Holding the line on the “public option”?

Perhaps it's just political posturing, but on substantive grounds I don't get it.  The biggest problems with the proposed reforms have to do with the incentives created by the mandates.  That includes the incentives for would-be purchasers (better to just pay the fine and remain outside the pool), the incentives for the subsidized (very high implicit marginal tax rates), the incentives for employers (look for illegal aliens), the incentive for doctors to stop treating Medicare and especially Medicaid patients, and the incentives for the insurance companies (there's probably a way to scare off high-risk customers or otherwise game the customer carry requirements).

There is room for disagreement as to how big these problems are in absolute terms, but still they should be seen as the major problems with the likely bill-to-come, issues of cost aside.

The public option alleviates these problems, albeit in a minor way, by removing some individuals from this circle of possibly unworkable incentives.

I still can see why you might not favor adding a public option to the plan, basically for the usual reasons which plague many government programs.  As for the politicians who are drawing a line in the sand at the public option, to me that's just a sign they don't understand the major potential problems in the plan in the first place.


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