The Obama Administration's announcement concerning its vision for a reformed American health care system, a vision predicated upon a Government based option to private insurance, has provoked quite a debate--one that seems able to fill the op-ed pages of major newspapers on a daily basis.
The arguments, both in favor of and against a government intervention into the health care realm, are for the most part legitimate, provocative, and varied. Opponents of the reform measures outlined by the President will generally put forth arguments that revolve around one or more of the following points:
- There is nothing wrong with America's current health care system.
- If there is something wrong with America's health care system, the Government should have no role in fixing it.
- The United States cannot afford to implement meaningful health care reform, at least not at this time.
- The Government is not capable of effectively managing the nation's health care system.
- Doctors personally hate the thought of it.
- If subjected to drug price "negotiations" with the Government, pharmaceutical companies will be forced to allocate less money to the R&D that is necessary to solve a host of pressing medical issues.
- A Government health insurance option will "crowd out" private insurance companies, rendering them useless.
As we've already stated, these are all perfectly valid arguments that merit serious discussion. To counter #7 however, we would argue that a reasonably applicable precedent of public/private co-existence has been in place for over 30 years. The peaceful existence we speak of is between the United States Postal Service, Federal Express (
FDX), and the United Parcel Service (
UPS).
Although an organized system of mail delivery has been in place in the United States ever since Benjamin Franklin was named the first Postmaster General in 1775, the United States Postal Service as we know it was not created until the Postal Reorganization Act of 1970. This Act essentially created a Government business that would be forced to fund its operations through its own revenue - not taxes. Although
initially subsidized in part by the federal government, the USPS was able to become operationally independent in 1982. The Act also created the Postal Rates Commission, and empowered the Commission to regulate the USPS and force it to adopt "fair" postal rates. It was during this exact time period that Federal Express was incorporated (1971) and began operations (1973). The United Parcel Service (
UPS) in contrast, was already a mature company at this time, and by 1975 it provided service to every address in the continental US. So here we have three nationwide package delivery services: one that received Government subsidies throughout the 1970's, one private upstart, and one more mature private company. An individual who carefully observed the circumstances in 1970 likely would not have predicted the current circumstances of these three organizations today.
In 2008, the US Postal Service, FedEx, and UPS reported annual revenue of $74.9B, $37.9B, and $51.4B respectively. Not only was FedEx able to avoid being "crowded out" by an already established Government business, it has since surpassed the USPS in relevancy - not an earnings season goes by without FedEx being described as a "bellwether" company. At the same time however, the US Postal Service has been able to provide quality services at a low cost to Americans. If a company needs an important contract delivered to a client before 10AM the next morning, it will use FedEx (or UPS), and it will pay a premium for this service. If the same company doesn't mind waiting 2-3 days however, it may choose to save money (especially these days) and go with the US Postal Service option. We would argue that the same dynamic can exist in the health care industry, given the proper implementation by the Government of course.
In order to address in preemptive fashion an obvious criticism that could be lobbed towards our argument, we will state that there are obvious differences between the health care and shipping industries. Some people might think that these differences are profound enough to negate any argument that attempts to compare the two. However, the rise of FedEx should be evidence enough that the existence of a Government option within an industry does not, by default, lead to the "crowding out" of other private participants. The emergence of a government option might have the potential to put some health insurers out of business, however, the strongest and most efficient companies in the private sector should live on and remain profitable - an outcome that would be to the benefit of everyone.
Disclosure: No position in FDX or UPS
This article has 9 comments:
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Most of the people uninsured are young people. they don't want to pay for insurance at rates designed for senior citizens (they use 80% of health care). Give these people a simple policy for catostropic insurance (its cheap). Also it seeems everyone fogets what insurance is supposed to do. Hint: Its not for new eye glasses every other yr. CAr insurance is not for oil changes, its for major accidents. paying for simple office visits isn't insurance, its a deferred benefits plan.
It's important to note that the whole employer paid health care scenario was a result of government intervention in the free market - during WWII there was a wage freeze. Companies offered health plans as a way around the wage freeze.
Government always creates more of a mess than it fixes. Always.
Unlike other businesses that need to provide you with their product in order to make any money, health insurance companies actually make more money for themselves when they restrict and do not pay claims.
In other words, they make more money when they do NOT provide the product that you have paid them for.
Read the 50 to 70 pages of your health insurance contract.
Pay particular attention to the section entitled “limitations and exclusions”.
People’s health is not a product that needs to be left to the whims of money motivated CEO’s and stockholders.
If that is your thinking, you might as well have your police and fire department protection based on insurance premiums you pay.
Then you can go to the police and fire protection insurance page for ‘limitations and exclusions’ on whether or not the police or fire department would come out to your house in the event of an emergency.
The point is, you would never think of discriminating against another citizen if he was the victim of a fire or crime.
So why would you be ok with health insurance companies discriminating against fellow citizens who have pre-existing medical conditions?
FedEx insures a small pool of relatively young, healthy, and hand picked workers !
1. The USPS is the only carrier that delivers 'mail' - the stuff that shows up in your mailbox. Neither FedEx nor UPS compete in that space, and it is the bulk of the USPS's revenue.
2. FedEx and UPS have both done studies that demonstrate that both could provide mail service at about half the cost of the government - and without subsidies. However, regular mail is a monopoly.
3. The USPS only competes with UPS and FedEx in three areas;
a. The USPS's 'Express Service' - which is only about 90% on time and offered at generally lower prices than both UPS and FedEx.
b. Priority Mail - arrives in 1 - 3 business days, there are catches, tracking is offered at an extra cost, there is no money back guarantee on the service and if it shows up in a week, you're out of luck.
c. Parcel Post - competes with Ground service, again, tracking is extra, no money back guarantee, etc, all services that are included with FedEx and UPS.
That said, the USPS doesn't have to make money, as evidenced by their dismal financial results. Both FedEx and UPS would have been out of business long ago if they had these kind of results.
The USPS does little but bolster the argument that our Federal Government, though loaded with good intentions, is unable to PROFITABLY and EFFICIENTLY run a business.
The same thing will ensue if we allow the government to run healthcare, when an entity need only to answer to bureaucrats and not shareholders and the marketplace - the private sector (who has to answer to those forces) it competes with is doomed to fail.