OK here is a sugar-free version of the current healthcare debate. On one side you have a push for a “government option.” In other words the government will act like an insurance company and sell you health insurance directly. The premiums you have to pay will most likely depend upon your level of income. So the less you make, the less you pay for health insurance coverage.   

The right side of the debate does not want the government to go into the health insurance business. The argument is that having the government act as an insurance company will jeopardize other private insurance companies and eventually put them at a disadvantage (or out of business all together). Why would this happen? Well think as a CEO for a minute. Let’s say your company paid about $1000(random amount) per employee to provide health insurance. Now there is a government option that costs only $750. Wouldn’t you decide to switch your employees to the government option? 

Now the left side of the debate says that the government would probably win the competition because they could provide coverage at low cost for each person. Since the cost for premiums will be adjusted based on income, then more Americans can afford health insurance. That sounds like a pretty good outcome. 

So why would it be bad for the government to offer health insurance? The reason points back to competition. Health insurance providers have to attract customers, earn money, control costs, and hope to turn a profit. If they provide bad customer service, let costs spiral out of control, and lose money, then they go out of business. All private health insurers play by these rules. However, these rules do not apply to our government. 

If the government loses money, lets costs spiral out of control, or provides bad customer service, there are no consequences. The government can never run out of money. If you are a private insurer and your competitor will never run out of money, how fair is the competition? This is one of the biggest (and least publicized) fallacies of government activity.  Uncle Sam does not have to worry about going out of business. The employees of the government have zero incentive to make sure that the best service is provided to its customers. When the possibility of bankruptcy is off the table, then there is no drive for the government to operate as efficiently as possible. 

Private health insurance companies get money from customers and investment from shareholders (or private investors). The revenue and investment is voluntarily given to the insurance company because the customers/investors believe that they will get some benefit. However, there are no investors getting in line to give the government money to provide health insurance. The government if funded by the taxpayers which is you and me. And if we don’t give them the money they expect, we go to jail (or pay a heavy fine). 

One of the great thinkers of the 20^th century was Milton Friedman, a Nobel Prize winning economist. He stated that you must judge government programs on their outcome and not their intentions. The intentions for a government option are good. They want to provide health insurance to all. However, if the government has no incentive to provide quality insurance, then their customers suffer. Then where will these customers go? They won’t be able to go back to their employer health insurance because that was discontinued. They could buy an insurance plan from a private insurer, but after the government takes all of their customers they will not be able to provide a low-cost option (or will be driven out of business). These people are left without healthcare. These will be the same Americans (low and middle class) that the government option was supposed to help. How ironic?