This is the Cato Daily Podcast for Wednesday, June 24th, 2009. I'm Caleb Brown.

President Obama believes that government health plan would reduce administrative costs for the health care system as a whole.

But what's the relevant precedent?

And would those reduced costs inside the health plan come at the expensive taxpayers and

private plans?

David Hyman is author of the Cato book Medicare meets

Mephistophiles. We spoke at the Cato Institute's conference on

health care June 17th. Part of the reason why Medicare works to the extent it

does is there are lots of people outside the system

paying in and relatively few people inside the system receiving services.

And as soon as you put everybody into a single program, you have to face up to the overall costs.

What instead people are talking about is what they call at various points, a government

plan, a public plan, or a public plan option.

And the idea here is that the government will set up an insurance company to compete with private insurance.

Now, the design details vary tremendously depending upon

whose version of a government plan, which is what I'll call it from now on, you're actually talking

about. So there's one set of people who don't want it at all.

There's another set of people who think we ought to have a government plan, but it has to be subject to all of the same rules and

limitations as the private plans that it's competing with. So it should have to

pay taxes, it should have to have reserves, it can't receive government subsidies, it should behave

just like any other insurance company, or at least be subject to the same regulatory

regime of any other insurance company.

...