Dealbreaker: Five Reasons Co-Ops Will Fail
Now we're being told that "health care cooperatives" are emerging as a "centrist alternative" to the public health plan in the Senate. Ezra Klein reminds us that a public plan option wasn't in any of the other plans Democrats championed. We're hearing that the idea is gaining in popularity -- at least among a small group of U.S. Senators.
Well, why not? What's wrong with avoiding the stigma of 'government health care' by creating co-operatives instead? 'Co-op' has a warm, fuzzy, even socialistic sound to it, like the hippies who run the local health food store. Co-op plans like the Group Health Cooperative of Puget Sound deliver excellent care and get consistently high ratings from their members. If we can take some centrist Democrats off the hot seat and still have meaningful health reform, what's the problem?
Here's the problem: Co-ops will fail. They will be unable to deliver the kind of comprehensive and systemic reform that's needed to save the U.S. economy and ensure the health of its citizens. Here are five simple reasons why:
1. Previous plans, like the Massachusetts reform, haven't been 'game changers.'
Democrats and their Republican counterparts celebrated when the Massachusetts reform law was passed. There were a few of us who saw warning signs, but our concerns were not given much credence. Yet despite the fact that Massachusetts started out in better shape that much of the country, they haven't been able to provide systemic reform or insure all their citizens. The state has insured a lot of people, and we've learned from its experience. What's more, Massachusetts is looking at some new and creative ways to create meaningful change. Previous national reform plans didn't have the benefit of the Massachusetts experience -- where it succeeded and where it did not.
A few of us had concerns about some of these earlier national reform proposals back when they were first proposed. Still, Ezra Klein and others point to the fact they lacked a public plan option and ask, why did you support them back then? My answer is this: we've learned from experience.
2. Co-ops will be a localized, haphazard solution to a nationwide problem.
When Sen. Kent Conrad first proposed co-ops as an alternative to a public plan option, the discussion centered around "regional cooperatives." But we've had state cooperatives before. They haven't been able to provide fundamental change in the financing and delivery of health care, because they lack sufficient resources to compete against the seven mega-corporations that now dominate private sector health insurance. They may make marginal improvement in one market or another, but that's as far as they've been able to go.
In response, Sen. Conrad is now making statements like this one: "If somebody came forward and wanted to put together a national entity, they could do that. If various states wanted to join together to have a regional option ... nothing would prohibit either of those."
Sen. Conrad's use of the passive voice is probably not accidental. If somebody wanted to create a national, not-for-profit cooperative, we wouldn't stop them. If somebody wanted to create a multi-state organization they would not be "prohibited." But people don't create national organizations simply because it's not explicitly prohibited. A massive undertaking of that kind -- which would, incidentally, needlessly replicate the already-functioning infrastructure of Medicare -- would require billions of dollars.
But, hey, says Sen. Conrad. If you've got a few billion to burn, who's stopping ya?
3. Co-ops can't identify national trends and react accordingly
Here's an example of what a public health plan can and does accomplish routinely: Health Leaders Media informs us that a government analysis showed "doctors in certain geographic areas order a lot more unnecessary tests." Investigators found "questionable ultrasound scans for Medicare patients in 20 counties where they are performed more often per beneficiary."
Those 20 counties were in the far-flung states of Florida, New York, New Jersey, Texas and Alabama. Had we been talking about general health insurance under the Conrad plan, we'd be dealing with four or five regional cooperatives that don't share information and can't spot these costly and harmful trends. Fortunately, this data was provided by Medicare - that "socialized medicine" system everyone seems to hate like so much.
Large-scale data mining, study -- and yes, advisory panels -- will be a necessary part of our effort to modernize and innovate our health care system. A balkanized system of fragmented local organizations will not be able to contribute to that process in a meaningful way.
4. Co-ops can't fight monopolies.
Did you know that health insurance is typically exempt from Federal antitrust regulation? Good thing, too, because a recent study showed that 94% of US markets are "highly concentrated," according to Justice Department guidelines. Blue Cross dominates Arkansas, for example, with 75% of the market. This monopolization has led to skyrocketing premiums.
A cozy relationship between state politicians and mega-industry has fostered a system where most U.S. markets are dominated by a single health insurance player. On May 29, 2007, then-candidate Barack Obama said this in Iowa City, Iowa:
We'll investigate and prosecute the monopolization of the insurance industry. And where we do find places where insurance companies aren't competitive, we will make them pay a reasonable share of their profits on the patients they should be caring for in the first place.
That's a good idea.
How do monopolies -- especially ones with a cozy relationship to local pols -- respond to a new and idealistic intruder? They use the power of favorable contracting (with critical hospitals, for example) to drive the newcomer to their knees. Then they deal a death blow with artificially low premiums until the threat is gone. After that they go back to their old rapacious ways.
Remember: Federal antitrust laws do not necessarily apply when these hardball tactics start. "Forget it, Jake. It's Health Care Town."
5. Co-ops have no reason to keep living -- as co-ops.
Once we had a nationwide system of nonprofit health organizations. While each was local, they were tied into a loose national confederation. Since they were nonprofit, the idea was that their primary goal was to have the interest of their members at heart. The name of this national nonprofit organization?
Blue Cross.
In the last several decades Blue Cross organizations privatized themselves in massive numbers, with the help of supportive state and national politicians. There is no reason to believe that any cooperative will remain nonprofit if it becomes successful. The continued benevolence of any cooperative will depend on the direction and guidance it receives from politicians like Sen. Conrad. But even now, in the courtship phase of this process, Sen. Conrad doesn't hesitate to discuss the establishment of effective cooperatives with passive and indifferent language (see above.)
What will happen ten years from now, when a few executives have the chance to get rich by converting your cooperative to for-profit status? Can we count on state and national politicians to take a brave stand and refuse them, even in the face of the massive campaign contributions they'll be able to offer?
I think we know the answer to that.
Co-ops are not a bad idea -- if they are offered alongside a public option. As a replacement for them, however, they're a dealbreaker. They won't create the comprehensive, systemic change we need.
RJ Eskow blogs when he can at:
A Night Light
The Sentinel Effect: Healthcare Blog
Follow RJ Eskow on Twitter: www.twitter.com/rjeskow
Liz Neumark: Harvesting Lasagna
We need to engage politically to make sure that food security (having enough to eat), and food justice (having access to affordable healthy foods) is in abundant supply to all our neighbors.
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The important distinction is that these Co-ops are more like benefit managers than insurers. The model would be USAA in auto insurance and the role of unions in the French and German Health care Systems.
USAA, for example, is a Texas, not-for-profit insurance exchange that operates nationally, contracting with auto insurance payors to acquire cheap auto insurance for active and retired military personnel. The service to members is uniformly excellent. That's the model to follow.
Done correctly, this would allow people to get the benefit of large, self-insured, ERISA regulated health plans outside the context of employment with true portability.
It's a large mistake to imply that health insurance is at all like auto, or
property insurance. The concepts may be similar, but the underlying
risks & costs are quite different. To oversimplify, many folks (well,
at least some) can go their entire lives without an auto accident.
Sooner or later, we eventually all have health problems & mostly
expensive ones.
Excellent service & cheap rates can work well with cars, but it
won't with people. With them, you can have one, but not the other.
I think GE and Safeway (and their participants and beneficiaries) would disagree. The problem is that not enough self-insured ERISA plans manage their cost, quality and access as well as GE does and that most non-self-insured employer-sponsored plans rarely manage care at all. For effective USAA-style Co-ops, this would be their business in a way that managing coverage is not a core-business for GE.
Speaking of non-profit healthcare providers, what IS the deal with their executive pay?
'The salary and bonus paid to Cleve L. Killingsworth, chairman and chief executive of Blue Cross and Blue Shield of Massachusetts, increased 26 percent last year, to $3.5 million, even though the health insurer's membership declined and its net income fell 49 percent.
Based on previous years' retirement benefits - which Blue Cross-Blue Shield did not report for 2008 - Killingsworth's total pay package was likely about $4.3 million, making him by far the highest paid healthcare executive in Massachusetts. ...' - Boston Globe, Feb 28, 2009
The deal would SEEM to be, instead of paying dividends to stockholders AND big
salaries to executives AND taxes, they'll just do the big salaries.
+RJ:
anyone remember the not-for-profit, co-op charter for BlueCross BlueShield?? that worked out well for the uninsured NOT!
It's a travesty of intellect to deny the systemic problems that single payor systems have had evident in Canadian Supreme Court decisions.
So progressives say, but we're not doing that, we're offering competition.
Tell those that believe, through simple rational deduction, how a government run plan will not by default necessarily mean running all private insurer's out of business. The government can run at a loss, like they do everything else. Can private insurer's run at a loss indefinitely? What is the current legislation proposing that determines that the government plan will truly be competitive and not forever usurp the very being of the insurance industry?
So if you want insurance to go away then anyway, then answer how long can the government then continue down the course of at loss underwriting, after working through all the billionaires and millionaires through taxes before they must begin rationing and taxing the middle class. If that's okay to you, then how much taxation will be enough on the middle class?
It's not a perfect world and there's no perfect solutions, however, this fantasy that government run healthcare is the panacea everyone can count on is the worse kind of wishful thinking. If people are hell bent to not substantively look at the systemic problems single payor systems around the world are having without parading how their aunt is doing just fine in Spain and other simple anecdotal proofs then we're headed to ruin.
And so the Capitalistic method we have is doing so good...? Really? You have insurance don't you? Is your insurance dependent on your job? hope you don't lose your job... The VA medical system works...medicare deffinately does...the military medical centers work... so though public Option has nothing to do with government take over of healthcare and even if they did it would be better then the health insurance take over of healthcare..a not for profit healthcare system would beat a system that allows a health insurance company to make a profit of 155 billion in this day when they dump sick people from their plans?
And in 1993 the Republicans declaired that HMO's were fixing everything..and so what are HMO.2009 but Co-ops?
Sure we get all these new young businesses to start up to handle all the co-ops...is that guarenteed, or is that more promises by the GOP and the DINOs?
Well, no, current payors tend to be neither HMOs nor Co-ops. Most are for-profit PPOs.
On the other hand, the current payors would morph into intermediaries and administrators , as with Empire BC/BS with Medicare. Payors would not lose out, although patients might.
Some keep asking for proof about waiting periods and rationing in Canada, I'll use this example, but it exists in abundance in the EU.
I turn to the Canadian Supreme Court that makes my case, looking up the legislation is easy enough up the legislation easy enough. The Canadian Supreme Court deliberation is based on systemic issues that warranted their judgement in the first place, it's undeniable.
There's no need to rely on anecdotal pro or con arguments in attempting to support punditry pro or con, this is why I post their judgement here. If Canadian Supreme Court decision doesn't give you pause nothing will. Some people are hell bent on an idealistic bath and chose to bury their heads in the sand in any substantive debate.
Again:
"The Canadian Supreme Court decided that the State cannot prohibit private healthcare delivery in Canada. The Court ruled that waiting times and restrictions in the current system are in violation of the Quebec Charter of Rights. That decision opened the door for a private healthcare sector for Canadians. If the Canadian courts rule in favor of private care facilities being allowed in Canada then what does that say about the success of that single payor system with their courts admission of abusive waiting periods and restrictions. "
That was in 2004 and the reason given was that the conservative party who was in power then took money OUT of the healthcare system.
So come up with a new reason.
No, the Supreme Court decision cited was June 9th 2005.
And no, it wasn't until 2006 that conservatives began to pick up seats in that government, conservatives only held 99 seats in 2004. So I suppose it's you who needs to come up with a new reason.
Co-ops were part of Hillarycare's managed competition health care plan. Whenever they have been tried since then, they were largely abandoned due to a lack of interest by their members (individuals or businesses). They weren't much cheaper than any of the other alternatives.
Co-ops are just another attempt by the Blue Dogs to make it sound like they are offering a solution when they are truly offering nothing. This tactic has been typical for the past 30 years. Propose a plan that in reality does nothing except offer more corporate welfare to offset the objections to the plan.
An example is the current income tax credit for low income people to contribute to a 401(k). The credit is not refundable and the income limits are at the point where most of the people who would qualify for it, already do not pay any income taxes. So while it sounds great, in reality there is little benefit as the people who qualify probably owe no taxes in the first place.
Look at USAA in auto insurance as the model.
https://ghcscw.com/About_Main.asp
About GHC-SCW
Group Health Cooperative of South Central Wisconsin (GHC-SCW) is a not-for-profit managed health care organization that provides the entire spectrum of health care services, including insurance, Primary Care and Specialty Care.
The heart of GHC-SCW is in its nationally-ranked Primary Care Clinics, which integrate with the insurance arm of the organization to provide quality care with value-added services. GHC-SCW is also paired with several networks, which allow our members to access a variety of Primary and Specialty Care options, depending on the insurance plan the member is enrolled in and the network he or she selects.
We believe that health care should begin at the Primary Care level, with an established relationship with a Primary Care Provider who gets to know the member and his or her health care needs.
http://en.wikipedia.org/wiki/Healthcare_in_Taiwan
http://en.wikipedia.org/wiki/Single_payer_health_care
http://en.wikipedia.org/wiki/Medicare_(Australia)
There's not just one way to go.
When things aren't working it becomes necessary to look for a better way, and that's the only way to learn.
Thanks for this information--I had been wondering myself what would be so bad about the Co-op option, in lieu of the now politically improbable public option.
So should the realists among us (or the appeasers, depending on one's point of view) now be pushing our representatives in Congress for a Co-op plan with teeth? We might operationalize "teeth" as:
1. The Co-ops must be seeded with Federal money--a relatively inexpensive compromise federal role if we are surrendering a public plan.
2. The Co-ops must contract to remain always and forever not-for-profit. Heaven help us if they spawn another Blue Cross / Anthem.
3. The Co-ops must be created to encompass whole regions, such that their size rivals one of the BIg Seven private insurers.
4. The Co-ops must be allowed to share data freely, in fact, encouraged to do so. (In fact, why not create a data-exchange among all health insurerers, including Medicare. Would this not benefit the entire system, for relatively little cost?).
Is this workable, and might it be effective?
Co-ops should be:
1) benefit managers, not insurers;
2) built around existing not-for-profit entities that already offer health insurance programs (e.g., ABA, VFW, Chambers of Commerce and Unions);
3) Should be able to bargain with payors, leveraging the number of members; have the protection that exists with employment-based coverage for people with pre-existing conditions;and premiums paid by members should be tax deductable;
4) Employers should be able to deduct payments made to co-ops that cover their employees;
5) Co-ops should be regulated as charities by the states where they operate and by the Feds as enitites operating in inter-state commerce; and
6) ERISA and US Dep't of Labor Multi-employer Welfare Arrangement ("MEWA") rules will need to be re-written.
A public option run by the government is worth fighting for. I would hope those we helped elect with our hard work and hard-earned contributions have the guts to fight this out. Compromise is necessary to be sure in any major legislative action, but giving up the store for compromise sake is capitulation. One hopes that legislators don't take the easy way out and pass half-measures that are certain to collapse over time. It takes courage to stand for principle. Let's hope those we elected to majorities in both the House and Senate have that courage - for once - and don't turn this opportunity into sad excuses. If so, what good are these majorities in the final analysis?
Why are they so afraid of a public option and want to replace it with something else? It's clear that a public option will be proved to be more efficient and costs a lot less than the monopoly of private insurers we are having now. They can't say taking out the profits in the equation is more costly than with profits added in. What kind of mathematics is that! That is why the private insurers are paying 1.7 million a DAY to derail the most important reform that we NEED to do to curb costs by cutting out the profits. They conveniently forgot why we had to reform in the first place: they got the monopoly for too long and they care for their profit not health care for people. Just look at who are these people who opposed the public option? They are the ones who have their own benefits paid by government, meaning taxpayers, and their best friends, the private insurers, spending money on them to keep the non-profit option out. They and the Republicans are using fear tactics to scare people of the public option as socialized medicine as if now the premiums of all the people who got health insurance are from their own pocket: no, it is not! They pay only a small part and the other part are paid by all of us, taxpayers or consumers of products whose costs include health insurance that companies paid for their employees.
Isn’t a co-operative system, a kind of not-for-profit insurance?
If a commercial enterprise can be operated so efficiently that it can compete or undercut such a method, it proves its own value. But if it considers the welfare of its customers secondary to profits, it demonstrates its contempt for those clients.
no a co op is not a not for profit. My electric company is a co op..and they sure do make a profit...and another name fopr co op is HMO. That sure worked.
It COULD be not for profit. It depends on the objectives of the co-op, as stated in it's articles of Incorporation.
The important thing here is to coordinate with the National Institutes of Health, the Universities and the Research Institutions; to create a national data base that verifies patient outcomes and indentifies the environmental and dietary causes of disease.
This can not be a for profit endevor.
The greatest generation started and finished World War II in 4 years.
The ancient Egyptians finished the Great Pyramid in 20 years.
John Kennedy started the Apollo Program in 1961 and 8 years later we had a man on the moon.
We have now been waiting 60 years for the congress to pass a single payer health care system available to all Americans. Still waiting.
It took Congress less than a month to give away a trillion dollars to greedy bankers.
The military gets a trillion dollars every year.
We CAN do health care and we WILL do health care and we will do it THIS YEAR.
1- MA is floundering because they haven't been able to enforce mandatory coverage. It has nothing to do with lack of a public option or not for profit carriers.
2- Comparing not for profit carriers with Medicare is apples & toasters. Medicare runs at a terminal deficit because for now, it can. It's predominately funded by tax payers. Not for profit carriers are funded by a given risk pool. They have to control costs to stay viable.
3-There's no case here. Our present not for profit carriers do just fine on national trends, fine enough that they are usually competitive with FP.
4- It wouldn't be difficult to mandate not for profits keep their designation. Seems a lot easier than creating a brand new bureaucracy based on a failing system (Medicare). As for contracting, not for profit carriers have remained competitive. If Eskow's assertion were true they'd be long gone.
5- This is blind rhetoric and doesn't acknowledge dozens of competitive, not for profit carriers all across the nation, including Bluecross organizations like Regence.
Eskow has the horse in front of the wagon. Without controlling the cost of services, real time, the cost of coverage will skyrocket no matter what insurance scheme we come up with.
MA's in trouble because the dollars aren't there to mandate coverage without breaking the middle class. The dollars aren't there because costs are skyrocketing. Costs are skyrocketing because piecemeal not-for-profits can't have a significant, systemwide impact on either costs or delivery. A for Medicare, it's doing far better than the private sector (including not-for-profits) on managing costs.
Phrases like "blind rhetoric" are, in fact, blind rhetoric. If not-for-profits were as effective at controlling the cost of services as "humpfree" suggests, they'd dominate in the market and we would all be in good shape. That hasn't happened. Horse, meet wagon.
The penalty for not obtaining coverage in MA is loss of your personal
exemption on the state income-tax (a few hundred dollars), which is not
much of a penalty considering just the *monthly* premium for health insurance.
Which is not to say the answer is a heavier penalty. That's an
interesting explanation for MA cost increases, which are indeed
said to be going up faster than expected, to say the least. There
isn't too much any mere state can do about this, arguably.
One ironic aspect of this, in MA, is that some people who now have
coverage can't afford to use it because of the high deductibles
that were implemented to keep premium costs down. In any
case, one would hope that whatever the US manages to do
will be an improvement, and that lessons learned in MA &
elsewhere will be of some use. (VT also has a similar,
modest plan.)
But it isn't piecemeal mot-for-profits, its piecemeal everything in Massachusetts. Massachusetts Connector does not work as there is no real individual market for health insurance.
No. Costs are up because the cost of service is needlessly (or shamelessly) inflated. I was pointing out the disconnect in your argument. Insurance premiums are high as a result. They are not the cause. Doofus mentions a huge problem- nonprofit hospitals charging asinine amounts for service. These fees are justified on contrived losses. We shouldn't put up with it.
As for Medicare A , why not mention B and D? Different dynamics I know, but neither would help your argument. And how exactly is Med A doing better? I don't know of 1 private carrier that's going broke. Medicare A (hospital fund) is. If 4% Medicare admin were a reality it wouldn't be on the brink of insolvency.
Horse, wagon... doh. No need to chide. I know. I hope my point wasn't lost.
I laud you for writing this article. For 8 years I have looked for a a health-care coop for which I qualify. I am a widow with a young child and not presently working. The policy available to me from BC/BS is not $600/month with a $1000/person deductable, $250/day hospital cap, a $35 co-pay for dr. visits and limited pharmaceuticals and no dentistry. That is over $9200 per year before a single $1 is reimbursed.
I read your article with interest but I would like more details. I know nothing about the issues in Mass to which you allude. I would love to read about the specific problems. You assume your reader is as well versed as you are.
Concerning the monopolistic issues, I am familiar with McCarren-Ferguson (as a former FTC employee). Why is there no discussion about the repeal of M/F? Is that solely a reflection of the power of the insurance industry or are there other issues? Why can't coops exist among groups across state lines. For instance can religious organizations establish coops for it's members throughout the US?
I do hope you will write more on this issue. Get into the nuts and bolts or include links with more detail. Universal health care appears to be off the table. Shouldn't coops still be part of the discussion?
If you want change, this is change. Highly efficient change.
http://64.203.97.61/SolutionsLab/Solution.aspx?Guid=2d50363e-00be-44e8-9251-9a6589ba820d
A public option simply goes against the grain of what America has always been - - a capitalistic country with social programs.
We run extreme debts with medicare, this country cannot afford another public option. Non-profits and private companies do not run extreme debts.
Change is on the way but a public option is not an option.
If we can afford to pay twice the amount in health care as other countries, we certainly can cover everyone, sorry you are wrong. However, I'm interested in how you put money before the health of citizens.....that sadly, is very American.
We run debts with medicare because sticky fingers can'nt stay out of the till. Remember when Gore was saying he would have a lock box for medicare and people laughed and bush said so would he. Well...he didn't. But people will still believe those who are genetically predisposed to lie.
I take it you have never been in the military...? I had three children in a military hospital...plus had other care. My first child cost be 8.95...that was 8 dollars..my last one was 25.00 because I was in there longer...two weeks. Socialized meds? no...just a very efficient and good care.
Ever visited a VA hosbital...my Mother and father were in WW2 and both were cared for in the VA system. My children and I volunteered at the medical centaer close by us. Perrypoint VA medical ceter..it is beautiful, huge and has wonderful care for everyone. That is certainly a government run medical stystem. ..So why the fear mongering. You say well this is America and we just don't have government run healthcare...wrong.
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