In pushing yesterday for the sweeping health care plan working its way through Congress, President Obama argued for a government option, saying it “would make health care more affordable by increasing competition, providing more choices and keeping insurance companies honest.”  He sounds like Adam Smith making the well-proven case for freedom in the marketplace – market competition drives down prices and improves quality and choice for consumers. 

No, the President hasn’t suddenly experienced libertarian enlightenment.  The competition he has in mind is the federal government competing against its own citizens.

Government works well when it sets rules that apply equally to all companies, protect consumer rights and provide for public safety.  When government itself enters a market though, in this case as an insurance company, government officials end their role as impartial referees and become market players, with one important difference.  The “competition” President Obama envisions is a national insurance company that can print its own money.

The point is well illustrated by Germany, which allows citizens to buy private insurance or pick a subsidized public option.  Guess what?  Eighty-five percent of Germans take the public option.  Having eliminated most private choices, program managers began rationing care.  According to today’s Seattle Times, “[Germany] tries to control costs by limiting what’s available.”  The practice is standard in socialized systems.  Laboring under intense budget pressures, government managers seek to control costs by limiting people’s access to medical treatments.

If the President wants us to gain from real competition, he should let Americans buy health insurance in any state, just like auto insurance.  Making private insurance companies compete for our business in a national market, not starting a federal super-insurer, is the best way to get health care spending under control.