If you want to understand why a public health insurance option is such a bad idea, just imagine a world where we’ve passed the Coburn Amendment, requiring all members of Congress to subscribe to that public option. In that world, a powerful Senator who develops a hankering for a nose job can make a few phone calls and nudge the public insurance commissioner toward a new appreciation for the moral imperative of covering cosmetic surgery.
And if the Senator is successful, where do the funds come from? Either higher premiums, paid for mostly by subscribers who never wanted this kind of coverage, or by dipping into general revenues. After all, the funds have to come from somewhere.
With or without the Coburn Amendment, and however unlikely you might find this particular scenario, the public option is nakedly vulnerable to exactly this type of corruption. A Senator who would never dream of intervening quite so blatantly on his own behalf might think nothing of intervening on behalf of a big campaign contributor, and will certainly think nothing of intervening on behalf of politically potent interest groups—that, after all, is what politicians do for a living.
Don’t believe me? Look what happened with General Motors. As Greg Mankiw pointed out last month, the takeover started with this promise from the President:
GM will be run by a private board of directors and management team…They — and not the government — will call the shots and make the decisions about how to turn this company around.
Within one month, powerful lawmakers had successfully “encouraged” General Motors to retool factories in their home states, and Senator Jay Rockefeller had prevented the closing of a dealership owned by one of his wealthy constituents.
Or recall what happened with Fannie Mae and Freddie Mac, who succumbed to so many political pressure that—well, you already know the rest of that story.
When you politicize an industry, be it cars, mortgage lending or health insurance, you invite interventions on behalf of the rich and powerful. The less rich and the less powerful foot the bill.
PS. Before you tell me that members of Congress are already covered by a public health plan, reflect on the difference between giving them the power to reshape a public health plan that covers 535 people on the one hand, and a health plan that covers tens of millions on the other.
PPS. See also my earlier post on this subject.