Andrew Sullivan posts this comment from a reader:
The economic argument against the public option is simple. Yes, it may reduce monetary outlays, but it will do so by forcing providers to accept prices lower than what they would in a competitive market. The public option can do this because it will be subsidized by taxpayer money. Thus, the public option will crowd out other insurers and achieve monopoly pricing power. Once monopoly pricing power is achieved, then you will see a decline in both quality and supply of health services. The key is the lack of supply. At the monopoly price, the number of people willing to provide heath services will be suboptimal. This is why you have to wait six months for a CAT scan in England. Effectively, supply is rationed. And yes, “costs” will be lowered, but only if you just count cash outlays. If you count the implicit cost of the having to wait too long for health care services or receiving lower quality care, then it’s not such a bargain. No free lunches I’m afraid.
This is textbook economics as to what happens with monopoly pricing. Don’t need to be an ideologue at all to believe this.
The comment seems to ignore its own analysis. If the implicit costs of care result in rationing under the public option, then people who can afford better care will move to private insurance, which pays more, and so has access to a wider supply of medical providers.
UPDATE: Some follow-up analysis here.
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