"Why would it drive private insurers out of business?" President
Obama asked last week, defending the idea of creating a new
government plan. "If private insurers say that the marketplace
provides the best quality health care, if they tell us that
they're offering a good deal, then why is it that the government
-- which they say can't run anything -- suddenly is going to
drive them out of business? That's not logical."
It's a point that's gained popularity on the left, but one that
is a complete red herring. The current debate isn't over whether
private insurers could compete all else being equal, but whether
government can actually run a fair game. Obama's argument is sort
of like asking, "Why should a blackjack player fear losing to a
casino?" In theory, unlike with a slot machine, there's no
inherent reason why one blackjack player has to have an advantage
over another. If a group of friends play blackjack at home
against each other, chances are that the most skilled player will
win. But things change when that skilled player enters a casino,
because the casino sets the rules of the game to give it an edge,
and it can outlast any player given the size of its bank account.
A player can reduce the casino edge through card counting, but
the casino can make it harder to count cards by using more decks
and still eject any player it suspects of counting. Casinos, in
other words, don't make a profit on blackjack because they hire
dealers who are the most skilled blackjack players around, but
because they rig the rules of the game in their favor.
This is why Obama's argument for a government plan is
disingenuous. Private insurers would be going up against
government on an exchange run by government and facing rules and
regulations set by government. While the government plan would
have effectively unlimited access to federal government tax
revenues, the private plans would not. Obama suggested that there
were ways to design the plan so that it wouldn't be eating off
"the taxpayer trough." But the key question is: would the
government plan be allowed to fail? Let's say the government plan
gets created, and five years from now it has tens of millions of
members, or even more than 100 million, according to some
estimates. If it were running at a loss, would it be allowed to
close down? Or would Democrats argue that we need to pump money
into rescuing it to avoid all of those people losing their health
insurance? Anybody being intellectually honest knows that the
answer is that it would not be allowed to fail, and thus would
ultimately have access to taxpayer cash. This cannot be deemed a
fair competition anymore than playing blackjack against a casino
can be seen as a level playing field.
