In one Washington Post article on the demise of the public option in the Senate Finance Committee today, we are treated to the following characterizations of health insurance companies by Senator Jay Rockefeller: voracious, rapacious, banditry, junk. He accuses insurance companies of putting their profits first and their customers second. He argues that this state of affairs justifies Medicare-for-all as a public option:
Rockefeller and Schumer argued repeatedly during the committee's markup that a public option would be the best way to give consumers an affordable choice in health insurance and rein in what they described as voracious, profit-driven private insurance companies.<!--break-->
The most voracious, profit-driven company I know of is Wal-Mart, yet Wal-Mart's entry into a market drives down consumer costs. And it is fine for Wal-Mart to put its profits first and its customers second -- it cannot make profits consistently if its customers aren't made better off and willing to come back. In my experience, it is at worst a very close second.
The solution to the problems in our health care sector is to make it look more like the retail sector or any other sector in which being voracious and profit-driven drives down costs. The problems of adverse selection and moral hazard in insurance markets are well known -- they are what stands in the way of extending the benefits of competition to health care. Addressing them should be the central features of the reform, with a risk-adjustment mechanism to address the former and high-deductible plans to address the latter. All of this discussion of Medicare-for-all in a public option is at best premature, since we have not seen whether a competitive, private system can function under the right form of regulation.