The private sector in theory lowers price by refusing care. A public option that does not have agencies finding ways to deny care would pay for more care, so would require more premiums. I think that is your argument.
I think that is your point, quite simply that a public option could not provide better care at a lower cost. I assume you state that lower premiums occur from people not getting care after getting sick. Or some of the other methods of private companies like preexisting condition limitations.
There is an argument that the 4% overhead of public systems, compared to 30% overhead of private systems would make up that difference. Also streamlined billing systems would lower the need for many costs. It is presumed that internal divisions of insurance companies that deny care have to show a profit, where labor spent on denying care has to cost less then money brought in for denying care. So your argument has a statistical basis, since denying care would have to be profit generating, even after overhead, to exist in the private sector.
A public option would have 25% more dollars to spend on care, however it would also spend more on health care. It is possible that the private sector could lower its profit margin, to underbid public option. In other words it could lower its prices. Many times companies with monopolies can use that monopoly power to run a competitor out of business. If the private sector was seen to be using monopoly control to price set, run at a loss, just to lower its cost and defeat the public option, that would be an anti-trust issue. And that is the argument against the public option being cost neutral. Although you don't hear that argument since people are not suppose to think about stuff like that. Now since the Insurance companies have not had to face anti-trust issues for many years, it does not seem correct for them to make that argument against government.
It has been said that the public option is only part of the reform, that is very true, things like not discriminating on pre existing conditions, and not being able to dump people after they get sick enforced on the private plans are also essential, so they can't treat the public option as a dumping ground for higher cost citizens. Also ideas like not paying for redundant tests, or paying for results of care, not how many tests can be given can increase care by moving the motive for profit. The reforms also contains measures that limit how people providing insurance for health care can give or deny coverage of people. Those parts of regulation stop some practices that generate profit at the cost of suffering, and those things would raise price if profit margin stays the same. So a mandatory insurance of all increase pool size to lower extra cost at emergency rooms and provide a bigger pool is the counter to that cost increase.
You can see a balancing of not denying care, and adding more people to the system as a way to lower cost and get better care. However that assumes the private sector wont just take those extra savings as profits. There is no system in just those two facets to push the private sector into a lower overhead model outside of group price setting, or no free market controls on the system. Reform saves money, Insurance companies take that money as higher profits, without public option that would be the action, since nothing would be pushing back on that action. The increase of health care profits while cost also increase show that there is not a societal competitive pressure. Also payments outside of moderation show that competition is not in effect currently.
To be honest, the free market solution to the health care problem would be to break up the corporations. The public option is combating monopoly with another system that has monopoly powers enforced by laws.
It is very true that along with competition, the sector needs regulations. In that it is true that the public option is only part of the legislation. But those other parts are not disputed as needed. If you look at it in three parts, you get one that stops insurance companies from denying care. That raises prices. Then you get one part that mandates coverage that lowers prices. and you get a public option that keeps insurance companies from just making any profit they want, which they do by having similar profit margins and bonus structure.
Their are other issues, when a public plan is in the mix, many times people like to just bill that public plan as much as they can. Many times public sector programs do not worry about cost, having the public plan aware of its cost keeps it more efficient. However for the need of society, and to care for the sick in a society sometimes there are price limits on services. So that not any price can be charged for a service, one way that is done is with price limits such as medicare has to set pricing limits on services.
There are certain controls in medicare that make it a workable public plan regarding pricing. Those items are in place so private hospitals do not just charge the public plan any amount of money. Page 121 of the house bill seems to have the same system so that pricing of certain services have limits on costs within the public option.
http://energycommerce.house.gov/Press_111/20090714/aahca.pdfIf hospitals in vertical monopolies wanted to charge more for a public option person then a private policy person, you would see the use of monopoly control to defend against the competition that the public option would provide. In that case vertical monopolies would have to be examined. Which is why negotiation of pricing by the public system is part of a plan. By not allowing any price charged to public option, it keeps its premiums down. That negotiation in the house bill seems to be similar to how medicare rates are negotiated.
It seems that is the argument of competition being made against the public option. If they set prices then they can keep down cost and do not compete. In a pure money world that is correct, their is a fudged competition in the pure money world. But since the current Insurance sector has not had any of its monopolies challenged, nor have they disliked the advantage of their monopolies, they really can't argue, since them setting profit margins for high pay is no different then a government setting a price forcing a lower pay. I am seeing some moves into more competition in other sectors, and with a free market competitive system it is possible things would not require as much government intervention.
To be completely honest, the private sector solution is actually to break up all the big companies, that is really the free market solution, but since the right wont really go for breaking up all corporations, adding a public system along side the corporate system is the other method. If the private system will not work within free markets, then they have no justification for a system people like limiting their profits. If you view it from a money perspective that is the best conclusion. however there is more to it, like should the profit motive be the determiner in areas where making profit goes against social good.
Also, when many people speak of competition they only think of what makes money. They think of all competition as what brings in the most dollars for some group of shareholders. Part of the competition of the public plan is how a people get treated in a society, and part of that can be less profitable and paid for by complex adjustments to some of the flaws of top heavy extreme capitalism profits. Medicare pricing limits profits, because those profits have not shown they are beneficial to society in an acceptable way to society. If you do not just think about money, then you can limit a profit for better social outcomes, part of that limiting is price negotiations, where pricing can make profit but not just as much profit as some group wants, since in those groups no amount is never enough, and always leads to collapse.