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Where's the virtue?

Apparently Andrew Sullivan is leaning towards support of a (limited) public insurance option, and as Andrew goes, so goes the nation. Historically, anyway. He says:

...on the public option, I'm still behind. I don't want to see a stealth government take-over of private health insurance, but I can see the case for a limited public option. Clear restrictions on the buying power of such a program would ease my concern. But if a public option can streamline overhead, pioneer less bureaucracy, and keep the private sector on its toes - as public universities can private ones - I'm not opposed. Why would anyone be? The key is reining in its unfair advantages while encouraging its fair ones.

So Andrew seems to believe that there is some good reason to keep private insurers around, even when a public option exists.

This makes me wonder: what is the virtue of private insurance? I'm really curious about this, and ten minutes of Googling didn't turn up any compelling answers; so maybe some of you smart people can enlighten me. What, exactly, do private health insurance providers contribute to our society? Obviously they employ a lot of people, but that does not strike me as enough of a reason for their continued existence, if their other effects are generally negative. Those people could be more usefully employed doing other things, like, I dunno, hyperinflating the values of some overcomplicated security instruments that no one else understands. It seems obvious that a corporation whose financial interest lies in pleasing its stockholders by maximizing profitability is not going to act in the best interests of its customers, if it can get away with not doing so.

And let's face it: insurance companies can get away with it. With a durable product, like a car or a computer, you generally get a warranty, and if it doesn't work as you expect, you can return it; or at the very least, refuse to purchase that product again and thus punish the supplier economically. But with health insurance, it's different. By the time you find out it's broken (that is, you need coverage that your insurance isn't going to come through with), it's already too late for you to shop around. You're now damaged goods, a pre-existing condition. Not to put too fine a point on it: you're screwed. So the usual economic incentives and constraints seem not to apply.

If a single-payer system can cover everyone and allow medical professionals and suppliers to make a decent living, why would we want to perpetuate the private health insurance system?

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Comment by Aaron S. (USA) on September 30, 2009 at 2:50pm: lol, yeah :P But, it wasn't even just the librarians, it was the customer service personnel, the managers, even the lowly shelvers like myself. And, I should add, without even the possibility of a raise, that I'm aware of - you had a test every six months that was easy as pie, which would get you a regular raise, but for most of the stuff you did "all" that you'd get was a thank-you and the knowledge that the library ran a little better because of something you did. And, the system worked amazingly. It's been really, really hard for me to accept that you need financial incentives to get people to do good work ever since then - in fact, it's started to make me wonder if what you're really rewarding isn't good work but just plain old greed.

Comment by Joseph Andrew Knapka on September 30, 2009 at 11:32am: Hey Aaron,

That is very encouraging!

I think probably librarians are more invested in their work for its own sake than many other people are. It seems unlikely one would go to the trouble of getting a library science degree if one were just in it for the money.

Comment by Aaron S. (USA) on September 29, 2009 at 7:18pm: I've only had experience working in public libraries, but rest assured, the ones in my local county system are efficient as hell. The exact figures are really hard to calculate, but I've estimated that we pay about as much for our libraries as we would for a subscription to Blockbuster. But, instead of ten rental per month, you get unlimited rentals (up to 10 DVDs, 10 VHS, 10 CDs, and 30 books, with a 30-item total max), including not just videos but music and books, plus a librarian staff available to help you find things/do research, plus computer access with word processing, broadband internet, etc. There *are* usually some long wait times for the latest Harry Potter book, but it seems like a small price to pay for everything else you get. Plus, since the funding comes from taxes, the cost of the service is adjusted for your ability to pay.

The most eye-opening things there were, first of all, how hard everyone worked to improve service despite not having an immediate financial incentive. Simply hearing a reasonable complaint was enough to get people thinking of how to improve the system.

It was also surprising to see how paranoid a lot of the patrons were, anyway. Several years ago, we got a smart-chip systems for the computers. Originally we'd have to manage all the patrons' turns manually, basically relying on their good word that their turn was over. For the most part it worked, but it was inefficient. The new smart-card system managed everyone's turns fairly, cheaply, simply, and automatically. Of course, when the system was first brought in, there was a noisy minority writing op-eds in the local paper and such that it was a huge government conspiracy to track everybody's reading habits and subtly influence the material they consumed. Luckily they quieted down eventually, but they'd scared a lot of people in the process.

Comment by Joseph Andrew Knapka on September 28, 2009 at 11:29pm: Yes. However, that unbiased government worker is, in the public imagination, sitting back and flipping through a porn mag under the desk for five minutes after each claim he reviews. The idea of "government waste and corruption" seems deeply ingrained in the American soul.

I used to take the inefficiency of government for granted (having absorbed that attitude osmotically by virtue of living in the same house with my father for 19 years). But fairly recently I've started to become amazed at what the government can accomplish. I mean, the US interstate system, for goodness' sake? Even if waste and inefficiency are endemic throughout the government (and doubtless they are), it's still taking on tasks that IMO do enhance the common wealth (often in indirect ways), and which no other entity has the motivation or scope to begin to contemplate. And given recent events in Capitalism World, the dewy-eyed libertarian notion that markets will magically gravitate toward economic optima seems extremely, ummm, optimistic.

It might be true that free markets would be an efficient means of allocating wealth, if all actors had perfect information and wisdom. But under those conditions, almost any system could achieve high levels of economic efficiency.

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