Smart Bombs: Some healthy competition

A routine taunt of public school critics is that the government is afraid to compete with private schools, thus it fights off plans that would allow taxpayer money to follow students to the schools of their choice.

This point ignores the fact that we’d never get apples-to-apples comparisons, because private schools could be selective. Public schools would still have to take all comers, including those students who require more attention and thus are more expensive to teach.

The concern is flipped when it comes to health care. Lobbyists are furiously working to ensure that private insurers and drug companies are inoculated from government competition.

They know that if there’s a public option to health care reform, they would have a harder time maintaining profits. A government program could use its considerable clout to bargain for reduced prices for medical services and prescriptions. If private insurers didn’t follow suit, more people would switch to public coverage.

The best example is the care offered by the Veterans Administration. The VA uses its bargaining power to drive down the costs of procedures and drugs. When Congress adopted the Medicare prescription drug law, it instituted a giant no-compete clause, which precluded the government from shopping for the best prices.

So who is against a public option for private insurance enrollees? Many of the same politicians who want to privatize education.

Must be afraid of the competition.

Exclusive coverage. Another reason insurers dread public competition is that government doesn’t have to sweat profit margins or finance lofty executive salaries. This keeps administrative costs much lower.

It would be fun to watch CEOs explain to shareholders why an option run by relatively low-paying government executives is kicking their butts.

This is why Medicare got started. There was no profitable private answer. Insurance companies didn’t want to take on the elderly, because they have a tendency to get sick.

And this brings us to another reason private purveyors are panicking.

If Congress introduces a public option, it will highlight the starkest difference between private and public care: The former is designed to avoid the sick (“any pre-existing conditions?”); the latter is designed to treat them.

Private schools value exclusion. So it costs more, and they get fewer students. To some parents, it’s worth it. To others, it isn’t. Some just can’t afford it. Insurers imagine that model and get sick. They know what will happen if there’s a public option.