Public Options in Transit and Health Care

Michael Lewyn's picture
Over the next few months, Congress will continue to debate health insurance reform, and in particular, whether to create a "public option"- a government-financed insurance company which would compete with private
health insurers.  Opponents of the public option fear that the government package might drive private insurers out of business.  Are such concerns legitimate? American transportation history may give ammunition to both supporters and opponents of the public option. 
A century ago, American urban transportation was far more privatized than it is today.  The dominant form of transportation (other than the private horse and foot) was the privately financed streetcar.  Streets were often privately financed, and in 1880 most American streets were not paved.   
But in the early 20th century, government at all levels decided to facilitate bicycle and automotive transportation through a "public option" of massive street construction.  In the first decades of the 20th century, municipal governments paved existing streets; by 1924, nearly all urban streets were paved.  In succeeding decades, government at all levels widened those streets to accommodate automobile traffic, and eventually built limited-access expressways to accommodate even more automobile traffic.  
By facilitating auto travel to places where public transit was inconvenient, the "public option" of wide public roads reduced transit ridership, eventually making private transit unprofitable. In short, 20th-century American street and road construction was a slow-motion nationalization of transportation: government created a public facility that simply outcompeted its private rival.

Eventually, unprofitable transit companies were themselves taken over by government, creating the modern public transit agencies we know today.  But this second "public option", despite its recent growth, has certainly been less successful than the auto-oriented public option of the 20th century.  
This is so for a variety of reasons.  To name a few:
 *the second public option has been less generously funded than the first - not just because government spends more every year on highways than on transit, but also because even if government spent more on transit, it would take decades to make up for the "head start" that the highway industry obtained in the early 20th century (when government spent money on auto-oriented streets but nothing on public transit) and the late 20th century (when government spent more money on highways than on public transit).  
 *government backed up its first "public option" with government regulation: zoning and planning rules that, by reducing population density and separating housing from other uses, created neighborhoods that would be very expensive to serve with public transit. 
*the first "public option" was not exclusively public: while we drive on publicly funded streets, we do so with cars and fuel bought from private industries- industries that can lobby government for money for roads and for government bailouts when times get tough, back up its lobbying with campaign contributions, and glamorize its product with advertising designed to make auto travel seem seductive.  By contrast, public transit agencies cannot make campaign contributions- and because the first "public option" made public transit unprofitable, transit agencies have limited resources for advertising and lobbying. 
So what does this tell us about health care?  That it is simply too early to tell how a public option will affect the private insurance industry.  A well-funded public option backed up with supportive government regulation and by support from private industry might well make private insurance less profitable.  On the other hand, a poorly funded public option, like today's poorly funded public transit, is no threat to private health insurance.
Michael Lewyn is an assistant professor at Touro Law Center in Long Island.



You left out one thing...

With premeditation and malice aforethought, streetcars were conciously, methodically, and illegally dismantled by a cabal led by General Motors. The video linked here spells it out including interviews with the actual parties involved.
for more on the economics of human transport:

We Already Have a Public Option

Very OT, but I couldn't help it.

In fact America already has several public options, Medicare, Medicaid, and the VA. All you have to do is look at those programs to see what a public option would look like and behave vis a vis the private sector. The best one two look at Medicare, because older Amercians are by far the wealthiest demographic in the country (and therefore would likely excersise some choice given their affluence)... any large private insurance market there (I honestly don't know)?

I know the Medicare bad, financed via a ponzi scheme with trillions of unfunded liabilities that our ruinining the federal budget, subject to billions of dollars of waste and fraud, killer payroll tax on the poor to benefit the wealthy, government management that has, hitorically, only responded by cutting reimbursement rates while mandating expanded benefits (costs which are passed on to private insureres)... and the good, free medical insurance for the elderly, open to everybody (that meets the age requirement anyhow), quick reimbursement for medical practitioners, creates a reliable voting bloc for politicians to exploit and makes certain people feel real good about themselves (I wonder if you can tell where I stand on the public option idea). But I digress...

I just think that if you really want to know what will happen in the US with a public option all you have to do is look at the public options that already exist here (the good, the bad and the ugly sides of them). I don't think comparing what happens in other countries is necessarily applicable as the US would likely build upon our exisiting infrastruture.

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