Fear of trusts

Andrew is concerned:

It seems to me that a public option which allows the government to use its huge buying power to achieve cost cuts that no private company could manage would be a Trojan horse.

A Dish reader replies:

You call the public option a "Trojan horse." I take it that you do not mean that allowing a public plan in which the government could generate savings by using its collective buying power will not, in fact, result in lots of Greeks with swords jumping out and killing us in our sleep. I am at a loss, however, as to what exactly you imagine the danger to be -- your sentence follows with no explanation. This is one of those things that I just do not understand at all when public option opponents gesture in this direction: what is the perceived worst case scenario here and why do you find it objectionable?

Let's say that such a government public plan would prove so effective at negotiating low rates that it would price private plans out of the majority of the health care insurance market. Is this a problem in some way? Anyone who had enough money could assuredly buy whatever high-end services or plans they would wish--you can't seriously believe that such a government plan would result in the absolute legal preclusion of private payment for medical insurance or services, can you? Or is this just a generalized fear that people will overwhelmingly prefer the public option, and the portion of our collective income going to the government in taxes (rather than private insurance policies) will increase? Really wondering what your fear is.

Andrew doesn't respond further, but I'll bite: I would have the same kind of fear if the government or a large private entity got a similar near-monopsony over any market. Monopsonies and monopolies are bad for well-understood reasons, which is why we have antitrust law. I elaborated on this several months ago in "Public health insurance, antitrust, and price controls".

For instance, today Medicare has a near-monopsony on care for the elderly. You might think that, per liberal health-care theories, this would make geriatrics a thriving field!

Alas:

KINGMAN - As baby boomers reach retirement age, the need for geriatric physicians in America will increase.

However, slow or less-than-adequate reimbursement to them by Medicare and/or Medicaid is discouraging doctors from getting into or staying in that field of medicine. Jane Potter, president of the American Geriatrics Society, responded to several questions last week.

[..] "The best indication that physicians are leaving the field is the fact that the number of practicing geriatricians is declining," Potter said. "There are more physicians leaving than entering the field.

"In September 2006, a group of leading educators who operate the nation's top geriatrics fellowship programs told us that finances are a major disincentive for physicians in training to enter geriatric medicine.

[..] "Geriatricians have the lowest expected salary of all medical specialties.

Those shamelessly evil, profit-mongering doctors! Oh, wait...

Meanwhile, progressives like Matt Yglesias and Ezra Klein often ridicule more conservative Democrats who both:

(a) Wish to reduce the cost of health-care reform.
(b) Simultaneously oppose a public option, which the CBO scores as lowering the deficit.

But as I've explained in the past, economic conservatism is not limited to reducing the cost of government.. Some of us actually want a healthy market in which the government does trust busting instead of, you know, creating and running one.

It is on these grounds that we consider a "robust" public option--one that uses outsized bargaining power to reimburse at Medicare's below-market rates--to be a trojan horse.

If I could be assured that a public option would compete on a level playing field (not take taxpayer funds, not pay below-market rates) I would still oppose it. But for different reasons, because I would think it as doomed to failure as, say, the government launching a new department store. Governments suck at running things competitively (see: Union of Soviet Socialist Republics, economic history of).

This is why progressives are so adamant that the public option be "robust" and allowed to leverage its large size to create a "real alternative" to private health-care providers. It's the only way their idea has any merit.  Alas, it's merit of the trojan horse, we-play-by-different-rules variety.