A leading right-wing argument against offering a public health insurance option as part of any health reform initiative is that such a plan would drive private health insurance companies out of the market. The health insurance lobby group AHIP called a public option “potentially lethal” to their industry. Similarly, Republican Conference Chairman Sen. Lamar Alexander (R-TN) said in May that adding a public plan would be akin to asking mice to compete against an elephant. “There wouldn’t be any mice left after a while,” he insisted.
Sen. Jim DeMint (R-SC) recently used this talking point himself in arguing against a public option for the National Review. Yesterday, however, DeMint appeared to inadvertently offer an example that demonstrates that the notion that the public plan would drive out competition is false. On Bill Bennett’s radio show, DeMint called blocking health care reform the top Republican priority, arguing that of all the items on President Obama’s legislative agenda, it would be the hardest to reverse. To support his point, he offered “government schools” — public education — as an example. “You can never, with another piece of legislation, change it,” DeMint said:
DEMINT: I think the biggest issue is health care. I think if they succeed in a government take over of health care the situation may be irreversible. It will be like government schools. I mean you can never just, with another piece of legislation, change it.
DeMint’s example of education is instructive, not because it is hard to repeal, but because it’s a prime example of successful public-private competition. Indeed, while state and local governments own and run the public education system — to a much greater extent than either Obama or members of Congress are suggesting with a public health insurance option — private schools are competing against the government and thriving in this country. Further, such competition actually improves outcomes. As the conservative Hoover Institution found, competition between public and private schools “improves achievement for both public and private school students and decreases the amount spent per pupil.”
As Joseph Hacker explains, such public-private competition works well not just in education, but in many other sectors of the U.S. economy:
In many areas of American commerce, private and government programs comfortably co-exist. FHA insured loans and non-FHA loans, Social Security and private pensions, public and private universities–all have long thrived side by side. Each side of the divide has strengths and weaknesses, but in every case the public sector is providing something the private sector cannot: A backup that’s there if and when you need it; a benchmark for private providers; and a backstop to make sure costs don’t spin out of control.
Igor Volsky recently explained the actual impact of having a competing public plan, writing, “In an environment where private plans are forced to compete with a new efficient public program, inefficient, over-bloated insurers will go out of business, but private plans with good networks of providers or better services will continue attracting new enrollees.” Jonathan Cohn has more on the effects of public-private competition.