Christians and Health Insurance 3: The Post Office Always Rings Twice

Thanks to President Obama, I get to parody the two greatest James M. Cain titles in the same blog series (see “Trouble Indemnity”). I’m referring to President Obama’s claim that a socialized medical system could co-exist with continuation of private health insurance. He gave as his example FedEx, UPS, and the Postal Service. There are a couple of problems with this example. First of all, FedEx and UPS do not compete with the Postal Service in the USPS’ most visible line of business. The Post Office is a government-protected monopoly in first-class mail. Second of all, comparing government –run Obamacare with the Post Office might not be the best P.R. move that the President could make.

Nevertheless, the President asks an important question. When can private and government services of charity or compassion coexist? This deserves an empirical and not an ideological answer.

The critics of Obamacare might reference the well-documented process through which the federal government “crowded out” private religious expenditures on charity and compassion starting during the Great Depression. Fanny Mae and Freddie Mac (remember them) used their portfolios of implicit government guarantees and regulatory advantages to gain huge market dominance in the mortgage industry. (Technically, Fannie and Freddie were “Frankenfirms”: some weird hybrid of being investor-owned yet quasi- government corporation). Amtrak (pretty much by design) displaced virtually all private rail travel in the United States. Again, Fannie Mae and Amtrak may not be the most effective advertisements for government-run health programs.

However, I can think, from close personal experience, one industry in which government and private (essentially non-profit) organizations seem to coexist: research-based higher education. Our list of exclusive research universities certainly includes many private institutions, but think about the rankings of programs at Georgia Tech, The University of Virginia, many of the UC schools, the University of Texas (sorry, Dad) and the University of Michigan. On the other hand, we have a tremendously healthy system of private universities even though in most, but not all, cases the state tuition subsidies are not transferable to private universities. Granted, many of the public schools receive beaucoup federal dollars, but they are still remarkably independent. Here are some hypotheses (not yet proven theorems) about this situation. It would be a good exercise to ask what this model would mean for health insurance reform, so I’ll try at the end.

1 ) Whether we like to think about it or not, the public schools are essentially vouchered and thus are forced into intense competition with one another. We take for granted that K-12 schools are organized by “districts” or “attendance areas”: proposals for school choice are all about breaking up those geographical monopolies. But those of us who teach at state universities are all too aware that no such in-state monopoly protection exists for us. We at Florida State must compete for the best and the brightest students from Miami to Pensacola. I conjecture that the quality of public universities would be much lower if Florida, Texas, Oklahoma, Virginia and so forth drew attendance boundaries for their universities, taking away the dramatic disciplining power of competition.

2 ) On the other hand, the operators of the subsidized public university systems, the states, exercise very little regulatory control over their rivals: private universities. Except for such basic items as fire safety in the buildings and so forth, the State of Texas has essentially zero control of the day to day curriculum, hiring, and other academic policies at Rice, Baylor, SMU, TCU, and so forth.

3 ) In part because of # 2 ) above, and also in part because of strong cultural norms, we as a society accept that different people will want, be able to afford, and ultimately receive very different experiences in higher education. I personally think that the massive extra dollars spent by parents who think that their offspring have to go any private university rather than any public university are, in many cases, a joke…if you are talking about the actual quality of undergraduate classroom instruction. However, there are other factors. At one point in time, an undergraduate student at Georgetown entered into a unique religious environment. And, many parents (rightly or wrongly) may believe that they are paying for more lifetime networking at Leland Stanford Jr., University compared to, for example, the University of Arizona. The point is: we as a society accept the heterogeneity of outcomes as legitimate.

If my model is correct, then compare this to the ideas of a federal public option floating around in the current House bill. First, the federal government will compete with no other public entity. Secondly, the bill pretty clearly expands, not reduces, federal control over the operational choices of its rivals, private health insurance. Finally, I conjecture that there will be a tendency to discredit, rather than honor, heterogeneous outcomes. Whether there is another approach in which public/private coexistence is possible is a question for further consideration.

But I want to make one final observation about the university example. Unfortunately, over the past decades many, many private universities founded by religious communities have forfeited their religious heritage in order to "compete" in the educational marketplace. That’s an issue for discussion in a future blog, but it’s a serious concern to me regarding the future of Christian health missions if forced to compete with a “public option.”