Debate: Will a government run public health insurance option do more harm than good?

Hi, a quick word of concern.

The person I am debating seems to not be explicitly taking a side on this issue. His claim seems to be that a government run plan, run like a business without any subsidies, will not be cheaper. While I disagree with him on that, that is not the argument. The argument is whether having a public option available will do more harm than good. I would say that, even if the public option sucks and isn't cheaper, it will do no harm because people will not sign up for it.

Sorry for not being explicit, Elshizzo. A government health-care payment organization (government payer) can never do more good than harm. I define good as lowering the total cost of health-care for all involved without reducing present or future supply or demand; I define harm as raising the total cost for all involved.

There is an unlikely situation where a government payer doesn't receive any subsidies (including start-up costs, low-interest loans, low rent on government property, etc...) and no legislative exemptions. In this case, the government payer would be good-harm neutral -- that is, it would be exactly the same as current private health-care payers. I don't think people want just another payer and I think it would be very difficult for the government to establish one without any subsidies or legislative exemptions.

Well, i'm not a long-winded arguer, but I will point out one thing to begin.

I think it is plainly obvious that health insurance companies are afraid of the public option. They are trying to convince the public and lobbying/bribing the politicians [successfully in many cases] to defeat the public option because they know they lose big if it passes. Even more proof, their stocks distinctly went up whenever there has been bad news with the public option passing, and down whenever there has been good news with the public option passing. Republicans in congress [and joe lieberman] are fighting hard to stop the public option, but they can never keep their stories straight. First they say it will be too good and kill the insurance companies, then they say it will be too bad and do nothing, then they say it will do harm for the deficit, then a report comes out about how it lowers the deficit. It is obvious that they know that if it passes, it will actually work, and Democrats will get credit for it.

The reason for these things is simple. The public option will work. If the public option was going to not accomplish it's goal and be extremely inefficient, people would not sign on to it [because it is an option], and no harm would be done for anyone. The main reason it will work is because, unlike the private industry, the government won't be trying to make a profit. Insurance company profits make up 30% of insurance cost, and provide essentially no service other than acting as a middleman.

There is nothing extremely different here than what the government does with college and postal delivery. They offer an alternative, which is usually cheaper and just as good. And, even if it wasn't, no harm done. Private alternatives still exist side by side, the government does not destroy them altogether.

woops i said I wasn't long winded and I ended up typing a lot :D

Question 1 (Q1): Is the following an accurate summary of your thesis? 'Private health-care payers currently earn a 30% profit, but a similar government health-care payer could forgo profit and reduce the average person's costs by 30%.'

How would the government payer collect the money to start their non-profit business? Being non-profit, it can't have investors. Banks will probably lend money to buy durable infrastructure, but they probably won't lend billions to hire employees and buy non-durable goods.

Q2: Considering the above, do you agree with the following statement? A government health-care payer cannot be created without a government subsidy.

Off-topic feature request for Ill Logic: is it possible to display the debate on the same page as the reply textarea? E.g., the way you reply to a comment on Reddit.

--"Question 1 (Q1): Is the following an accurate summary of your thesis? 'Private health-care payers currently earn a 30% profit, but a similar government health-care payer could forgo profit and reduce the average person's costs by 30%.'"

For the most part, yeh I'd agree with that statement. There are many other variables, though, ofcourse. One of the things talked about is the preexisting conditions part. If you took away the ability for insurers to take away service because of preexisting conditions, that will obviously increase the cost of insurance [public or private]. It is still the right thing to do, though.

--"How would the government payer collect the money to start their non-profit business? Being non-profit, it can't have investors. Banks will probably lend money to buy durable infrastructure, but they probably won't lend billions to hire employees and buy non-durable goods."

Gotta admit I don't know the details of that, hasn't been talked about in the public sphere. I can't imagine starting the insurance company costing that significant amount of money, though, it provides an almost meaningless service, it simply takes a chunk of money from pile A [premiums] and disperses it to people who are sick. As Michael Weiner says, insurance companies are simply a middleman, they don't add anything.

I'm not sure why you are focusing on the cost of creating the insurance program, i'm pretty sure the cost is so minute that even republicans aren't attacking it on that argument.

Actually, let me modify my first statement. I also believe premiums would be cheaper because government has more leverage to negotiate costs with providers. Medicare pays less for services because the government has the leverage to be able to pay less than insurers.

So, in other words, public health insurance option would be cheaper for two reasons - 1. no profit motive and 2. leverage to pay less

El Shizzo: thank you for answering my first question. I agree with you that a government payer can use economies of scale to negotiate lower prices.

Regarding your question: I'm focusing on the source of capital for the government payer because tax-supported government subsidies violate my libertarian principles. You're focusing on the non-profit aspect, but libertarians don't oppose non-profits on principle, so I won't argue with you there until an economic utility argument becomes necessary.

I'm wondering if you could answer my question more directly now: "Q2: Considering the above, do you agree with the following statement? A government health-care payer cannot be created without a government subsidy."

I also agree with you and Michael Weiner about health-care payers being middlemen, but I disagree with you about a middleman's job being simple. There's nothing simple about what health-care payers do. Let's make a short list, starting with a service you admit they provide:

1. Health-care payers negotiate lower prices

2. Payers charge different people different rates which are usually locked in for a long time

3. Payers charge the same rate year-round even though most health-care costs come during the first and fourth quarters

All three of the above require the payer to anticipate cost and demand. There's nothing simple about anticipating change in a dynamic world. For example: at the beginning of the year, FooCare Incorporated anticipates its customers will want 10,000-12,000 flu shots, so it negotiates a low price for 11,000 flu shots and lowers the price of premiums accordingly. Come flu season, FooCare loses money if any of the following things happen: its customers use more than 12,000 flu shots; its customers use fewer than 10,000 flu shots; the open market price for flu shots drops below the negotiated price; or the flu shot maker goes bankrupt too late to negotiate another good deal. Only if FooCare correctly anticipates costs and demand will it break even or earn a profit.

You'll notice that in the above examples, FooCare customers pay the same price for health-care no matter the open market cost of flu shots. So, although FooCare customers don't get anything tangle from FooCare, they do get something they want very much: price security.

Considering the above, will you retract your statement that, "insurance companies are simply a middleman, they don't add anything?"

"Q2: Considering the above, do you agree with the following statement? A government health-care payer cannot be created without a government subsidy."

I already told you, i'm not familiar with how much it would cost to create the program in the first place. All I know is that even Republican's aren't attacking Dems on that standpoint [and they attack them on EVERYTHING], so that tells me it probably isn't much at all. That's all I know on that.

"Considering the above, will you retract your statement that, "insurance companies are simply a middleman, they don't add anything?"

Absolutely not. All you did was show that estimating the amount of money you'll need in intake to match the money you use in outtake isn't an easy thing to do. Just because it isn't easy doesn't mean they are adding value. It isn't easy for a stock trader to make money trading stocks on margin, but it still doesn't change the fact that they add no value to society. [Same goes for all of wall street for the most part]

Not to mention, insurance companies by and large don't do the one thing they are supposed to do [provide price stability]. In MANY cases [which we learn about daily], people go bankrupt from their insurance rates going through the roof after they have an accident or get sick. Insurance companies find loophopes and deny people for BS reason's all the time right when people need the care.

If you don't think health-care payers provide a service, why do you think the government should create another payer?

"If you don't think health-care payers provide a service, why do you think the government should create another payer?"

Well, ideally, I don't think they should. I'd much rather favor a single payer system over this whole crap with insurance. However, if there was a government insurance option, it would benefit all of us, because it would be a cheaper version of insurance.

[BTW, I hate the insurance option being discussed right now. They've watered it down so that only 5% of the country can sign up for it and they aren't using medicare rates anymore. We can blame the blue dogs and the republicans for that one, most of our government is corporate owned sad to say]

Do I understand you correctly? You think a universal health-care payer would provide a service, but you don't think diverse health-care payers provide a service.

We are playing a game of semantics here.

Health care insurers provide a service, but they add no value. Kind of a complex statement there, so let's just skip it and stop talking about semantics.

The reason single payer would be beneficial is because it bypasses the "service" insurers provide altogether. We all pay in, and we all take out when needed. We don't have to waste our time doing calculations trying to break even, because breaking even doesn't matter.

I don't think it's possible to provide a service without adding value. I'd like to request Ill Logic step in here and help us come to terms.

El Shizzo: in the interm, is there anything you'd like to ask me about my position? I know I've been asking you a lot of questions and I think swaping roles might make the debate less stagnant and more interesting. Ask me anything.

"I don't think it's possible to provide a service without adding value. I'd like to request Ill Logic step in here and help us come to terms."

I fail to see the point why it even matters. You are supposed to be arguing how a government run option would be less efficient, instead we are arguing over semantics. Please explain why it would be less efficient.

I'm arguing that, "A government health-care payment organization (government payer) can never do more good than harm."

You're currently arguing that non-government payers don't add value, which I take to mean that non-government payers don't do any good. If that's true, my argument falls apart because it depends on non-government payers doing good.

I'm willing to accept your argument, but I need understand how one can provide a service but add no value. That's why I can't proceed and that's why I've asked for Ill Logic's help.

"You're currently arguing that non-government payers don't add value, which I take to mean that non-government payers don't do any good. If that's true, my argument falls apart because it depends on non-government payers doing good."

That's not my argument -at all-. I already explained my argument. My argument is that government insurance would be cheaper because it has leverage to get better deals with health care providers [which you agreed] AND doesn't take out 30% in profits as the insurance companies currently are.

Whether or not insurance adds value is irrelevant to the discussion as far as I can tell.

You have yet to explain what is wrong in my calculation as to why it would be more affordable.

Re: add value. I think it isn't important to you because it makes sense to you. It's important to me because it doesn't make sense to me. I love debate because it challenges my preconceptions and eliminates those that are wrong, but I need your help to eliminate my preconception that it's impossible to provide a service without adding value.

Re: calculation. Your calculation doesn't include the cost of establishing the payer. If the initial funds come from a government subsidy, that means they were taken from tax payers involuntarily. Thus, at the start, a government payer will have caused more harm than good.

"1) elshizzo, did I understand your positions correctly?"

yes

"2) I assert that, since David feels it is relevant, this is still an important point of contention in this debate (since you two are still in fact debating this). I believe we should at least establish whether or not it's relevant, and then figure out from there. elshizzo, how do you feel about this?"

The cost of starting it is relevant, but I believe the cost is so small compared to other costs that we are dealing with, that it becomes almost irrelevant. Since David brought up the cost as issue, I think it should be his prerogative to show evidence that it would be extremely expensive to start up the program. It might be in one of the bills about to be voted on in congress in fact.

"I think this is an independent issue. Perhaps it's just a matter of semantics, but I think it's at least important to establish what we mean so we can move on. I'd like to split off a subdebate here as well. elshizzo, you say you're not sure whether it's relevant, but I think it's at least important to discuss it only because David thinks it is relevant, basically for the same reason as the previous point. David and elshizzo, does this sound good?"

How about instead of doing that I will just concede on this point and just rephrase my initial statement. I believe insurance companies (in theory) add value because they (in theory) prevent people from going bankrupt in an emergency by providing price stability. I say "in theory" because people still go bankrupt from insurance premiums being jacked up and from preexisting condition bs.

Ill Logic wrote, "is it cool if we move this to a sub-debate"?

That's fine by me. I think there's two separate issues here: (1) the cost of establishing the program and (2) will the government need to subsidize the cost of establishing the program. At the moment, all I want is El Shizzo to confirm, in #2, that a government subsidy is necessary. Whether the subsidy is one dollar or one trillion dollars doesn't matter to me right now.

El Shizzo wrote, "... in theory ..." That's all I wanted. No further discussion on that issue necessary.

"At the moment, all I want is El Shizzo to confirm, in #2, that a government subsidy is necessary. Whether the subsidy is one dollar or one trillion dollars doesn't matter to me right now."

I think you are using the wrong word. Subsides [as far as I know] are for private entities, not a public option. I think what you mean to be asking is "Who will be funding the government private insurance option cost", and the obvious answer is ofcourse the government/taxpayer.

to clarify, this would be the cost of creating the program itself, not the cost of running the program and paying providers for care, that cost would be paid for by premiums from the people who sign up for the option

Yes.

And no, I don't have any other points of contention. I have made my case and David has made a small point with the cost of startup - however he hasn't really disputed my theory as to why I think premiums would be cheaper.

El Shizzo wrote, "[Harding] hasn't really disputed my theory as to why I think premiums would be cheaper."

I already agreed that a taxpayer-funded subsidy can reduce a sick person's bill. As I wrote in my position statement, "A government health-care payment organization can reduce a sick person's bill only if the organization is exempt from some of the government's own costly legislation or receives a taxpayer-funded subsidy. Either way, the organization won't have to compete fairly with other health-care payment organizations, with implications I'm prepared to discuss in detail."

"I already agreed that a taxpayer-funded subsidy can reduce a sick person's bill. As I wrote in my position statement, "A government health-care payment organization can reduce a sick person's bill only if the organization is exempt from some of the government's own costly legislation or receives a taxpayer-funded subsidy. Either way, the organization won't have to compete fairly with other health-care payment organizations, with implications I'm prepared to discuss in detail.""

I don't know what you are talking about. The government [I suppose] will fund the small cost of creating the program, but once the program is up and running, it is entirely revenue neutral, there is no subsidy.