That's just false. Medicare administrative costs are less than private insurance costs. Also, it has already been demonstrated, in other areas, that public-private competition does improve quality, drive down costs, and does not shut out private competition. Both exist side by side:
DeMint’s example of education is instructive, not because it is hard to repeal, but because it’s a prime example of successful public-private competition. Indeed, while state and local governments own and run the public education system — to a much greater extent than either Obama or members of Congress are suggesting with a public health insurance option — private schools are competing against the government and thriving in this country. Further, such competition actually improves outcomes. As the conservative Hoover Institution found, competition between public and private schools “
improves achievement for both public and private school students and decreases the amount spent per pupil.”
As Joseph Hacker explains, such public-private competition works well not just in education, but in
many other sectors of the U.S. economy:
In many areas of American commerce, private and government programs comfortably co-exist. FHA insured loans and non-FHA loans, Social Security and private pensions, public and private universities–all have long thrived side by side. Each side of the divide has strengths and weaknesses, but in every case the public sector is providing something the private sector cannot: A backup that’s there if and when you need it; a benchmark for private providers; and a backstop to make sure costs don’t spin out of control.
Igor Volsky recently explained the
actual impact of having a competing public plan, writing, “In an environment where private plans are forced to compete with a new efficient public program, inefficient, over-bloated insurers will go out of business, but private plans with good networks of providers or better services will continue attracting new enrollees.” Jonathan Cohn has more on the
effects of public-private competition.
Update Igor Volsky has more on the role of private insurers in public-private competition.
DeMint Inadvertently Concedes That Public Health Insurance Option Won’t Take Over The Market