What Is Competition?

Monopoly - Pennybags

He’s done such a good job with your schools,
now he’s going to run your health care!

(Guest post by Greg Forster)

Mike Petrilli notes that Barack Obama and Paul Krugman are using the language of “competition” to mask Obama’s ambitions for a government takeover of the health care sector.

Krugman writes:

The “public option,” if it materializes, will be just that – an option Americans can choose. And the reason for providing this option was clearly laid out in Mr. Obama’s letter: It will give Americans “a better range of choices, make the health care market more competitive, and keep the insurance companies honest.

Mike responds:

You mean just like creating charter schools will give Americans “a better range of choices, make the education system more competitive, and keep the teachers unions honest”?

So in education, where the government is the major player, we’re trying to create competition via the private sector. But in health care, where the private sector is still a major player, we’re trying to create competition via the public sector?


Mike, “weird” is not the word you’re looking for. Try “wrong.”

In health insurance, as in education, there’s no “market” deserving the name. But the way the government eliminates the market is slightly different. In education, government destroys the market by providing the service for “free” (of course you pay for it in your taxes, but it’s free at the point of service), making it impossible for anyone to compete; other providers are stuck serving niche markets. Whereas in health care government uses the tax code to force almost everyone to get insurance through their employers, which also eliminates the market, but more sneakily.

It’s as though government told you that from now on, your employer gets to pick one restaurant for you, and from now on you’re only allowed to eat out at that restaurant. They’d say that it’s a free market – because, hey, the restaurants are privately owned and there are multiple options available!

So it’s not surprising if the health sector and the education sector seem similar. Both are government-controlled command economies. The difference is, in the health sector you have these huge privately owned companies acting as rent-seekers, siphoning off tons of money and getting away with it because government has abolished the market forces that ordinarily weed out leeches – as Matt once explained to our Sith apprentice Leo. Whereas in the education sector, the rent-seeker siphoning off tons of money is the government itself.

The Obama/Krugman proposal isn’t about creating competition for private health insurers. That’s a smokescreen. It’s simply the first step toward making the command economy in the health sector more like the command economy in the education sector.

9 Responses to What Is Competition?

  1. Ughhhh!

    Considering we have reached a tipping point and fundamental change to the health care sector is going to happen, opponents of the President’s plan are missing a huge and significant proposal to maintain the private sector.

    Thus, I am still baffled by the Administration’s refusal to, and the Republicans ignorance of, offering consumers another “choice” with a logical blend of public and private care. This is best exemplified by the Healthy Americans Act – also known as the Wyden-Bennett plan – or the extension of FEHBP – Federal Employee Health Benefits Plan – to all Americans. In these systems, the free market exists and health care providers bid to serve a pool of 300 million Americans. Each person can choose to purchase as much or as little as he needs or wants, but no one is denied access. No one is forced to give up his doctor – as I was in our current private employer-based system – and all medical decisions remain between the doctor and patient.


    The problem for critics of Obama is that the country wants change, and it will come, and if conservatives are not careful, they could end up with single-payer simply because they provided no logical alternative that maintains the free market. HAA and FEHBP do this. Why is no one in the media or on the blogs or anywhere talking about this. Let’s get on it.

    Two-thirds of Americans are in favor of some form of national insurance – that’s insurance not system (ie. Britain and Canada). And they will support the public option that will eventually morph into single payer if conservatives and the GOP don’t get on board with a real plan. Their current proposals simply won’t play in Peoria.

  2. Patrick says:

    Michael, our options on health care reform are NOT Obama’s plan (which is not free market) vs. the status quo (which is also not a free market).

    In our current system our government says “You can only buy the Lexus with all options and you can only buy it from an instate dealer licensed by the state.” In a free market, government doesn’t dictate what you must buy, what bells and whistles you must have and then restrict you to only a few approved in state sellers. Oh and a free market certainly doesn’t give government subsidized advantages to large corporations not available to small businesses and private individuals.

    We could lift mandates, remove restrictions on health insurance purchases (you can only buy a policy instate so their is no competition), you can offer tax credits for individuals to buy their own health insurance, you can encourage health savings accounts which would go along way in returning some fiscal restraint to the buyer and seller of health care services. There is lots our government can do to make healthcare affordable by removing the restrictions, regulations, and bad incentives that make health care expensive in the first place.

    All of these ideas have been offered in the past but Democrats have refused reform (and so have many Republicans who missed the opportunity back in the early 2000s because their strategy was to expand government and throw out government benefits to build up a dependent constituency on the Republican party).

  3. Valid points, Patrick.

    Though they would not lead to the type of reform you probably envision. For you probably don’t realize that the key lobbyists for restrictions of health care purchasing are reps for the industry. Costs are cheaper in some states for many reasons, and for those same reasons insurers don’t want to sell lower cost insurance to a buyer from a state with higher costs. And don’t think you can compare it to your auto or home insurance. If you do, you have a huge misunderstanding of the health insurance industry. They are entirely different systems with entirely different tables for calculating risk and profit.

    Additionally, while HSAs are a good idea for costs – and they would be offered like all other options under HAA or FEHBP – the mere purchase of them on the open market is restricted by pre-existing conditions and many other factors. If you purchase health care on your own, including HSAs, as I do, you’d know this. Otherwise, you are merely speaking ideologically, and there is a practical reality of the health care and health insurance system of which you are completely unaware.

    Additionally, the Democrats (of which I am not one by the way) have not refused reforms like you mention any more than the industry has. The Democrats and Republicans have voted mostly in line with the industry desires. If you don’t believe that, do some research on the campaign contribution followed by votes on the specific problems you address.

    Again, as I noted, reform is coming because they industry has operated on the premise that insurance companies make money “by collecting premiums and denying claims.”

  4. allen says:

    Oh, come on Mike, we’ve been here before.

    Those “reforms” of which you think so highly are merely the usual baited-hook that socialists always use to attract the mass support a more honest approach would repel.

    Whether it’s the straight forward single-payer or the more complex, mandatory purchase of health “insurance” that you favor the outcome’s the same because the underlying process is the same. Access to medical care will decrease as the cost of medical care increases but spread over the entire nation of 300 million+ people the changes won’t be sudden and undeniable.

    Decisions that were once made by people who were most vitally interested in the outcome – will I be able to play the piano after the operation and will that MRI machine pay for itself before it becomes obsolete – will increasingly be made by people who are detailed, by virtue of the office they hold, to make those decisions and the decisions that result will be an amalgam of self-service, vigilance of oversight and the applicable law. The evidence makes it clear that the decisions reached by the latter process include only as an afterthought the medical care available to the public.

    To expand a trifle on Greg’s point about the use of the language of competition, the other reason proponents of socialized medicine are trying to obscure its shape with an artful layer of linguistic camouflage is that socialism in all its guises is an increasingly tough sell.

    Americans can still be tempted by the possibility of getting something for nothing but getting us to commit is turning out to be increasingly tough. So with the adaptability of desperation and the amorality of the self-appointed superior, any means – temptation, fear, confusion – is justifiable to the proponents of socialized medicine, even the adoption the language of the idea they instinctively despise.

  5. Allen,

    Amazingly, you still have little knowledge or understanding of the very programs I mention, and you’ve done little to no research on health care funding around the world.

    All you say is “blah blah blah socialism blah.” Seriously, it’s laughable. You’re like my neighbor who makes the exact same criticisms, yet truly enjoys the veterans benefits he has. Laughable, if it weren’t such a load.

    Really, do a little research on HAA and FEHB – actually read the fine print which I have done – and then we’ll have a real debate.

  6. allen says:

    I would be fully justified in responding that you don’t even make an effort to respond to the points I raise which have the benefit of not requiring oodles of education on your part. You simply ignore all objections with the casual dismissal that a failure to meet your educational requirements on the subject renders all opinions beneath notice.

    My objection is based on my contention that socialized medicine shares the common defects of all socialized institutions.

    It doesn’t really matter whether you’re feeding people, housing them, educating them or healing them if the institution charged with the task is a political entity, i.e. socialist. Certain results are inevitable. You may change the details of the the operation of the system and that may delay the emergence of some of the less pleasant aspects of socialized medicine but they will eventually emerge just as surely as the Mississippi river will eventually burst through the any levy that’s built to contain it and for the same reason – human behavior’s as immutable as a river’s behavior.

    No matter how artfully you contrive socialized medicine it’ll still be the smart play to work the system to the maximum, to get while the getting’s good. You won’t prevent people with political power from suborning the system for understandable and nefarious ends. You won’t prevent the bureaucratization of the system so that a gradually increasing percentage of the budget goes to the administration of the system – just like public education. You won’t prevent that bureaucratization from impeding technical developments and slowing the deployment of new technologies.

    If it makes you feel better to assume that my opinions are valueless because they don’t meet your educational criteria then by all means, feel better. I won’t feel even a trifle burdened because like I wrote at one of our other encounters I don’t have to a herpetologist to feel justified in my desire to want to avoid being bitten by a venomous snake.

  7. How true – yet you may spend your life jumping at the sight of a garter snake – and you might even disrupt an ecosystem over unfounded fears of the “dangers” of a garter snake.

    Interestingly, considering our always animated and engaging discussions, have you read “True Enough” by Farhad Manjoo. It’s enlightening.

  8. allen says:

    A garter snake isn’t a venomous reptile but I do appreciate the effort you display to misrepresent my statements. It’s sort of a backhanded compliment.

    That puts you head and shoulders above most supporters of socialized medicine who swiftly descend to spluttering, and vulgar, incoherence. I’m not sure if that comparison is damning by faint praise or praising by faint damn.

    Of course if you consider the incomprehensible brutality that results from seizure of nations by socialism – the rattlesnakes – then the fear of the lesser forms seems rather more understandable and justifiable.

    No, I didn’t read “True Enough” by Farhad Manjoo. The last book I read that wasn’t related to computers or education was “Liberal Fascism” by Jonah Goldberg. I’d recommend it not so much for the case he makes for current-day lefties being the political heirs of the Italian Fascist movement but for the fascinating, and dense, history of the reality of the Italian fascist movement and how Mussolini figured into it.

  9. I know the garter snake isn’t venomous – that was my point. I didn’t mis-represent your statement – you misunderstood my reply. Read carefully and infer.

    In response to my statement that you should be more informed about the issues, you said,” I don’t have to be a herpetologist to feel justified in my desire to want to avoid being bitten by a venomous snake.” Thus, I pointed out that being mis-informed, or under-informed, would lead you to unfounded fears – The current GOP, with the help of Hannity/OReilly/Hewitt/Limbaugh/Beck has seized on this fear from ignorance very effectively. You can “feel justified,” though you may not be. The GOP has “justified” much to voters without much or any evidence. In fact, they lead the race to the bottom in terms of decrying intelligence. The point about the garter snake is that you mistakenly fear the harmless based on your ignorance, and you might take negative action because of it. That’s your right, though I don’t know how you feel proud or justified in being less informed.

    (Note – my criticism is of the GOP, not conservatism, which I don’t think they effectively represent.)

    Incidentally, I have read Goldberg’s book, and I saw him on Glenn Beck’s show yesterday. I like Goldberg – He’s actually quite pragmatic, and seeks to fully inform readers/viewers, even when he’s on Beck’s show, where the “commentator” likes to use information out of context and “inform” people though ideological soundbites – like your herpetologist comment. Basically, you’ve argued that you are “justified” based on a generalization, without any credible evidence to back up your claims.

    Feel free – sadly too many people vote that way. But that is their, and your, right. Oh, and which part of the HAA or FEHBP is “socialized medicine”? How do you infer that I am a “supporter of socialized medicine”?

    By the way, In terms of education books, have you read Rothstein’s “Grading Education” or Wagner’s “The Global Achievement Gap” or Nesbitt’s “Intelligence and How to Get It.” If so, what did you think?

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