Myth That You Can't Compete With The Government: Colleges, Packages, and Water

The private health insurance companies are fighting hard to make sure that they don't face any competition from a new public health insurance plan. They claim that there is no way they can complete against the government. This argument is, of course, absurd. Any private company can easily compete against the government by simply providing a higher quality product or a better price.

Three classic examples of fields where private industry has managed to excel competing against the government are colleges, package delivery, and bottled water. State universities, public water utilities, and the United States' Postal Services are all highly effective government programs. Two are run primarily by local governments and the other by the federal government. All provide great services.

There are currently hundreds of public colleges and universities. Public colleges tend to be significantly cheaper than private universities yet private universities thrive. It is possible to receive an excellent education from either a public or a private university. Despite the fact that the government offers a cheaper “public option,” I don't think Harvard, Stanford, Brown, Yale, etc. think the competition will drive them out of business.
There are several package delivery companies competing directly against the USPS. They include UPS, Fedex, DHL, and thousands of smaller couriers. Fedex, UPS, and DHL have managed to compete directly with the USPS. Small private couriers and short distance runners don't compete directly but offer specialized package delivery services. They can offer delivery within hours instead of days.

Another example is bottled water. The vast majority of Americans receive public water on tap at home. The water is clean, safe, and cost pennies. One would think it would be impossible for a private company to sell a product that the government practically gives away for free. Of course, we know that is not the case. Bottled water is arguably a better quality product. Many believe it tastes better and is more convenient. Bottled water is now a multi-billion dollar industry in the United States.
I'm not surprised that private health insurance companies are fighting against competition. Competition lowers prices for consumers (all Americans) and reduces profits for sellers (the insurance companies). The idea that more competition would somehow drive all private health insurance companies out of business is a myth. Their fight against a public plan option is purely about maintaining high profits. Public policy should not be concerned with protecting profits but about what is best for society.

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