If Private Insurance Can Do Better Than a Government-Run Alternative, They Should Prove It

Lee Fang dings Blue Cross / Blue Shield of North Carolina for their Harry and Louise Redux ad, which features a narrator who gravely intones:

We can do a lot better than a government-run health care system.

Needless to say, the dread specter of rationing and so forth is raised.

The proposals currently before congress would not, of course, create a government-run health care system. There is, however, a proposal to create a health care system that would include a widely available public health insurance option. The point of this would be to try and see if private industry actually can do better then a government-run insurance plan. After all, if the public option offered rationing and low-quality care, why would anyone sign up for it? Nobody would. That kind of low-quality public option would give private insurance nothing to fear. But what they really fear isn’t that a public option would be bad, it’s that it would be good—putting effective cost-controls in place without compromising patient care, thus threatening private industry’s business model.

That, however, is one of the best ways at our disposal to make health reform really work. A public option that strives to achieve public goals—quality care at an affordable price—will challenge private industry to do a better job. Then competition between plans will drive improvements in quality and efficiency. Without a public option, the risk is that private plans will compete by trying to screen out sick patients. That’s a viable root to private sector profits, but it does nothing to improve quality or control costs.