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PrintAugust 18, 2009
Health Insurance Co-ops: The public option by any other name
Classic bait and switch going on in Washington now as the public option appears headed for oblivion.
To replace it, the White House is signaling that they would accept an even more unworkable, complicated, boondoggle; health insurance cooperatives.
Robert Pear and Gardiner Harris writing in the New York Times:
The White House has indicated that it could accept a nonprofit health care cooperative as an alternative to a new government insurance plan, originally favored by President Obama. But the co-op idea is so ill defined that no one knows exactly what it would look like or how effectively it would compete with commercial insurers.
What is certain is that, as a substitute for a government plan, the co-op concept disappoints many liberals and stirs little enthusiasm among insurers or Republican lawmakers.
And as the White House signaled its flexibility, a contentious debate over the merits of a public plan versus co-ops began playing out in the Democratic Party. Aides to Mr. Obama tried to tamp down concern on the left by emphasizing Monday that the president still supported the idea of a public plan and had not decided whether to drop it.
Some lawmakers said the White House had sent mixed signals, confusing friend and foe alike on Capitol Hill.
Speaker Nancy Pelosi said Monday that House Democrats, rather than backing down, strongly supported giving people the choice of a new government health insurance plan. "A public option is the best option to lower costs, improve the quality of health care, ensure choice and expand coverage," said Ms. Pelosi, Democrat of California.
To give a football analogy, it's 4th down and long with less than 2 minutes to go in the game for the White House and they are fumbling the ball. Obama is getting desperate and is woefully mistaken if he believes co-ops can save his bill.
I wrote about co-ops in an article published today at American Issues Project:
The first health insurance cooperatives date to the Depression where most of them were horribly mismanaged to the detriment of shareholders. They had a resurgence in the 1980's when some municipalities adopted the model with mixed results. There are a few co-ops like Group Health out of Seattle and Health Partners from Minneapolis that work fairly well by offering cheaper insurance while maintaining quality care.
But for every success story, there is failure as well. The Washington, D.C. based Group Health Association was forced to sell itself to Humana when it was done in by "falling membership rolls, strikes by staff doctors and nurses and competition from other HMOs."
That DC co-op was so badly managed they had to sell themselves to a for-profit HMO in order to stay in business.
The problem with health insurance co-ops appear to be a matter of scale. Small municipal or metropolitan co-ops where the shareholders (consumers) have a big say in how the co-op is run seem to be more successful. But this isn't what Obama has in mind. The kind of co-ops he will accept would be gargantuan entities that would attempt to cover millions of people. Some smaller states would probably combine to make regional co-ops, complicating matters even further.
The attractiveness of co-ops is that initially, the federal outlays would be minimal. "Seed money" totaling $3-4 billion might get the program up and running - in several years. The enormity of organizing these co-ops on a nationwide basis would be almost as complicated as setting up a public option.
Excellent backgrounder here from Heritage Foundation's Edmund F. Haislmaier on co-ops. And over at AIP, Thomas Sowell has a blockbuster, 4 part essay on health care reform that you really should read.
In short, fear the co-op option as much as the public option.
