Public Option Will Be Expensive, Inefficient

November 16, 2009 
Nashville Business Journal


It sounds so simple to have Uncle Sam simply set-up a medical insurance operation to assure fair competition with America’s 1,300 insurance companies. We have been told that there will be no taxpayer subsidy so it will simply be a matter of collecting premiums, paying benefits and covering overhead expenses.

Starting any business, and, make no mistake about it, this is a business, requires initial capital investment and, in this case, a massive one.  So, Mr. and Mrs. Taxpayer, it has to be your dollars that provide the “seed” money to get this insurance operation off the ground.

You can count your initial investment in the billions. How many billions?  We don’t have any idea. Undoubtedly, the capital to start the business will be borrowed, which further adds to our growing national debt.  In business, debt must be either paid back or serviced with interest payments which come from operating income.  It is hard to believe that a federal insurance operation will either pay interest or repay the debt.

There are 1,300 companies currently providing medical insurance to Americans.
These companies compete with each other to profitably grow their businesses.  There is certainly a lot of criticism directed at these companies about a variety of issues, but the idea that 1,300 companies with hundreds of thousands of employees could ever collude to avoid competition is simply unthinkable.  Competition is the best and only real path to achieve efficiency in this or any industry.  We all should stand-up and support maximum free-market competition.

If you like government run businesses, just look at Amtrak, which was taken over in the 1970s and is today gobbling-up billions of our tax dollars every year.  Consider Amtrak’s level of efficiency:  For every dollar you spend on an Amtrak ticket, we taxpayers send in another dollar!  In business terms, their profit and loss statement reflects a 50% loss, which, in the free market place, is an express ticket to the bankruptcy court!

Government’s job ought to be to set the rules, monitor the scoreboard and sit back to watch the competitive marketplace do the rest.  Government ought to knock down regulations that impede competition.  Government should make the rules for the game by setting standards on difficult issues like pre-existing conditions. Government ought to assure transparency on all key issues.

The idea that non-profit motivated bureaucrats in Washington can achieve a greater degree of efficiency than 1,300 insurance companies is simply unrealistic.

 

Joe Scarlett, joe@joescarlett.com
Retired Chairman of Tractor Supply Company
Founder of the Scarlett Leadership Institute

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