How the Public Plan Crowds Out the Market

Public-plan proponents have feigned ignorance of how such an option would crowd out the public market.? The answer is simple: a public plan would be a political, not a market, entity.? Its justification is premised on a belief that the insurance market is not competitive and that insurers price oligopolistically, retaining excessive profits.? Even if this were true, the public plan would have no way of knowing when it had priced away its more efficient market competitors’ oligopolistic profits.? It would not know that it had destroyed these “inefficient” profits until it had lowered its premium prices to a level too low for private insurers to match.? Or, as a flowchart:

It is inevitable that the government will stack the deck in favor of its own offering.? Even if it is not openly subsidized, the public plan will almost certainly be able to outsource expensive administrative duties to government bureaucracies with their own operating budgets.? It will likely have powers to impose its prices on providers that its private competitors will not.? And it is absurd to think that the government would simply allow its plan to disappear if it failed to operate within its budget.? The public plan’s political structure and mandate to drive down prices blindly guarantees that a bailout will be needed sooner rather than later.

-wallace