The misguided myth of the 'public option'

The underlying logic of the American social justice system is straightforward. Redistributive measures, most notably in the form of progressive income taxes, can be used to forward social welfare objectives ranging from universal education to the elimination of extreme poverty to, most recently, universal health care coverage. Setting aside any ideological divisions about this idea, and there certainly are plenty, the basic premise is simple: The rich use their excess income to finance the most basic needs of the poor. Since the end of World War II, this model has become nearly ubiquitous in the developed world, albeit in marginally different incarnations. The rise of redistributive policies, however, seems to have simultaneously engendered a logical fallacy regarding the implementation of welfare programs, namely the notion that a redistributive agenda implies the need for a directly administered set of government programs. This, in effect, is the myth at the heart of the misguided cries for (and President Obama’s misguided endorsement of) a “public option” in government-subsidized health care.

The problem with health care, as it stands, can be characterized as follows. Health care is expensive, and many Americans cannot afford it; thus, many Americans are uninsured. In effect, a policy that eliminates the gap between the spendable income of the poor and the cost of basic health care is needed. In this reduced form, the problem of health care resembles many other welfare issues—issues, in fact, that have long-standing government-financed, but privately administered, solutions. A case in point is American hunger. By the 1960s, voters had decided that they were willing to earmark a portion of their respective incomes for the elimination of domestic hunger. The result was not government trucks passing out bread, nor government-owned or subsidized supermarkets, but rather the Food Stamp Program, a system of government-funded vouchers entitling the recipient to the equivalent cash value in food, from any private vendor. The federal government recently eschewed its role as distributor of the credits in favor of a privatized system. The remaining government hand is the one providing necessary funds, yet somehow the poor still get their food stamps. Costs have not suddenly spiraled upwards, nor have the private contractors who administer current benefit transfers conglomerated to exploit taxpayer or recipient. The reality is that the transformation of American tax dollars into “publicly provided” goods and services usually occurs indirectly, channeled through private contracting, whether via the contracting of public works and infrastructure, or the acquisition of military hardware. Lockheed Martin builds our jets, not U.S. Government, Inc.

In the context of this framework, cases such as public schools, or (soon to be) publicly administered health coverage, are curious outliers. So a question arises: Why saddle the federal government with the task of administering more services, when there are a sufficient number of private sector agents willing to do it?

The implications of this framework make a cogent solution to the problem of universal coverage relatively straightforward. Whether in the form of outright cash grants, or insurance-specific subsidies, the federal government can expand coverage most efficiently by allowing the newly minted consumers in question to acquire coverage themselves.

The only semitenable defense of the public option has come from advocates of cost control, with sponsors suggesting that the private sector has failed to price health care efficiently (read: affordably). That may be, but does it follow directly that the best way to lower prices is to add a government “competitor”? Certainly not. Advocates of this point are glazing over a key paradox. Any truly competitive public option would have no market power to alter prices. Any government-administered health care provider that could alter prices would need to act in a predatory, monopolistic fashion that renders the notion of the public “option” less a choice and more a mandate. There is no way to magically push down costs within the current health care system. The real issue with high health care costs comes not from the intermediaries (insurers), but from the convoluted style of medical practice that dominates the American profession. There are a host of reasons for America’s health costs being sky-high relative to their European counterparts, which stretch beyond greedy insurance barons. Focusing on tort reform to reduce defensive medical practice, as well as pre-emptive treatment strategies, would be a good start.

The fact is that increasing the scope and scale of the federal bureaucracy to include an industry that accounts for over 15 percent of GDP is not a great way to maximize the benefit/cost ratio of the associated dollars spent. An issue as critical (and unavoidably expensive) as health care demands the most efficient possible solution. Why not leave the industry to the industry, and issue vouchers to poor Americans? Instead, Barack Obama appears to be increasingly at risk of giving in to the irrational calls for a “public option.” He should not.

The author is a Columbia College sophomore.