"A(n) important tool to discipline insurance companies..."

In the President's news conference today he used the phrase to justify the government run aspect of his health proposal. The fractured syntax is no match for the even worse fractured logic.

Let me see, Mr. President, the US Postal Service serves as an important tool to discipline companies like Federal Express. Hmmm. In reality, to the extent that the USPS is any better than it once was is a result of the market based competition offered by the non-governmentally run delivery services. The USPS even with a government monopoly on some deliveries is failing to be able to compete because of the dynamic nature of the competition for sending and receiving information. Did markets become more or less efficient when the Civil Aeronautics Board was abolished (an agency to discipline airline companies)? Of course not.

A good part of the research on health care has concluded that part of the escalation in costs has been brought about by the administrative structures like Medicaid and Medicare. Government run programs run best when there is little variation in the expected results. The problem with asking government to take over another seventh of the GDP is that they are unlikely to be any more successful in bringing discipline to an uneven market than they have been in other areas. The variation in treatment options and desired results are simply so large in health care that it is absurd to believe that government will be able to bring order. There are two kinds of discipline which the president could be speaking about - market discipline and regulatory discipline. Regulatory discipline can help in some areas but there is not a high chance that health care will be one of them.