It appears that the House of Representatives led by Nancy Pelosi wants to include a government run option as part of the health care legislation to be considered later this year. This government program will compete with the private insurers and will be modeled on the medicare program. Insurance companies worry that this option if enacted will make their plans uncompetitive. Ms Pelosi contends that this will make American businesses more competetive by lowering the cost of health care.
Maybe I am not as smart as Ms Pelosi but I am trying really hard to figure out why a government run option will be more competitive than private insurance. I am sure as hell it is not because our government is inherently more efficiently run than a private business. The only thing I can think of is a government subsidy. If this is the case, than I have a few serious objections.
- I think it is unethical for the US government to compete with private business and undercut them by providing subsidies. If the US government wants to compete fairly than I have no problems, but predatory pricing to undercut the competition is a gross violation of anti-trust laws.
- Subsidies will need to be funded somehow. And the added government bureaucracy will also need to be funded somehow. And I am pretty sure that ultimately the taxpayers will pick up the tab for the added expenses (even though their health premiums might go down). This additional burden on the taxpayers will exceed the savings on the health plan since the bureaucrats need to be fed and housed as well.
But hey, if the government can run banks, wants to run insurance companies and maybe automakers, than why not a health plan!
Shailesh Kumar is an Entrepreneur, investor and blogger. He writes about value investing at Value Stock Guide. Learn about the stock market and discover the techniques proven to work best for long term investors for finding appropriate stocks to buy in their portfolio to get superior risk adjusted returns.