Rhoads: Force Is Not Competition

Jared Rhoads, director of the Lucidicus Project, has written another excellent OpEd, this time on force and pseudo-competition, as it applies to the proposed "public plan".

Here is his piece in its entirety, reposted with his permission:

Force is not competition
By Jared M. Rhoads
May 12, 2009

A letter to the editor in yesterday's edition of the New York Times calls for health insurance companies to be forced to compete with a public health plan administered by the government. "And if they fail," the writer goes on, "they should get out of the health insurance business."[1]

Compete? What a strange concept to apply to a scenario in which one party deals by voluntary trade, and the other deals by force.

Private insurers compete with each other to provide the best product they can on the market. Their costs are based on the payments that they can negotiate with providers, voluntarily. Their revenue is based on the number of customers they can attract, voluntarily. These companies are contractually obligated to provide that is clearly stated in the policies they underwrite. Many of these companies are quite large. Dealing with them can sometimes feel impersonal. But no matter how big they are, they cannot "wield power" capriciously, break contracts arbitrarily, or force you to subsidize your neighbor's premium. Consumers have recourse if they do.

The government, on the other hand, has no other way but to deal by force.[2] It gets price advantages by strong-arming providers (and will almost certainly be dictating care options before Obama's term is over). It gets operational advantages by hamstringing the private industry with regulations. And whatever revenue the government cannot raise from premiums, it can confiscate through taxation and inflation. That's not a business model. That's organized crime.

Many advocates of the public option proudly acknowledge that their plan amounts to one massive Medicare-for-all program that would likely have the effect of wiping out the insurance industry altogether. Yes, that is the same bureaucratic Medicare that is racked with unprecedented levels of fraud and abuse and which now faces insolvency as soon as 2016 or 2019.[3] The purpose of the public option is political, and if it is allowed to be implemented, the results will be ugly.

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1 Blaine, M. "Re Schumer Points to a Middle Ground on Government-Run Health Insurance" New York Times, Letter to the Editor, May 12 2009

2 The delegation of force to the government is appropriate only for the purpose of protecting individual rights. This is true for the military, police, and court system.

3 Will, G. "Dr. Leavitt's Scary Diagnosis" Washington Post, January 1 2009

More broadly, this is another example of the statists conflating economic power with political power.

But rather than the usual claim that allegedly evil private companies' use of economic power in the marketplace is equivalent to using force against helpless consumers, they're reversing the claim to promote the idea that the government's use of genuine force is just another benign form of economic power in the form of "competition". This is just an old fallacy in a new guise.

Thank you, Jared, for highlighting this issue!