Posted by Jonathan Adler:
Mankiw on the Pitfalls of a Public Plan:
http://volokh.com/archives/archive_2009_06_28-2009_07_04.shtml#1246217304
[1]Gregory Mankiw evaluates the risk of a public health care plan.
Even if one accepts the president�s broader goals of wider access
to health care and cost containment, his economic logic regarding
the public option is hard to follow. Consumer choice and honest
competition are indeed the foundation of a successful market
system, but they are usually achieved without a public provider. We
don�t need government-run grocery stores or government-run gas
stations to ensure that Americans can buy food and fuel at
reasonable prices.
An important question about any public provider of health insurance
is whether it would have access to taxpayer funds. If not, the
public plan would have to stand on its own financially, as private
plans do, covering all expenses with premiums from those who signed
up for it.
But if such a plan were desirable and feasible, nothing would stop
someone from setting it up right now. In essence, a public plan
without taxpayer support would be yet another nonprofit company
offering health insurance. The fundamental viability of the
enterprise does not depend on whether the employees are called
�nonprofit administrators� or �civil servants.�
In practice, however, if a public option is available, it will
probably enjoy taxpayer subsidies. Indeed, even if the initial
legislation rejected them, such subsidies would be hard to avoid in
the long run. . . .
Such explicit or implicit subsidies would prevent a public plan
from providing honest competition for private suppliers of health
insurance. Instead, the public plan would likely undercut private
firms and get an undue share of the market.
President Obama might not be disappointed if that turned out to be
the case. During the presidential campaign, he said, �If I were
designing a system from scratch, I would probably go ahead with a
single-payer system.�
References
1. http://www.nytimes.com/2009/06/28/business/economy/28view.html
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