Ang Mo wrote:My ultimate question is why there is even a debate about the "public option"? I thought the conservatives believed in the principle of a free market where a consumer could make a choice. In the current debate the conservatives feel that only a private sector option should be available. My understanding of a free market is where the consumer can decide whether to stay in a private sector offering or they could go with the public option.
The concern would be that the 'public option' has an unfair advantage. First the govt can create the public option -- then the govt can set the rules for the private companies. So that isn't really the "free market".
For example, I live in Florida and the state of Florida just started offering it's own homeowners/ hurricane insurance (hurricane insurance is a big deal here).
The insurance companies by law (and it's a good law) essentially have to keep X% of possible claims in a cash bank account. This is good policy.
But when the state of Florida started issuing insurance, they do not abide by their own law. They basically just collect insurance money from home owners and are praying the big one doesn't hit here (when it does FL will be asking the Fed for much help). It's really the same with Social Security. There is a 'trust fund' but the govt collects more than it needs and rights itself IOUs. This is far more egregious than what Enron did. But who polices the govt itself?
So to recap: private insurers have to (a) pay their overhead, (b) pay small claims when there are no big hurricanes, (c) put a lot of money in govt mandated savings account.
The 'public option' for insurance has to do (a) and (b). But not (c). And C is huge.
Guess which costs less.
The result is that State Farm, previously Florida's largest insurance left the state entirely because they couldn't compete with the public option. Other smaller companies have left, too.
When the big one hits, I'd personally rather have State Farm who would have a big pot of money sitting & waiting to pay claims than have to rely on the State government who has no money sitting in a pool.
So here is an example of a public option competing with the private market. In theory it's a good idea. But when the govt can also create rules to hamstring the private companies, and it will, it's not really a free market.
I don't think these debates belong here. There are plenty of political boards for such conversations. I come hear to read about Vienna and about music.
But you asked, so I'm giving one reason why it's not 100% clear that the public option is cut & dried the best thing to do. Basically because in the not-too-distant future the public 'option' would be the only option. Then it isn't really an option.