III

Supporters of a new “Fannie Med” think it will cost less than private insurance because they ignore many of the costs of government programs, such as reduced economic growth and forgone innovation.

How many potential jobs have been destroyed (a non‐​monetary cost) because every dollar of Medicare taxes eliminates 30 cents of economic growth?

How much time (a non‐​monetary cost) have American patients spent filling out forms because government programs suppress electronic records? Or sitting in waiting rooms because government programs suppress electronic communications between patients and doctors?

Medical errors kill up to 100,000 Americans each year. How many died needlessly (another non‐​monetary cost) because the largest purchaser of medical services in the world — Medicare — penalizes innovations that prevent medical errors?

A level playing field between government and the private sector is pure fantasy. It would be about as fair as your kid’s lemonade stand competing with Al Capone.

Congress has so many ways to hide its inefficiencies and cripple the competition that it would drive private insurers out of business despite offering an inferior product. As an example, President Obama has proposed just kicking private insurers out of Medicare entirely. Is that the sort of “fair competition” you have in mind?

A level playing field is impossible even if Capone — er, Congress — puts it in the healthcare reform bill.

Obama economics advisor Larry Summers found that Fannie Mae and Freddie Mac saved $6 billion annually on borrowing and other costs merely because everybody believed Congress would bail them out if they ever got into trouble. The same perceptions would adhere to Fannie Med, giving it a sizable, immovable and unfair advantage.

Some on the left hint that insurance companies would like to let consumers and employers purchase less‐​expensive coverage across state lines. In fact, insurers hate that proposal because it would break up their little cartels. Meanwhile, the insurers are salivating over the subsidies that Congress and Obama are poised to give them.

Does any of that give you pause?

Research shows that state‐​level price controls do little or nothing to increase pooling, but they do reduce choice and increase the number of uninsured. If price controls make insurance too expensive for people to afford, then they’re not really consumer protections, are they?

It’s ironic, really, that some people rail against “near‐​monopolies” in insurance markets but endorse outright monopolies for insurance regulators. Letting people purchase insurance across state lines won’t produce a race to the bottom — that’s what the insurance regulator monopolies are giving us right now. Making the regulators compete would allow consumers to keep the protections they want and avoid the hidden taxes and special‐​interest giveaways that drive up the cost of insurance.

What do you say we break up both monopolies? Or is competition not what you’re really after?

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