Larry Kudlow
The day after President Obama's impassioned speech for big-government health care, Wall Street bet heavily that the so-called government-insurance option he supports is dead.

In a strong stock market on Thursday -- the market's fifth-straight daily rise (so much for the September swoon) -- health-insurer shares advanced significantly. Cigna increased 5 percent; Health Net almost 5 percent; Humana 3.5 percent; and UnitedHealth Group 1.5 percent. Hospital shares like Community Health Systems and Tenet Healthcare also rallied smartly, climbing about 5 percent each. Drug company Pfizer rose more than 1 percent.

These stocks would not have rallied if the public option looked alive. Corroborating this, the Intrade pay-to-play online betting parlor shows only a 24 percent probability of the government option passing by the end of this year. Also, of 17,308 respondents in a Politico poll, 38 percent registered thumbs-up for the president's address, while 58 percent said thumbs-down.

Obama's speech was not a game-changer. Good delivery, bad product. And at the top of the list, the new government-insurance option, which surely is a gate-opener for the government takeover of the entire health care sector, is a clunker. The public doesn't like it. Moderate and conservative Democrats don't like it. Republicans can't stand it. And Wall Street doesn't want it. Hence, the Dow's 80-point rally the day after the speech.

But the free-market option is still nowhere to be found. Right now, Sen. Max Baucus, D-Mont., is working to save President Obama's face, with a kind-of Obama Lite plan coming out of his Senate Finance Committee. But Baucus' framework has individual and business mandates, and it surely will give the government an even stronger whip hand on health care.

There are taxes galore for this $900 billion baby. It includes a 35 percent excise tax on high-end insurance policies, plus billions more in taxes on insurers, drug companies and medical-device makers. Government boards will determine value, quality and quantity for doctors, hospitals and clinical laboratories. Folks who opt out could face a $3,800 tax (based on a family of four).

At the end of the day, thoroughgoing free-market choice and deregulation is just as missing in action under Baucus as it is under Obama. There's a bipartisan deal to be had, one that would deregulate health insurance across state lines. It could pass the Senate. But Democratic leaders aren't going there. For some reason, they won't put the market to work.

In other words, there's no real market and no real choice in Democratic health reform.


Larry Kudlow

Lawrence Kudlow is host of CNBC’s “The Kudlow Report,” which airs nightly from 7 p.m. to 8 p.m.