Advocates of government-run public option health plan are fond of claiming that the market "has been given its chance" and that all we need now is for the government to "inject competition into the health care market so that [we can] force waste out of the system and keep the insurance companies honest."¹ Yes, the President of the United States associates force with the market, and choice with the government—not the other way around.

Perhaps the scariest thing is that most of Congress agrees.

With a public option back on the table, Congress is poised to pass what would, in effect, be a massive new entitlement program for the lower and middle class paid for explicitly through a combination of payroll penalties on employers (i.e. displaced wages) and confiscatory taxes on the rich (i.e. theft). Since that won't be nearly enough to cover the real expenses of such a plan, the balance will likely be covered through general taxes and inflation, both of which tend to hit middle-class savers the hardest.

If anyone believes the government assurances that the plan will be self-sustaining—after $2 billion in government startup funding, of course—just look at the books of Medicare, Fannie Mae, and Freddie Mac.

Boston Globe columnist Jeff Jacoby recently captured these sentiments and more in a piece calling for less government and more real reforms.² Here are his top three insurance reforms. All are desperately needed, and any one of them would be a major breath of fresh air:

1. Tear down the barriers to buying insurance across state lines. ... When it comes to almost any other product or service, Americans would find a ban on interstate commerce and competition intolerable: Imagine being told that you could buy a car only if it was manufactured in your state. Consumers in the market for a mortgage are free to do business with an out-of-state lender; those in the market for health insurance should be equally free to do business with an out-of-state insurer.
2. Repeal mandatory benefits that make health insurance needlessly expensive. Compounding the lack of interstate competition is the way states drive up the cost of health insurance by making certain types of coverage compulsory. Consumers and insurers should be free to work out for themselves just how comprehensive or limited a policy should be. But state mandates prevent such flexibility by requiring insurance companies to sell a fixed array of benefits that many customers may not want. Individuals seeking plain-vanilla health insurance—a policy that will cover them, say, in case of major surgery or catastrophic illness—may find themselves forced to pay for a policy that also covers acupuncture, in vitro fertilization, alcoholism therapy, and a dozen additional treatments.
3. De-link health insurance from employment. Nothing distorts America's health insurance market like the misbegotten tax preference for employer-sponsored health insurance. Until that preference is removed, millions will continue to rely on their employers' health plan, rather than buying insurance for themselves. Fix the tax code, and no longer could insurance companies routinely bypass employees and deal only with their employers. Instead we would see intense competition for individual customers—and the lower premiums such competition would yield.

The market is not suffering for a lack of government control; it is suffocating from too many controls. How can insurers compete effectively when they have to sell into fifty different markets with fifty different sets of arbitrary rules? How can patients and consumers shop for what they need, when what they must buy is dictated by federal and state governments? And who is going to expose themselves to additional tax penalties by forgoing employer insurance in exchange for buying a policy in the current individual market?

The current insurance market is so hampered by government controls that it cannot even seriously be called a market. If you went to buy an apple at a fruit stand, and a third party intervened in your transaction telling you which type of apple to buy, from whom, at what price, could you really call that a market transaction? Of course not. (And by the way, the intervener also tells you that you have to buy an apple, and that you are not allowed to manage your diet or hunger in any other way—that's the individual mandate.)

What is needed is not just a defeat of the current House and Senate bills, but the proposal of a wholly new bill that enacts real market reforms. Real market reforms make markets more free, not less free.

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¹ Obama, B. "Remarks to the American Medical Association" Chicago, Illinois. June 15 2009

² Jacoby, J. "An option for public: less government, more choice" Boston Globe, November 4 2009

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