Competing Our Way to Socialism

The Supreme Court is hearing testimony about the health insurance law that requires everyone to buy insurance. It would seem likely SCOTUS will strike the law down because it is completely unprecedented as federal law. However, other courts have upheld its constitutionality (may this be because most states require their residents to buy car insurance, meaning having a government require people to buy something is not entirely without precedent?), so it is hard to say what will happen.

But there are real consequences to the mandate being upheld. If SCOTUS upholds the mandate, the Congress can mandate people to buy anything (silly arguments that health insurance is a unique market notwithstanding -- all markets are unique). It is the consequences of that which nobody has really talked about, though.

One of the things the government has done is to offer its own health insurance as part of the law. Since the federal government can subsidize their insurance (with your tax money, of course), they can offer it cheaper than can private companies. Since the government is forcing everyone to buy insurance, this will be an attractive option.

More, since the government is forcing everyone to buy insurance, this will drive up insurance prices in the private industry. I know we have heard many argue that it will drive down prices, because the healthy, uninsured young will be paying in, thus subsidizing the older and sicker, but the fact is that prices are brought down by competition -- and insurance is having to compete against "nothing," which costs exactly $0. This keeps rates down. If you don't have to compete with "nothing," prices will go up.

As prices go up, the government-provided insurance will become even more attractive. Thus, more people will buy the government insurance, until we end up with everyone "choosing" a single-payer system. The federal government will have nationalized the entire industry by default.

It occurs to me that this may have been the plan all along. The American people will not put up with outright nationalization of an entire industry (we were wary of the government taking over GM and Chrysler, even with promises they were going to privatize them again once they were on their feet), but what if an industry were nationalized without anyone noticing? What if it were nationalized by people choosing the government option?

If SCOTUS upholds the mandate, there will then be a precedent for forcing the American people to buy something. As a result, you may rest assured that insurance won't be the last thing Congress forces us to buy. And you may equally rest assured that the government will be sure to provide their "cheaper" option for everyone to buy. The government could easily nationalize practically every industry this way, driving out competition with their lower prices, made lower through its own subsidies.

All in all, it's a rather brilliant, quite elegant idea. It's the only way our federal government could ever get the American people to agree to nationalize an industry -- by giving the appearance that the American people are voluntarily, individually choosing the government option, until there is nothing but that option left.