Time to Give Up on the Public Option

By Steven Pearlstein
Wednesday, August 19, 2009

Enough already with the public option!

It is not the be-all and end-all of health-care reform. It is not the long-awaited safety net for the uninsured. And if, as many liberals hope, it turns out to be nothing more than Medicare for All, it won't do anything to hold down long-term growth in health spending.

The public option is nothing more than a political litmus test imposed on the debate by left-wing politicians and pundits who don't want to be bothered with the real-life dynamics of the health-care market. It is the Maginot Line of health-care policy, and just like those stubborn French generals, liberal Democrats have vowed to defend it even if it means losing the war.

So there was Howard Dean, the former Democratic Party chairman, over the weekend declaring that health reform without a public option simply isn't worth doing. My colleague Ezra Klein pointed out on his must-read blog that Dr. Dean's fascination with a public option is rather recent since it was nowhere to be found in the reform plan he proposed when running for president in 2004.

Or how about MSNBC's Rachel Maddow, who opined that the failure to deliver on a public option would represent nothing less than the "collapse of political ambition" for American liberalism?

The public option has become for the left what "death panels" have become for the right -- an easily understood metaphor that can be used to wage an ideological war over the issue of Big Government, and mostly a sideshow.

The case for a public option begins with the unassailable observation that our system of private health care and health insurance has not been effective in restraining the growth of medical expenditures.

Some of that cost growth has to do with an aging population and technological gains that have dramatically increased the number of cures and treatments. But those same cost drivers can be found in other advanced countries, including those with government-run health-care systems.

Liberals have a point when they argue that the price competition in our private markets is something less than robust.

Because consumers don't pay out of pocket for much of their health care, they don't shop around for bargains the way they do for cars or toilet paper. Nor is it clear that people would flock to the heart surgeon in town who advertises bargain-basement rates.

Competition is also imperfect because many regions of the country have dominant hospital chains that can virtually dictate rates to private insurers. You simply could not offer a competitive insurance product in Northern Virginia, for example, if Inova's Fairfax Hospital weren't in your network. And in many rural communities, there's only one hospital.

Drug companies have monopoly pricing power for drugs under patent for which there is no substitute. Ditto for medical-equipment makers with the latest imaging machines or artificial hip joints.

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