For the people who think a public healthcare option will endanger traditional health insurance...

[texasfanboy]

...please answer the following:

1) When did the US Postal Service drive FedEx and UPS out of business?

2) When did you close your 401k or IRA because Social Security was enough?

3) When did Medicare become good enough for retired individuals that they needed to drop all other health coverage?

Comments

[dbroussa]

1) Who delivers standard letters? The USPS...why? Because they are subsidized by the taxpayers and no one can compete with a $.42 flat fee to send a letter anywhere in the US. If it was private it might be much cheaper to send it locally or in state and much more expensive to send it to say...Alaska. So the gov't subsidizes the program and it works as a public service. In fact the USPS uses FedEx to ship its overnight overseas packages. The point is that UPS and FedEx are not direct competitors with the USPS, they are actually niche competitors in a fairly lucrative market (overnight and priority delivery). They compete on their service even though the USPS is cheaper (being subsidized) because their service is superior and people can afford to spend $40 to ship something from San Antonio to Houston early AM priority to get their house closed. Now extrapolate that to Health Insurance. Average transaction cost for a mail parcel is likely less then $1 (when you realize that far more mail is sent at first class rates ($.42) then priority, but lets make it $5 just for giggles. Average transaction cost for health care is about $400 or about 80 times as expensive. So, if people are willing to pay $40 to ship a package overnight for a house closing out of pocket, will they also be willing to pay $3,200 for a single transaction? If you take away private insurance (which a public option has to do eventually), then you leave people who don't want to use the public option (for whatever reason) they will be forced to pay a ton of money out of pocket.

The issue is that when you have a public option that is taxpayer funded and not for profit, it inherently will be one of two things. It will either drive private insurance out of business because it can offer the exact same coverage for less (because of subsidies and lack of need for profit), or it will bankrupt the country because the coverage will be terrible and no one will want it and then it will become a cry that we can't allow the poor to have such terrible coverage so we need to fund it better and suddenly everyone will have "gold plated" coverage and that will cost huge amounts of money.

Remember that partially this is going to be funded by taxing "gold plated" insurance plans...which means that if your plan will give you benefits over about $8K a year that you will pay a 35% surcharge on your coverage. Suddenly that plan that you pay $400 a month for (along with an employer contribution of $400 skyrockets to $680 (because the employer is going to pass that surcharge along to you either in higher premiums or lower salary). It will become even easier for the employer to simply pay the 8% tax on the salary and tell the employee to go get the public option.

Oh, and also don't forget that the plan is to require that all coverages much match the public option. If they cover less, then they will be mandated to be discontinued, and if they cover more, they will be taxed (35% or more).