Co-Op Idea Isn't Half a Loaf -- It's Half-Baked

You have absolutely no idea how much I was hoping I wouldn’t have to write about Sen. Kent Conrad’s proposal to establish state and regional “health care co-ops” in lieu of a public health insurance option.  Unfortunately, Sen. Max Baucus stepped in to say, “I am inclined, and I think the committee is inclined, toward a co-op.”  So now I have to devote this post to a half-baked idea which would do virtually nothing that a public plan would, but is being embraced by people who really ought to know better.

Bugger.

To be clear, the notion of a co-op where individuals and so-called “microbusinesses” can come together and pool their resources for affordable health care is not a terrible idea on its own.  It's just a completely different idea from a public health insurance option.  It’s also not a terribly new idea.  The original idea behind Blue Cross and Blue Shield, decades ago, was very similar.  Although many Blue Cross Blue Shield plans have turned into for-profits over the last twenty years, before that they were all non-profits competing with for-profit insurance at the state level, more or less exactly the way Conrad thinks these new co-ops will.  Candidate George W. Bush suggested that small businesses and other organizations might well come together in pools to buy insurance to get favorable terms like a large business.  Neither of these were overtly co-ops, with the implied "decisions are made by the membership" operation, but the idea was the same:  take people who have little negotiating power with for-profit insurance because they’re so small, and allow them to combine and get much bigger.  All Conrad’s co-op idea would do differently is create a democratic co-op structure to it in which the people who pay into it would have a say in what services it provides and who runs it.

But of course, it’s not even doing that because the powers that be in the Senate are literally coming up with it on the fly.  Will it be regional or state-based, thereby completely defeating the purpose of a national public plan with economy of scale and bargaining clout?  What happens to small businesses above 10 employees?  How will these co-ops fit into the architecture of a National Health Exchange where customers will be able to take their income-based subsidies and compare like-to-like among the private plans?  What happens if you want to join a co-op but can’t afford it?  How the hell long will it take to set up a co-op given the number of uninsured is booming, and how do we prevent things like the executive compensation questions that, yes, even plague not-for-profit insurers?  Will there be a national co-op that everyone can buy into?  Don’t bother asking – the Senate doesn’t have the answers yet.

Although Conrad and others are looking to the co-op model to get them out of a political bind – entrenched Republican opposition to the public plan – let’s get back to what has to be the fundamental question:  how do we change the game so it works for you and me and not insurance CEOs, and so health care covers more and costs less?

Former Labor Secretary Robert Reich articulates well most people’s gut-reaction: “Nonprofit health-care cooperatives won't have any real bargaining leverage to get lower prices because they'll be too small and too numerous.”  Conrad’s answer to that has been consistently to say, “But you know, one of the interesting things when we talk to experts, is that they say critical mass is probably around 500,000 members.”  Let’s skip over the difficulties in finding half a million people for a co-op, let’s just say that 500,000 non-profit customers doesn’t change the game.  Know how I know?  Because, as pointed out by Bob Laszewski, Conrad’s home state of North Dakota has 475,000 people enrolled in the not-for-profit North Dakota Blue Cross Blue Shield.  That’s not just competition – it’s a monopoly, 60% of the market.  Guess what?   It hasn’t helped.  Premiums jumped 74% in the past seven years.

More to the point, the co-op doesn’t even address any of the additional reasons to try a public health insurance option, like the ability to negotiate prescription drug rates, the low administrative costs of public coverage, the emphasis on primary care and prevention that comes from presuming you have a customer for life rather than a customer only for the few years they’ll be at their job, and the ability to force private insurance to compete on quality and cost-control as much as on customer satisfaction.  Baucus and Conrad act like these co-ops will hold insurers feet to the fire.  Beats the hell out of me how.

So in summary, we have an idea that needs a few more hours in the oven, doesn’t actually address most of the reasons for having a public health insurance plan, seems to be a pain in the ass to set up from scratch, isn’t guaranteed to bring many Republican votes, is guaranteed to lose Democratic votes (at least in the House), doesn’t really offer a compromise so much as a completely different thing, and doesn’t dramatically improve on a model which caused premiums to jump more than 10% each year in North Dakota.

Kent Conrad, you owe me at least an hour of my life back.

(Photo credit:  yarnivore on Flickr.)