A Harvard Economist’s Viewpoint on the Government Health Plan Issue

Greg Mankiw is a Harvard University economics professor who, in my opinion, writes one of the most interesting blogs on the Internet.  He has knack for getting right to the heart of complex issues.  He’s done that today in a response to Paul Krugman’s New York Times column advocating the creation of a government-run health plan.

Mankiw writes that the key question is whether the government-run plan would have access to taxpayer funds that would be unavailable to private insurers?  If so, then it’s impossible to have a level playing field between the private plans and the taxpayer-backed government option.

But if the government-run plan isn’t allowed to tap into federal funds, Mankiw writes:

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.”

Mankiw underscores the point many of us have been making.  If we adopt insurance reforms, which have strong bipartisan support, to ensure access to health coverage with pre-existing conditions no longer being an obstacle, and we provide subsidies to help low-income Americans afford health insurance, then what’s the compelling rationale for a new government health plan?