Steven Landsburg is now blogging. One of his first posts is on health reform. Concerning the public option, he writes,
A more efficient bureaucracy? But if there were a way to save money by streamlining the bureacracy, why wouldn't all those greedy private insurers have adopted it already? Does anyone believe that the major insurance companies are too lackadaisical to make an easy extra buck?
Read the whole post. It has a lot of basic sense. However, I have highlighted a section that does not address the arguments of the proponents of a public option.
Paul Krugman and others will tell you that private-sector competition in health insurance is wasteful. Resources are spent on trying to select a pool of healthy customers. Since, in the aggregate, everyone must be included, those resources are a waste. A government health insurer will not be selective, and thus will not waste resources that way.
Just once, I would like to see someone making this argument collect data on how where insurance company overhead comes from. I suspect that very little of it comes from designing means for selecting customers in the individual market. Instead, I suspect that a lot of overhead is associated with designing and administering plans for employer-provided health insurance, where adverse selection is not an issue. In the individual market, a lot of the overhead relates to regulatory compliance, because health insurance is regulated differently in every state, and it is illegal to sell health insurance across state lines (except in the case of an employer-sponsored plan).
Which leads me to a question I have had all along about the public option. Will it have to comply with state regulations? If so, then it will be misleading to talk about the public option, because it is unlikely that the same plan will work in all fifty states. If not, then it is misleading to talk about the public option being on a level playing field with private health insurance.