The Oregon Small business council wrote this Op-ed for the Oregonian today touching on an interesting free-market argument that explains recent health care costs and why a public option might be a good idea.

The recent increases in health care costs look a lot like what happens in a market when an oligarchy or monopoly raises barriers of entry to squeeze out competition. The reason for this may be accidental- they might all be using the best scientific statistics possible to set prices, thus making all their prices close to the same. But the end result is the same- increased cost to consumer due to a lack of choice, resulting in incredible profits being returned to stockholders, who then reward C-level executives with outlandish compensation packages.

So far, the reasoning is sound. But the solution seems to be novel: Add a low-cost/low-value public option to cover those who can't get insurance otherwise or for whom the low-cost option is sufficient, to add competition to the marketplace.

The argument against this, from the oligarchs themselves, is of course that such an option will put them out of business. I don't find this argument to be credible- after all, US Mail now offers flat-rate volume pricing, but it hasn't put FedEx or UPS out of business. Most cities have a police force, but that hasn't put the alarm and private security companies out of business. Sure, these businesses are less profitable than they would have been without the public option adding competition to the marketplace- but that's the whole point of competition in a free market.

It makes me wonder if we could do much better in other areas. A government low-value food bank system based on the Mormon Bishop's Pantry markets. A nationalized low-cost oil company. etc. Not replacing private industry- but competing with private industry in a free market to lower prices for everybody.

After all, as President Obama claimed, if supposedly government can't do anything right as the libertarians claim, they shouldn't be too hard to outcompete.

But here's one thing I'd like to see in public option- if we're going to ask the poor to pay an insurance premium, then the least we can do to be fair to the rich is to follow the US Mail model- and keep the public option as profitable as possible, with the impact to the tax revenue budget as small as possible.