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This was a reprise of the Dutch government’s response to its rising costs. It is instructive that while the prices controlled by the Dutch government continue to rise, the few uncontrolled health care prices dropped through entrepreneurial innovations.

The government exchange can complete this march toward a single-payer system by underpricing all competitors. After all, unlike its private-sector competitors, the government can borrow from our progeny, via deficits, and force us to pay taxes. Medicare’s $38 trillion deficit provides worrisome validation of the government’s willingness to underprice health insurance through these means.

To clarify these dynamics, imagine Uncle Sam running the only car dealership for the poor. To protect them from getting confused, Uncle Sam standardizes the design of all cars but accedes to the automobile lobby by requiring that they come loaded with features. Your little tushie will have a heated seat even if you live in South Florida. To achieve economies of scale, Uncle Sam turns a blind eye toward the consolidation of automobile manufacturers and may underprice his cars to attract more, non-poor customers. Of course, he would respond to demands to sell only American cars. As prices inevitably rise with option-loaded cars and absence of competition, Uncle Sam steps in to regulate all automobile prices, thus effectively controlling all distribution channels and manufacturers.

Sad to say, the defeat of the public option opens the door for the exchange. This victory may go down in history as yet another example of winning the battle and losing the war.

Regina E Herzlinger is the McPherson Professor at Harvard Business School and the author of “Who Killed Health Care? And the Consumer-Driven Cure” (McGraw Hill 2007).

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