Posted On: June 24, 2009, 8:12 am CDT

Posted By: Ratemaker

"If private insurers say that the marketplace provides the best quality health care; if they tell us that they're offering a good deal, then why is it that the government, which they say can't run anything, suddenly is going to drive them out of business? "

The answer to why a government program could drive them out of business is that the government program has no profit motive, and no solvency mandate. Backed by the taxation and debt-issuance powers of the federal government, a federal program has no need to reflect the actual cost of issuing the coverage.

When (not if -- politicians are involved) the decision-makers behind pricing the federal program decide that free-market prices are too high, they have the power to undercut the private sector's market-driven prices for an indefinite period of time without threatening the existence of the program. In short, a government program has the capability to "Wal-Mart" the private sector out of business.

In my humble opinion, the only role for a government program is that of a residual market. Even that has its risks, though. Look at Citizen's in Florida.