Talk about a public option reducing health care costs misses one major factor – unions!

All the silly talk about a public option reducing health care costs misses one major factor – unions. The only group of US workers that have been increasing union membership is the public sector (city, county and federal). The public plan for offering health care in competition with the private options will surely move towards substantially more unionized positions for both administrative positions and health care professionals than we have today. This will surely increase costs not decrease them.

In the private sector unions tend to drive the unionized business into bankruptcy or out of the country so the union excess is self-correcting. Hence few private jobs are being unionized and the ones that are unionized tend to go away. But government jobs never go away. Even when a state like California needs to cut costs they don’t lay off 20% of their workforce like the private sector would do. Instead they give everyone an unpaid day off every 10 days. On the surface this sounds like they are reducing their labor costs by 10% but when you take into account their benefits, and overhead like office space it has a negligible impact on actually reducing costs.
In California the all-in costs for government employees is about $85,000 per year and for private employees is about $45,000 per year. Frequently they have very similar base wages but when you factor in the benefits packages for public employees like the option for some employees to retire at full pay after just 20 years, and Cadillac heath care plans the cost difference is substantial.

And very few public officials are willing to play hardball with their unions. Since Ronald Reagan fired striking Air Traffic Controllers in 1981 when has a public official fought that hard to keep costs down? Most public officials really don’t want the stress and bad publicity of saying “no” to their unions. There is little personal upside for politicians and these unions include increasingly stronger voting blocks.