That’s a response I got to my last post. It’s true, I don’t know of anyone seriously promoting that, but it can still do what I said in my previous post. Why? It all has to do with the fact that it is a federal program.
Imagine that you have kids and live in an area with lousy public schools. You really don’t want to send your kids to neighborhood school, what to do? Sure, you have a choice, you don’t have to choose to use the state’s school, there are plenty of private schools to choose from. Here’s the thing, even if you choose to not use the public school you still have to pay for it. Your choice to not use the school does not help you out at all. You have to come up with the money for both the public and the private school. On top of that, the public school doesn’t really care if your children don’t go, they won’t change what they do at all.
Facing that decision, most parents go ahead and send their kids to the public school. If they are really committed, they will agitate to improve the school. Of course, if anything ever does come of that agitation, it will only be long after their kids are through that school.
It’s a similar thing with a federal health insurance “option.” It will be optional to use the services, but it will not be optional to pay for it. Faced with that decision, most people will go ahead and use it. Using what you are charged for is the rational thing to do, even if that thing is substandard. The cost of using something else is just too much for most people. This is the mechanism that will cause the federal program to squeeze out the private ones.
Keep in mind that this holds even if you can opt out of the premiums. This is because the inevitable cost over runs and/or cost underestimates will still be the responsibility of the federal government. Without any real reason to worry about profitability, there will be both. It will be like Fannie mae and Freddie Mac, political promises with no incentive to rein in costs or risks. In other words, a disaster waiting to happen.