What Is "Competition"?

The Washington Post is concerned that private health insurance companies wouldn't be able to compete with a public option. Their position is consistent with their historic defense of private insurance, but (as one might expect from an editorial page led by Fred Hiatt) falls far short of providing a sound, logical argument.

The Post presents what amounts to a three-part argument against the public plan.

First, the public plan will pay less than private insurers. Um... okay, let's assume that the government plan will be able to negotiate lower rates, still have adequate numbers of doctors and hospitals sign up to provide services, and pass those savings along to customers. This is "bad" because... of what? Why can't private insurers develop similar scale, or negotiate similar discounts? It's not about for-profit vs. non-profit - for-profit insurers survive and thrive despite the non-profit BC/BS networks. Why would doctors play ball, rather than dropping out of the government program in favor of the higher-paying private plans? Can a Medicaid patient walk into any hospital or clinic in the nation and obtain treatment? Why do many insurers base their reimbursement on Medicare reimbursement rates if those rates are so unreasonable - and why don't they publish their reimbursement rates so we can actually see for ourselves how much they pay for the same services?

Second, looking at the Medicare prescription drug benefit, "Insurers and private companies have been at least as innovative as the federal government in recent years in finding ways to provide quality care at lower costs". But isn't the argument supposed to be that they're better at finding efficiencies? If the "free market" struggles to keep up with the government as an innovator, what's its value again? And if we're supposed to be talking about "a level playing field", why is your only example one in which the government is handicapped and prohibited from negotiating discounts from pharmaceutical companies? If the defense of the free market is that, when not similarly hamstrung, private insurers are roughly equivalent in their coverage to the hobbled Medicare program, again, how's that an endorsement of the market? And why aren't we discussing Medicare Advantage, where private insurers required massive subsidies to provide the same level of care offered directly through Medicare? Why can private insurers compete effectively with the "public option" in a nation like Chile, when they would supposedly fall flat on their face, across the board, in the United States?

Third, mandating that insurers cover everybody without regard for pre-existing conditions takes away a leading justification for a public option. Really, what would that do other than create a sinecure for the existing insurance companies? How could a new competitor (other than the government) enter the market? In the presence of a public option, the mandate gives consumers a choice between insurers who have a history of bad behavior, who we are to trust wouldn't game the new rules, and a public option which would not game the system. A mandate without a public option provides a double windfall to private insurers - it requires that a lot of healthy people sign up for insurance, while pretty much ensuring that no new contenders will enter the marketplace such that there is... you know, such that there might actually be a healthy, competitive marketplace.

I don't really mind that Fred Hiatt and his crew shill for private insurance companies. The Post's editorial page is a big defender of corporate America and lemon capitalism. But I do wish they would be more honest about their agenda, and more careful (or is it an honesty thing, again) in their analysis.
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Update: In fairness to the Post, they ran an editorial on "5 Myths About Health Care Around the World, that more or less shreds the arguments raised in its many anti-reform editorials.