from the NYTIMES

Paul Krugman – New York Times Blog
September 8, 2009, 4:56 pm
Why the public option matters

Most arguments against the public option are based either on deliberate misrepresentation of what that option would mean, or on remarkably thorough misunderstanding of the concept, which persists to a frustrating degree: I was really surprised to see Joe Klein worrying about the creation of a system in which doctors work directly for the government, British-style, when that has nothing whatsoever to do with the public option as proposed. (Forty years of Medicare haven’t turned the US into that kind of system — why would having a public plan change that?)

But what is one to make of the practical, political argument from the likes of Ezra Klein, who argue that any public plan actually included in legislation probably wouldn’t make that much difference, and that reform is worth having even without such a plan?

There are three reasons to be suspicious of that argument.

The first is that I suspect that Ezra and others understate the extent to which even a public plan with limited bargaining power will help hold down overall costs. Private insurers do pay providers more than Medicare does — but that’s only part of the reason Medicare has lower costs. There’s also the huge overhead of the private insurers, much of which involves marketing and attempts to cherry-pick clients — and even with community rating, some of that will still go on. A public plan would probably be able to attract clients with much less of that.

Second, a public plan would probably provide the only real competition in many markets.

rest of article at link above.

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