They Never Give Up

I see the Democrats have reintroduced the “public option” (i.e. State Health Insurance) back into their health reform bill a mere couple of weeks after being unable to get such a bill through the Senate Finance Committee. They never give up, do they? It is highly unlikely that they will keep all the Democrats on board such a bill, let alone attract sufficient Republicans.

In the meantime, the better aspects of the health reform bill are stalled. This is typical American politics. The better aspects could have gone through separately with little trouble, but are being kept in a single bill as a “sweetener”, to counteract the unpalatable taste of a public insurance option.

New Zealanders, of course, will be a bit mystified about all this. Apart from the fact that our health system is state run, we have a sole state insurance provider in the form of ACC. Most of the furor in our country comes when the government tries to let private insurers in on the action. In New Zealand, it has been argued that private insurers will take the “cream” leaving the state insurer with the hard-to-insure expensive clients, which will cost the tax payer more money. Fascinatingly, almost exactly the same line of argument has been used by Republicans to point out that the likely cost to the state will be far higher than the $800 billion currently suggested.

So why is it that in New Zealand, we think that private health insurer will make a profit muscling in on ACC’s business and in the US the insurers are saying that a state insurer is unfair competition? I think the answer lies in who is entering what. In New Zealand, private insurers are entering the market. They know the ground rules. They also know that ACC is in no position to undercut them with tax payer subsidies, particularly in the work account. In the US, the private insurers are the market. The state insurer (Medicare) has a well-defined territory. The problem is that the proposed public insurance scheme has both vastly expanded territory and a mandate to undercut the market with state subsidized premiums. It is the State entering the market and with a massive advantage. The result will be the destruction of many of the smaller insurance companies and a marked lessening of competition in the insurance marketplace. There is also absolutely nothing to stop the subsidized state insurer from eventually pricing all other insurers out of the marketplace. This is what Republicans fear – state medicine by stealth.

Knowing the Democrats, I am certain their fears are fully justified.

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