The Public Option and Price Discrimination
Blogger Milton Recht made a very good comment on my recent post about public/private competition in health care and education markets. Here's his description of what would happen if the public/private split in healthcare markets looked like education markets (with my emphasis):
A similar effect is possible with the introduction of the public health insurance option. Health insurance price insensitive consumers will buy an expensive private health insurance with extra bells and whistles. The public option will be cheaper (either by forced price controls, subsidies, fewer benefits, rationing, longer delays, denials, etc.) but it will not have the bells and whistles (or maybe just prestige) of the private option.
In this price discrimination situation, there will be two different goals. The public option will want to be as low cost as possible and it will curtail benefits as much as it served population will allow. The private option will want to distance itself from the public option as much as possible, adding many additional benefits and pricing itself as high as it served population will allow and that will maximize profits. Over time, the low cost public option users will want the better benefits of the private option and force the government to try to increase benefits or deal with an increasing dissatisfaction among the electorate using the public option. The result of a public private option is class distinction based on the source of the benefits, a public education versus an elite private education or a public health plan versus an elite private health plan.
The sentence I've highlighted is what distinguishes whether this will be "Medicaid for all" or "Medicare for all." The program is operated within state budget rules (though with some federal funding), so there is no presumption that costs can grow without regard to other funding priorities and the current taxpayers willingness and ability to pay. The beneficiaries of the former are low-income and thus too weak politically to effect these changes through the political system. They get very little help toward that end by the suppliers in the market. My concern about a larger government role in health care is that with federal funding and a beneficiary population with more political muscle (like the elderly in Medicare), there will be very little to control over the cost growth in the program. We'd have all the risks of third-party payment, with a direct line to the Treasury and a sense of entitlement to the funds.
Be sure to check out more Milton's posts at his blog, Misunderstood Finance.
Looking at the analogy more factually...
Milton Recht wrote:
The public option will want to be as low cost as possible and it will curtail benefits...
The result of a public private option is class distinction based on the source of the benefits, a public education versus an elite private education or a public health plan versus an elite private health plan.
If we really are going to compare a public option health plan to public education, shouldn't we consider the factual picture of actual public v private education, instead of just imagining the big difference the be "class distinction"?
For instance, the New York City public schools now consume $20,000 per student annually, with results and accountability like this(!) (as reported by a NYC public school teacher -- not so different from those reported for that "public option" single-payer govt health program, Medicaid).
The biggest private option alternative to these public schools by far in NYC is the Catholic school system, which spends about $5,000 per student, with results at least as good (many studies say clearly better) for comparable students.
These Catholic schools now serve a population that is dominantly minority and lower-middle working class. In many most of the children aren't even Catholic these days, the parents just want their kids in a decent school, as under-funded and under-capitalized as the Catholic schools are -- even though they have to pay very hard-earned money to do so, when they could use public schools that are free.
So here, do we really see the public option as "low cost" ($20,000 per student), and the private option serving "an elite" -- so the big result is the creation of "class distinction"? Really??
Or do we see the stakeholders in the public option leveraging their political connection to (1) immunize themselves from accountability for the results they produce, while simultaneously (2) sucking in huge spending subsidies compared to the private option (4x) to undercut the private option in competition?
2 points
1. I'm pretty sure the original post was about college education, not K-12.
2. NYC certainly spends far too much to get far too little. But please recall that the requirements around public schools (mostly special ed, but a whole host of "managing for the 1%" oversight requirements) make comparisons with private schools difficult. In your example, we could mention that many of the teachers are unpaid, and certainly not paid the average of large city teachers; Catholic schools do not have to run special education units (although some do for mild problems), which generally costs about 1/3 of a typical public school budget; they don't provide breakfast and lunch; they don't have to take expensive tests and process the results (adding another bureaucracy); and they can refuse or expel difficult students without due process, foisting them back on the public schools.
I can't speak to NYC, but in eastern Vermont you have private high schools that struggle to survive on a tuition set at the statewide public average spending levels, even though they refuse difficult and expensive children. Private is not cheaper, at least up here. Better, yes, again because there is no requirement to keep troublemakers and slow students. But not cheaper.
Re. 2 points
I'm pretty sure the original post was about college education, not K-12.
The original post considered an analogy to a private option in education.
One commenter chose to make the comparison to college education. I chose to make the comparison to K-12, which seems far more appropriate.
If one wants to see how far even "private" universities are from being private, just consider the FASFA form as your entry point to the massive government bureaucracy that regulates, guides and funds them.
Private K-12 schools in contrast actually are private, or at least much closer to being so.
And in private v public "option" K-12 education we see in action exactly what skeptics of the public option in the health plan, like Mankiw, warn of -- the public option levers huge subsidies out of the political system for competitive advantage (while its political patrons protect themselves, and the system, by defining down all measures of minimal satisfactory performance).
... we could mention that many of the teachers are unpaid ...
Total myth. "Unpaid clergy" as teachers in this day and age are functionally 0% -- and literally 0% when you realize the Catholic system is unionized.
No offense, but most of your other comparative points are equally mythical, although this is not the place for me to cite chapter and verse on all that.
I did point out that for 25% of the money, multiple studies show the Catholic schools perform better for the same quality students, and none have ever found them performing worse.
Really, take a moment, click on the link I provided to the NYC public school teacher writing about accountability for performance in the NYC system. You'll see the factors affecting the public schools' results. See if you can attribute any of them to advantages the Catholic schools may have.
Poppycock, balderdash, and other such invective
"Mythical"? Are you honestly proposing that catholic school faculty make the average of big city teachers? Patently absurd.
It is ridiculous to propose that Catholic schools accept and pay for $100,000 per year private tutors for autistic children, $150,000 per year residential settings for massively developmentally delayed children, or even the more common $50k or so per year to put violent children into a setting where they're more controlled. Again, I say patently absurd.
Run a school board for a few years, sir, as I have, and we can talk about where the money goes. There is no broad evidence that private schools do better with the SAME students, as they never accept, or quickly expel, anyone who does not fit their niche. That's what I would do if I ran a private school. The private companies who tried to take over public schools and run them by the same rules are all bankrupt. Which is exactly what anyone with an ounce of experience in a real school would have expected, because there's no room in the budget for seven-figure managers and a 10% profit margin.
Re Poppycock, balderdash, and other such invective
"Mythical"? Are you honestly proposing that catholic school faculty make the average of big city teachers? Patently absurd.
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Of course they don't make the same money -- public school teachers here now top more than $100,000, plus get maybe the best benefit and pension package in the world, for a 180-day year, 6.33 hour day, with paid sabbatical years off, and rock-hard immunity from accountability for performance, which results in performance levels ... did you read the description of them by the NYC public school teacher at the link I provided?
Here is that link again.
But the issuue is not how much they make, it is the result they produce for their pay -- high pay for low output is bad, not good, in education as in health care. (California pays prison guards over >$100,000 per year. The state is bankrupt. Do you want to endorse >$100,000 prison guard pay as a virtue of their system?)
BTW, NYC public schools outsource a significant number of troubled special ed kids they can't handle to the Catholic schools. "Unpaid clergy teachers, special ed, Catholic schools expel kids public schools don't", you're really working your way through the myths.
"There is no broad evidence that private schools do better with the SAME students"
You really don't know anything at all about the NYC schools, do you? The studies that say the NYC Catholic schools do better with the same students -- for a fraction of the cost -- have been piling up for decades. Google hit #1...
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eric.ed.gov.
Data analysis indicates that Catholic schools in New York City are bringing their students to higher levels of achievement than are public schools, regardless of the number of poor and minority students.... Catholic schools come closer to breaking the link between race, family income, and student achievement than do public schools. Catholic schools are more successful at maintaining a basic level of achievement than are public schools....
-- Prepared for New York University, Program on Education and Civil Society.
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Those exist by the volume. From Rand, Harvard, you name a study source.
I'll cut you a break and take it you think NYC public schools are run like schools in Vermont (though why you'd think that...?)
In any event, read the link that I provided above, again, to the description of how the NYC schools work by the NYC public school teacher. Then come back and discuss what she wrote. Tell us how that compares to up in Vermont.
If you aren't willing to do even that little thing, and expose yourself to a NYC teacher's thoughts, really, there's nothing to talk about.