President Obama lost a bit of his famed cool at today's press conference when he was asked about the "public option" in his health care plan crowding out private insurance. It's not logical, he said, if private coverage is better than public coverage, i.e., if those insurers are doing such a great job, then folks won't choose the public option.
I'm not a health care economist, but it seems to me that this would be true only under one set of circumstances. It might be true if the public option was no more than the right of people to enter the public option by paying the COBRA premium, i.e., the amount that a terminating federal employee would have to pay to stay in the federal plan (or, if the federal plan is not subject to COBRA, it's equivalent). In other words, it would be true only if there were no subsidy masking the true cost to the government.
Even under those circumstances, it seems to me that there would be a tendency for employers with high cost populations, e.g., those with a larger number of older workers, to drop coverage. That will, of course, increase costs for the public plan.
If the plan is subsidized, then a certain number of employers will have an incentive to drop coverage and let the federal government pay a portion of the health care costs that they now bear. Some of the private savings may be passed along in wage increases but, for health care, the result will be increased public domination of the health care market.
What would be wrong with that? It'd just be "Medicare for all." Here are a few. First, medicare is going broke. Adding more subsidized insureds would require some new revenue source that the President has yet to disclose.
More fundamentally, Medicare exists today with unseen subsidies. Every doctor I know says that his or her non-medicare patients wind up paying more than they otherwise would because medicare arbitrarily refuses to pay the true cost of the services that it purchases. If we enact "medicare for all," there would be, at best, a diminished private health sector over which to spread the cost of this (much larger) subsidy.
To say, as Obama and the Democrats do, that they can provide universal coverage and control costs with no real pain is disingenuous. The unanswered question is this: While the US has a problem with the absence of insurance and with the economic dislocations caused by the accident of employer provided coverage, the fact remains that the overwhelming majority of us are happy with our health care. Turning the system upside down is not the self evidently proper thing to do.