NCPA - National Center for Policy Analysis


August 31, 2009

At a recent White House press briefing, Press Secretary Robert Gibbs took a step back to reiterate a familiar Democratic argument that we need a "public plan" to provide "choice and competition" in the health insurance market.

According to Gibbs, in Alabama, for example, BlueCross/BlueShield has roughly 89 percent of the private health insurance market.  It's a monopoly and it's hard to keep costs down.  If there was competition, prices might fall.

Gibbs's argument sounds reasonable enough, but Republicans have a sound, two-fold response, says the Weekly Standard:

  • Replacing a private monopoly with a public monopoly won't do much good; and
  • There are better ways to promote choice and competition in the marketplace.

One such way is Rep. John Shadegg's (R-Ariz.) Health Care Choice Act, which allows individuals to purchase policies across state lines to increase competition.  Each state currently regulates what and who insurance companies must cover, and according to Devon Herrick, a senior fellow at the National Center for Policy Analysis, there is a much stronger correlation between costs and regulation:

  • For example, a 25-year old man in highly-regulated New Jersey or New York would pay more than $5,000 annually for a policy while the same person would pay only about $1,500 in lightly-regulated Iowa or Kansas.
  • In addition to letting people purchase policies across state lines, the Health Care Choice Act enables people to purchase their own health insurance at the same tax advantage basis that a company can buy it.

Both Republicans and Democrats agree that the current system could be improved with more competition. While conservatives would like to create scores of new options, Obama wants to create only one new government plan, says the Weekly Standard.

Source: John McCormack, "John Shadegg v. Robert Gibbs on How to Break Up Health Care Monopolies," Weekly Standard, Webblogs, August 19, 2009; Devon M. Herrick, "How to Create a Competitive Insurance Market," National Center for Policy Analysis, Brief Analysis, No. 558, June 15, 2006.

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