Many people on the left seem to assume that the public option is a win-win situation: those who don’t need it can keep their healthcare whereas those who do need it get healthcare. Everybody’s happy. What could be wrong with that?

Here are the arguments I find most persuasive against the public option.

First, is the argument that it is a trojan horse for single payer.  Single payer results in less competition, less innovation and longer wait times.

But…but…the Democrats promise, PROMISE, that it won’t lead to single payer. It will just force private insurance companies to compete, to provide better service. Okay, say that is true. Harvard economist Greg Mankiw answers that claim directly:

Would the public plan have access to taxpayer funds unavailable to private plans?

If the answer is yes, then the public plan would not offer honest competition to private plans. The taxpayer subsidies would tilt the playing field in favor of the public plan. In this case, the whole idea of a public option seems to be a disingenuous route toward a single-payer system, which many on the left favor but recognize is a political nonstarter.

If the answer is no, then the public plan would need to stand on its own financially and, in essence, would be a private nonprofit plan. But then what’s the point? If advocates of a public plan want to start a nonprofit company offering health insurance on better terms than existing insurance companies, nothing is stopping them from doing so right now. There is free entry into the market for health insurance. If a public plan without taxpayer support would succeed, so would a nonprofit insurance company. The fundamental viability of the enterprise does not depend on whether the employees are called “nonprofit administrators” or “civil servants.”

More here and here.

Then there is the issue of cost: how are we going to pay for the plan? The CBO has already stated that the current proposals, rather than decrease costs, increase them dramatically:

In the legislation that has been reported we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health care costs.

This is on top of already record spending and real record deficits (see chart here).

Then comes the question of need: who does this public option benefit? Who needs it? It can’t be the most needy, after all, there is already medicaid for the poor and medicare for the elderly. In fact, there is even SCHIP for the lower middle class. So who is left? A very, very small percentage of people who are in no way poor.

Bala Ambati, the Director of Cornea Research at University of Utah, explains:

On the 47 million people without health insurance point, that too is a statistic where there is less than meets the eye. First, health insurance does not equal health care (there are not just emergency rooms but cash-based clinics, and conversely, a lot of people with insurance don’t get good health care). Second, of that 47 million, 14 million are already eligible for existing programs (Medicare, Medicaid, veterans’ benefits, SCHIP) yet have not enrolled, 9.7 million are not citizens, 9.1 million have household incomes over $75,000 and could but choose not to purchase insurance, and somewhere between 3 and 5 million are uninsured briefly(<2 months) between jobs. That leaves about 10 million Americans who are chronically without insurance. Needless to say, extending the blanket of coverage to this group should not cost $1.5 trillion and require a wholesale overhaul of all of medicine.

Lastly, how this whole healthcare reform will be paid for has especially bad timing. Economist Bryan Caplan explains:

… when the unemployment rate is 9.7%, it’s a bad idea to legislate an 8% payroll increase on businesses that fail to offer health insurance.   Employers are reluctant to hire workers at today’s wages; how are they going to feel once the marginal worker gets 8% pricier?

In short, I oppose the public option because it’s likely to result in lower quality healthcare for all, it’s too expensive, it doesn’t curtail the growing cost of healthcare, and its payroll tax implementation is especially harmful in our current labor market. Hardly win-win, like some leftists make it seem.

For more on this topic see here, here, here, here, here and here.