Michael Tanner

Cognitive dissonance is defined as holding two completely contradictory ideas at the same time. 

That seems to be the case with the American public, with a new poll showing rising support for a so-called public option in health care, even as the public continues to oppose greater government control over the health care system. 

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Most likely that is because supporters of a public option have successfully framed it as just that: an option.  That seems entirely reasonable.  The American people believe in “choice” and “competition.”  So why not allow another choice?  Most Americans would keep the insurance they have today (and are happy with), but those who wanted to join the government plan could do so. 

But that’s not the way it would actually work.

A government-run plan would have an inherent advantage in the marketplace, because it ultimately would be subsidized by taxpayers. The government plan could keep its premiums artificially low or offer extra benefits, because it could turn to taxpayers to cover any shortfalls.  At the very least, the program carries with it an implicit guarantee against future losses.  Would a Congress that has bailed out banks and automobile companies because they are "too big to fail" resist subsidizing the government's insurance plan if it began to lose money?

Even without direct subsidies, the government could prevent the true cost of the program from showing up in premium prices in myriad ways.  For example, the government-run plan will not have to pay state or federal taxes, and unlike private insurance plans, who can be sued in state courts, the government-run plan could only be sued in federal court.

Michael Tanner

Michael D. Tanner is a senior fellow at the Cato Institute, heading research into a variety of domestic policies with particular emphasis on health care reform, welfare policy, and Social Security. His most recent white paper, "Bad Medicine: A Guide to the Real Costs and Consequences of the New Health Care Law," provides a detailed examination of the Patient Protection and Affordable Care Act (Obamacare) and what it means to taxpayers, workers, physicians, and patients.