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If you happen to be living in a cave, on some deserted island, or deep at the center of the earth, I kinda envy you. Your remote digs mean you've most likely missed the increasingly angry and politicized rhetoric surrounding President Obama's efforts to reform our health-care system.
I'm here to assert that one of the most vilified planks of the Obama administration's platform -- the proposed public health care option -- may actually do the greatest good for our free-market economy.
But ... but that's socialism!
Before you start Photoshopping my head onto pictures of Josef Stalin, take a deep breath. I'm not arguing for a state-run, single-payer monopoly on health care. Neither is the president, for that matter.
Though Obama has spoken favorably of a single-payer system in the past, no part of the plan currently under discussion asserts that Uncle Sam should be your only choice for health care. Instead, the Obama plan proposes that anyone who wants to should have the option -- just the option -- to sign up for a government-run plan instead of a private insurer.
That's no different from the U.S. Postal Service, which must compete with UPS (NYSE: UPS ) , or the government-subsidized Amtrak rail service, which vies with airlines such as Southwest Airlines (NYSE: LUV ) , bus lines, and your very own automobile for your travel dollars. (Note that in both those cases, the private businesses are often doing better than their public rivals.)
And before you conjure nightmares of a public plan's endless lines and bureaucracy, remember that government-run Medicare has been doing a respectable job of treating our senior citizens for decades. I personally grew up receiving excellent health care from the government as the son of a U.S. Air Force officer.
The mere threat of having to compete against an organization that might be less expensive and more efficient has private health insurers absolutely terrified. That's the dirty little secret of capitalism: Some established, successful companies hate competition.
Doctor, doctor, gimme the news
A decade ago, the major record labels were fat and happy, making piles of cash off CD sales. They could use their massive marketing muscle to push manufactured bands onto the airwaves and into listeners' ears. If you had to buy a whole subpar album just to get the few songs you really wanted, well, too bad.
Then Internet file-sharing rolled into town. I'm not arguing that piracy's right, but digitally available tunes did become a real competitor to the established music business. Rather than adapt to consumers' changing tastes by going digital themselves -- which would have meant surrendering their fat margins, and some of their control over what people listened to -- the record labels panicked. They started suing file-sharers, driving their own customers away. In short, the record labels weren't meeting customers' demand; they were trying to dictate what they thought customers should demand, and actively ignoring what the free market really wanted. Does that sound like capitalism to you?
Industry outsider Apple (Nasdaq: AAPL ) finally had to almost bully labels into offering digital tunes at a fair (or at least fairer) price. Now Amazon.com (Nasdaq: AMZN ) and a host of others compete with Apple's iTunes, a rivalry that has lowered prices, eliminated restrictive copy protection, and generally given consumers better music options. In return, audiophiles bought more music in 2008 than ever before, according to a January USA TODAY article. Most of those sales came in the form of digital downloads and individual tracks.
In my opinion, private health insurers are no less slothful and stubborn than record labels were at the dawn of the digital era. Insurers' defenders say that a rival public option would "destroy their industry." WellPoint (NYSE: WLP ) has set up a website to oppose it. But in my opinion, it's more likely that the increased competition would merely reduce their profits, loosen their control, and force them to work harder, smarter, and more efficiently. That may be bad news for health insurers' stockholders, but you can't deny that it's good news for folks who need health insurance.
To be fair ...
Private insurers like Aetna (NYSE: AET ) and UnitedHealth Group (NYSE: UNH ) have become scapegoats in the ongoing debate, as much for political reasons as anything else. By all accounts, they've given the Obama administration many concessions; in return, they get to, well, stay alive. Recently, though, they've been increasingly vilified by Obama and those who support his plan, simply because the politicians feel the need for a common bogeyman to help rally support.
Cry me a river.
Let's be brutally honest here. The way I see it, private health insurers' business model involves taking your money on the expectation that they'll pay the bills if and when you fall ill. But when you do get sick, insurers try to spend as little of your money as possible on health care, and pocket as much as they can in profits.
I'm not saying private insurers are solely responsible for rising health-care costs, nor that the promise of profit isn't a worthy incentive to drive innovation and industry. But I am saying that their near-monopoly on health insurance gives private insurers no incentive to be anything but complacent, inefficient, and profit-hungry. That's bad for customers, and in the long run, bad for the insurers themselves.
Sometimes, private industry needs a good hard slap from the ol' Invisible Hand. In this case, if it's efficiently and effectively run, I think a public health-care option would do that job quite well.
This is an important topic for both patients and investors. Are there better free-market solutions than a rival public option? Please take a moment and share your thoughts in the comment section below.