Article: Why We Need the Public Option, and Why Co-ops Don't Fit the Bill (Daily Kos),-and-Why-Co-ops-Dont-Fit-the-Bill

Daily Kos

Why We Need the Public Option, and Why Co-ops Don't Fit the Bill

by mcjoan

Thu Aug 20, 2009 at 12:52:04 PM PDT

Jacob Hacker, Professor of Political Science at the UC, Berkeley, and uber public policy wonk, particularly on healthcare, joined Reps. Raul Grijalva and Keith Ellison today in a press call to release a new report [pdf] reiterating the criticality of a robust public option for meeting the basic goals of comprehensive healthcare reform: lowering costs, and providing higher quality access and care, and guaranteed health security for all Americans.

The comprehensive healthcare reform was proposed by candidate and President Obama, Hacker argues, rested on three pillars: creating more choice for consumers and competition for private insurers through a public option; creating an employer mandate, with affordable options for all businesses to buy in to; creating an individual mandate, again with affordable options. Hacker argues persuasively that without the key pillar of a public option, the structure can't hold. In light of that, Reps. Grijalva and Ellison reiterated the fact that 60+ progressives in the House are committed to not passing a bill without it--either on the House floor or out of conference.

The Hill is reporting today that some of the 60+ members might be "soft" on the pledge (though it doesn't name any of them specifically) and who might be willing to accept co-ops. Assuming that's true, a review of the co-op proposal (such as it is) from Hacker's new report is essential:

    So few specifics are available about what consumer health cooperatives would look like or how they would be chartered that a detailed critique is difficult. But that may be just as well, since there is absolutely no reason to think that cooperatives of any sort could do the three crucial things that a competing public plan must do—that is, provide a backup, benchmark, and backstop.  Cooperatives might be able to provide some backup in some parts of the nation, but they are not going to have the ability to be a cost-control backstop, much less a benchmark for private plans, because—like private plans--they are not going to have the reach, authority, or desire to drive broadly implemented delivery and payment reforms or act as a strong public-spirited competitor that discourages private insurers from engaging in practices that undermine health security. As Senator Jay Rockefeller, a member of the Finance Committee, has concluded after extensive review of the issue: "What I have to worry about is, are co-ops going to be effective taking on these gigantic insurance companies? And from everything I know from people who represent them, the answer is a flat ‘no.’"

    Consumer cooperatives would have several severe disadvantages. First, they would require building a new set of plans largely from scratch in markets often dominated by one or two powerful insurers. This would mean forfeiting the administrative, economic, and political advantages of building on the Medicare infrastructure to a get a new alternative to private plans up and running quickly. Second, such models would also require forfeiting another major advantage of a Medicare-like public plan: the ability to provide enrollees with a broad choice of providers. The only two sizable examples of consumer health cooperatives, Group Health Cooperative of Puget Sound and HealthPartners in Minnesota, are both health maintenance organizations (HMOs) with restricted provider networks. And they have had decades to become established. New cooperatives would face the same problems breaking into markets that smaller private competitors face in many markets today. Analysts at Oppenheimer, Carl McDonald and James Naklicki, report that "as the co-ops are currently described, we think they would be a big positive for the managed care group, but it seems to us that they would be destined to fail from the moment of creation."

    The history of health cooperatives backs up McDonald and Naklicki’s pessimism. Cooperatives of various sorts have been discussed and sometimes created to provide health care in the past. After the Great Depression, the Farm Security Administration encouraged the development of health cooperatives--which at one point had about 600,000 members, mostly in rural areas. But the cooperatives crumbled in the face of physician resistance (including boycotts), the lack of financial wherewithal of the cooperatives themselves, and the eventual withdrawal of government support.

    Even today’s remnants of the cooperative movement do not provide the most inspiring of lessons. The only survivor of the 1940s experiment is Group Health Cooperative of Puget Sound. It is a well-regarded HMO, paying doctors on a salaried basis but, unfortunately, is now little different from other nonprofit HMOs, with around a half million members in Idaho and Washington State. By contrast, WellPoint—the nation’s largest insurer and a major force behind the defeat of health care reform in another West Coast state, California—has more than 33 million members.

    Finally, and most important, the prospect for cost restraint and quality improvement under these proposals would be limited. Medicare has increasingly out-performed private plans in restraining the rate of increase of health spending while maintaining broad access. A new public plan could draw on Medicare’s experience, as well as the experience of the national VHA system, to improve its cost-control methods and enhance the quality of care. By contrast, cooperatives, if established after a potentially lengthy period of development, would be relatively small and scattered and therefore lack the means to restrain cost increases or drive delivery or payment reforms on a broad scale. (pp. 13-14)

Hacker concludes:

    That the two bills under consideration in the House and Senate contain a public health insurance option is considerable cause for celebration. Yet it is no cause for complacency, because the Senate Finance Committee appears unlikely to produce a bill that contains a true public plan. If, as expected, the Committee endorses federally promoted health cooperatives, they should be understood for what they are: an effort to kill the public plan and, with it, the prospect of an effective competitor to consolidated insurance companies that have too often failed to provide affordable health security.

Cooperatives have been forwarded as a solution to a political problem--how to get Republicans on board--and even in that have proven a failure. They are not a policy solution, and aren't a viable alternative. That's the bottom line, if this reform is going to be real.

Hacker does a good job of reiterating that the public option isn't just a political bargaining chip--that it is absolutely essential part of all of the bills that have thus far made it out of committee (though the House bills are stronger than the Senate bill--check his paper for the details on that) and is an essential part of lowering costs throughout the entire system. We're not just fighting for this to create some kind of political litmus test--we're fighting for this because it's what can work, and work fairly.