This item by J.P. Green was originally published on August 18, 2009.
Sorting out the pros and cons of the co-op option vs. the public option is the challenge of the hour for progressives who want real health care reform, and it will certainly be hotly debated. Most just-published articles and blogs equate ‘public option’ with a government plan. But it seems important to ask, is there any way that a co-op can be a public option? There is no shortage of opinions on the topic:
The New York Times has “Alternate Plan as Health Option Muddies Debate,” a probing article by by Robert Pear and Gardiner Harris. The authors spotlight some key problems with the co-op approach:
As the debate rages, lawmakers are learning that creating cooperatives — loosely defined as private, nonprofit, consumer-owned providers of health care, much like the co-ops that offer telephone, electric and other utility service in rural areas — will not be easy.
The history of health insurance in the United States is full of largely unsuccessful efforts to introduce new models of insurance that would lower costs. And the health insurance markets of many states suggest that any new entrant would face many difficulties in getting established.
The government would offer start-up money, perhaps $6 billion, in loans and grants to help doctors, hospitals, businesses and other groups form nonprofit cooperative networks to provide health care and coverage.
The co-ops could be formed at the national, state or local level. Proponents say that a health co-op might need 25,000 members to be financially viable, and at least 500,000 members to negotiate effectively with health care providers…they would need time to buy sophisticated information technology and to negotiate contracts with doctors, hospitals and other health care providers.
…In the 1990s, Iowa adopted a law to encourage the development of health care co-ops. One was created, and it died within two years. Although the law is still on the books, the state does not have a co-op now, said Susan E. Voss, the Iowa insurance commissioner.
Not a very promising prospect, according to ‘the newspaper of record.’ Worse, $6 billion is about what we spend occupying Iraq in one month. Iraq and Afghanistan are the ignored elephants in rooms where health care reform is being debated. Few would doubt that half of what we spend on these two wars annually could go a long way toward bringing real health security to America.
Columnist Bob Herbert is even more dismissive in his NYT op-ed, “Forget about the nonprofit cooperatives. That’s like sending peewee footballers up against the Super Bowl champs.”
In his Alternet post “It’s Now or Never for a Public Option: Why We Need to Take a Stand Against the Insurance Industry’s Greed” Joshua Holland explains,
In 2000, the Government Accountability Office conducted a study of the impact similar purchasing schemes had had to date. “Despite efforts to negotiate lower premiums,” the GAO concluded, “cooperatives have only been able to offer premiums that are comparable to those in the general small-group market. The cooperatives we reviewed typically did not obtain overall premium reductions because: 1) their market share provided insufficient leverage; 2) they could not produce administrative savings for insurers.”
The Commonwealth Fund did an analysis of the impacts nonprofit co-ops would have as well (PDF), and its findings were similar. Researchers found that, “with very few exceptions,” premiums offered through co-ops “have not been lower than those available to small employers elsewhere” because they “have not been able to reduce administrative costs … they have not had enough market share to bargain for discounts.”
Because of their inherent limitations, former Vermont Gov. Howard Dean told me in an interview last month that the co-op scheme is a “fake public option,” and “really not [a] serious health reform.” He predicted that if they were created, they would “be crushed just like Blue Cross was crushed. Most Blue Cross chapters are now for-profit. They’ve been taken over by the insurance industry. Any reasonable-sized insurance company can crush a not-for-profit co-op.”
And, in The Nation, Katha Pollit writes of co-ops,
…They’re untested, small, unregulated, that they exist in twenty states and that Senator Kent Conrad of North Dakota really likes them–but I didn’t discover what they actually are. I understand “public option,” and “public” has a good, strong ring to it–it says, Healthcare is a right, part of the common good, something everyone should have, and if you can’t afford it in the marketplace, the government will provide it. “Insurance co-op” speaks a whole other language, of commerce and complexity and exclusivity
Writing in the Washington Post, David S. Hilzenrath and Alec MacGillis explain:
“It’s very difficult to start up a new insurance company and break into markets where insurers are very established,” said Paul B. Ginsburg, president of the Center for Studying Health System Change. “I don’t see how they’re going to obtain a large enough market share . . . to make a difference.”
Karen Davis, president of the Commonwealth Fund, a foundation focused on health care and social policy research, said co-ops may not enroll enough people to negotiate favorable rates with health-care providers.
…Co-ops would lack perhaps the main advantage of the public option: reimbursement rates for doctors and hospitals set by federal law, like those paid by Medicare, the program for older Americans. Federally determined reimbursement rates were central to the cost-saving promise of a government-run health plan and a potentially powerful competitive advantage. They were also a lightning rod for intense opposition from health-care providers and private insurers, who denounced the public option as a threat to their financial survival…Co-ops would lack the ability to piggyback onto existing government institutions, like the ones that help administer Medicare.
On the other hand, Co-ops have some advantages and “could serve a useful purpose in health care — just as credit unions compete effectively with banks, prompting them to offer higher interest rates on deposits and lower rates on loans,” explain Pear and Harris, summarizing the views of Ann Hoyt, a University of Wisconsin economist who has written extensively about co-ops.
…Professor Hoyt said she had been a member of the Group Health Cooperative of South Central Wisconsin since 1985, and she reported that “the care is excellent.”…Larry J. Zanoni, executive director of the Wisconsin plan, said: “We are a testament to the success of a health care cooperative. But it took us over 30 years to get where we are today.”