“Why would it drive private insurers out of business?” President Obama asked last week, defending the idea of creating a new government plan. “If private insurers say that the marketplace provides the best quality health care, if they tell us that they’re offering a good deal, then why is it that the government — which they say can’t run anything — suddenly is going to drive them out of business? That’s not logical.”
It’s a point that’s gained popularity on the left, but one that is a complete red herring. The current debate isn’t over whether private insurers could compete all else being equal, but whether government can actually run a fair game. Obama’s argument is sort of like asking, “Why should a blackjack player fear losing to a casino?” In theory, unlike with a slot machine, there’s no inherent reason why one blackjack player has to have an advantage over another. If a group of friends play blackjack at home against each other, chances are that the most skilled player will win. But things change when that skilled player enters a casino, because the casino sets the rules of the game to give it an edge, and it can outlast any player given the size of its bank account. A player can reduce the casino edge through card counting, but the casino can make it harder to count cards by using more decks and still eject any player it suspects of counting. Casinos, in other words, don’t make a profit on blackjack because they hire dealers who are the most skilled blackjack players around, but because they rig the rules of the game in their favor.
This is why Obama’s argument for a government plan is disingenuous. Private insurers would be going up against government on an exchange run by government and facing rules and regulations set by government. While the government plan would have effectively unlimited access to federal government tax revenues, the private plans would not. Obama suggested that there were ways to design the plan so that it wouldn’t be eating off “the taxpayer trough.” But the key question is: would the government plan be allowed to fail? Let’s say the government plan gets created, and five years from now it has tens of millions of members, or even more than 100 million, according to some estimates. If it were running at a loss, would it be allowed to close down? Or would Democrats argue that we need to pump money into rescuing it to avoid all of those people losing their health insurance? Anybody being intellectually honest knows that the answer is that it would not be allowed to fail, and thus would ultimately have access to taxpayer cash. This cannot be deemed a fair competition anymore than playing blackjack against a casino can be seen as a level playing field.