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June 7, 2009 6:21 p.m.

Following the lead of this post by Jon Taplin, you really must read this article in the Times on the battle over including a ‘public option’ in the new Obama health care reform bill. If you’re not familiar with the lingo of this debate, the ‘public option’ refers to allowing the federal government to sell its own insurance plan which would compete with private health insurance providers. Think of it as a version of Medicare that everyone could buy into.

Here’s the key graf from the Times piece …

But critics argue that with low administrative costs and no need to produce profits, a public plan will start with an unfair pricing advantage. They say that if a public plan is allowed to pay doctors and hospitals at levels comparable to Medicare’s, which are substantially below commercial insurance rates, it could set premiums so low it would quickly consume the market.

As Taplin suggests, these ‘problems’ sound remarkably like ‘the point’ of the whole exercise. Most of the argument here is that a big government plan would just provide the insurance ‘service’ much more efficiently and cheaply than private carriers. And that the private carriers wouldn’t be able to make any money off selling the service any more. But this is the argument that single payer advocates routinely make — namely, that a lot of the money that goes into private health insurance goes to paperwork, much of which is tied to finding ways to deny people coverage. That, and the need to earn profits on providing the service.

Presumably if there were other quality advantages to the private plans, the carriers wouldn’t be so worried that everyone would switch to the public plan. I think I might be open to some effective scare-mongering on that front. But the private carriers don’t seem to have much confidence there’s much to scare people about.

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