Is the Public Option the Wal-Mart of Health Care?


Republicans and conservatives are arguing that a so-called "public option"—a government administered health-insurance plan—is a bad idea because it would compete unfairly and shift many of the insured onto its rolls, exposing millions of Americans to poor quality, government-run health care. Liberals defend the idea of a public plan by saying that it helps control health-insurance prices by providing a low cost competitor that, due to its size, has a lot of bargaining power with medical manufacturers.

Where have I heard this argument before? Oh right—in the never-ending left/right squabbles over bargain-mad super-retailer Wal-Mart. Except in the Wal-Mart debate, the roles are reversed. Liberals dislike the way Wal-Mart crowds out other retailers, the "monopsony power" it exercises over suppliers to get products on the cheap, and the relatively low quality goods it provides; conservatives argue that it's a triumph of the market—using a relentless focus on low prices to make a wealth of retail commodoties and groceries affordable and available to all.

Of course, the analogy only goes so far before it breaks down: Wal-Mart isn't subject to the same sorts of political considerations that would inevitably plague a public plan. Just as the auto-bailouts have injected parochial politics into the car business, a public plan will almost certainly make legislators' regional interests part of the decision-making process. Nor is Wal-Mart subject to regulations like community rating and guaranteed issue, as any public plan would be, which place strict limits on how it can conduct its business. Wal-Mart might not be the most aesthetically pleasing retail environment, but it is relatively efficient, and it's inarguably successful at delivering high-volume, low-cost goods to the largest possible number of people. A public plan, bogged down by politics and regulation, likely wouldn't be. Rather than Wal-Mart, it would probably end up more like K-Mart—outdated, poorly managed, and financially unsound. 

Still, it strikes me that most of the arguments in favor of a public plan also apply to Wal-Mart, and that those advocating a public-plan in health reform might consider that next time they're inclined to attack the big-box retailer.

Further reading: Last year, Reason senior editor Michael Moynihan wrote in defense of big-box stores.