How does the public option work?

with today's question. How does the public option work? You know the public option, as in the healthcare reform debate public option. For the last year, the government healthcare idea known as the public option has been the focus of intense discussion and debate. There's been so much debate, in fact, that the future of the whole idea is far from certain. The public option has been inserted into legislation, taken out,

put back in, cut again. Currently, the public option is in So let's take a look at the idea and see how it works. The simple summary of the public option is this, the government will run a health insurance company and citizens can choose to use it or not. This idea sits in the middle of a spectrum of ideas. At one end of the spectrum is a world in

which private insurance companies provide all health insurance. In the United States, at the other end of the spectrum is a single payer system, where the government provides all health care coverage for everyone. In America, the public option is more toward the former end than the latter. With the public option, there's simply one more company in the pool of companies providing healthcare coverage. That new company happens to be run by the government on behalf of its citizens.

It should be noted that most other developed nations have trended towards a single payer system. Single payer has the potential to dramatically lower healthcare costs for a nation. It also removes healthcare coverage from the backs of businesses, lowering the cost of doing business. In the United States, there's concerned that the single pairer idea doesn't have enough support

to pass into law. It might also be economically disruptive in the short term, since it would fundamentally change an industry that makes up eighteen per cent of the American economy. The approach behind the public option is not unusual. For example, the government run post office competes with private companies like FedEx and UPS to provide letter and package delivery services. At last check, EPs and FedEx were doing fine and

competing well against the government run delivery system. In the same way, there are many public universities created by states, and they live in harmony with private universities. This despite the fact that many public universities have significantly lower tuition costs because they receive state subsidies. These two examples demonstrate that public and private companies can coexist in a marketplace. Why would the government want to set up a health

insurance company? The idea is that a government runs system could provide service at a lower cost. This is important because healthcare costs are rising fast and they could eventually cause serious problems for the economy. One prediction shows costs nearly doubling by and consuming thirty four percent of the nation's GDP. The public option would create competition that could, in theory, compel private insurance companies to lower prices and

cover more people. How might the government run health insurance company lower costs? First, it would eliminate the need to create profit and dividends for shareholders. Second, it would be able to do away with multimillion dollar executive salaries. Third, it could probably lower other administrative costs, and it would, through its size, probably negotiate better eates on drugs and services.

But where would the money for the public option come from the stated goal of the public option is to create a system that covers its own costs and is self sustaining. People choosing the public option would pay premiums like they do to a private insurance company. People unable to afford insurance would receive subsidies from the government which they could use to buy either public or private insurance. Opposition to the public option idea comes on several fronts.

Existing private insurance companies express concern that the public option will put them out of business, but is mentioned above, this seems unlikely. Pharmaceutical companies are concerned about the bargaining power of the public option. Some view the public option is a first step towards a single payer system. It will be interesting to see if these opposing forces can eliminate the public option or if it survives. For more

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