The difference between insurers and supermarkets

THE DIFFERENCE BETWEEN INSURERS AND SUPERMARKETS…. The Wall Street Journal ran a very odd op-ed today from someone named George Newman, described as “an economist and retired business executive.” The point of the piece was to try to debunk some of the common arguments in support of health care reform. Towards the end of the piece, Newman tackled the notion that we need a public option “to keep the private plans honest.”

The 1,500 or so private plans don’t produce enough competition? Making it 1,501 will do the trick? But then why stop there? Eating is even more important than health care, so shouldn’t we have government-run supermarkets “to keep the private ones honest”? After all, supermarkets clearly put profits ahead of feeding people. And we can’t run around naked, so we should have government-run clothing stores to keep the private ones honest.

ABC News’ John Stossel was “especially” impressed with this argument. That’s a shame.

Jamison Foser explains why Newman’s analogy doesn’t make sense.

Supermarkets make money by selling people food. Clothing stores make money by selling people clothes. If they don’t give people food/clothing, they don’t get money.

Insurance companies, on the other hand, make money by selling people insurance — and they make even more money by selling insurance, and then denying claims.

I would have hoped this was obvious, even to Stossel and the editors of the Wall Street Journal‘s op-ed page. Oh well.

I’d just add, by the way, that Newman is convinced that American consumers already benefit from the competition among existing private insurance plans. Perhaps, before his next op-ed, Newman could look into the phenomenon of “highly concentrated” insurance markets.