health insurance co-ops are not a real alternative to private health insurance and they are not a substitute for a strong public plan option, and we should not suggest to the American people that they would be.
Sen. Rockefeller did research on the history of coops and the applicability to the heath insurance field. He wrote letters to the National Cooperative Business Association (NCBA), the United States Department of Agriculture (USDA), and the Government Accounting Office (GAO) requesting detailed information about the current role of insurance coops in the heath care field.
In his letter to Baucus and Grassley, he describes what he found out as "astounding."
Wendell Potter tells Ed Schultz that Max Baucus' bill is a joke.
During a hearing of the House Democratic Steering and Policy Committee Rep. Mazie Hirono asks Wendell Potter, Former Communications VP/Spokesperson for CIGNA, and J. James Rohack, MD, President of the American Medical Association (AMA), about the idea of health co-ops, What Potter calls the Baucus "Insurance Industry Profit Protection and Enhancement Act".
This morning on CNN, Sen. Kent Conrad (D-ND), the author of the health care co-op proposal that is apparently gaining traction among many Democrats, argued it’s a “very successful business model.” But when host John Roberts repeatedly pressed Conrad on whether the creation of non-profit, member-driven health care cooperatives would drive down costs for consumers, Conrad acknowledged they would not:
ROBERTS: What would they do to reduce costs? Because that is one of the central issues of health care reform.
CONRAD: Well, the important thing is they’d provide more competition. … Beyond that, I think it’s very important not to over-promise here. [...]
ROBERTS: So nothing really in driving down the costs of service then?
CONRAD: Uhhh, no. If you believe competition helps drive down costs, then they would certainly contribute to holding down costs.
While Conrad emphasizes the “competition” that health care co-ops would provide to private insurers, health care experts argue they would be too weak to have a major impact. “It’s very difficult to start up a new insurance company and break into markets where insurers are very established,” said Paul 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.” The New York Times adds that the history of health care co-ops has not fared well
If we would only pay attention to history, we would know that co-ops will fare no better than exchanges. Many co-ops were started during the 1930s in the years of the Great Depression, only to fail in most instances despite initial government subsidies. Most of these co-ops never reached sufficient size to either become financially viable or to counteract market problems. Only a few have succeeded over the years. An excellent example is Group Health Cooperative in Washington State, which today has some 600,000 members in an effective integrated health care system. But despite its reliance on salaried physicians in a large well-managed group practice, it still has to compete against its competitors and has almost as much trouble containing costs. Group Health today has only a 9 percent market share in Washington State. It has increased its premiums by an average of 12.3 percent a year since 2000 (four times the rate of inflation) (Link to Sack, K, Health co-op offers model for overhaul. New York Times, July 7, 2009: A1), and is raising its premiums in 2009 by 13 percent (compared with 17 percent by Regence BlueShield). (Link to Song, K.M. Health-plan costs soar for individuals. Seattle Times, July 9, 2009)
Proponents of co-ops today grossly underestimate the difficulty in setting up co-ops, both in terms of start-up costs and lead times in the best of cases. It took Group Health 62 years to reach an enrollment of 500,000, which many health analysts figure is the minimal viable size. As a champion of co-ops, Senator Conrad acknowledges that start-up funding would be high for co-ops, requiring some $4 billion, while others estimate $10 billion. (Ibid, Sack above)
So where does all this leave us in this summer of discontent over health care? Despite the vigorous efforts of the Administration and many members of Congress, exchanges and co-ops won’t work. They won’t make health insurance more affordable. They are a political compromise position in an effort to gain bipartisan support for a bad health care bill. Beyond not fixing the insurance problem, they won’t contain runaway costs of health care. But that is the subject of the next post.
The U.S. General Accounting Office produced a report on cooperatives in March 2000 that was mostly sour on the idea. Using five different co-ops as examples, the study concluded that on the key function -- lowering the cost of insurance -- these non-profit insurance pools came up well short.
"The cooperatives' potential to reduce overall premiums is limited because (1) they lack sufficient leverage as a result of their limited market share; (2) the cooperatives have not been able to produce administrative cost savings for insurers; or (3) their state laws and regulations already restrict to differing degrees the amount insurers can vary the premiums charged different groups purchasing the same health plan."
"The history of cooperative is that it's very hard to set these things up, and while we're trying to set them up, there's not going to be accountability and pressure [on private insurers]," says Hacker. "They would be weakest when they're most needed — at the outset." In addition, cooperative health policies would not be portable, meaning if you had one and moved to another state, you would need to drop coverage and enroll elsewhere. Rates could also vary dramatically, depending on regional differences in health costs and the size and makeup of co-op pools.
Assuming state-based health co-ops could offer lower premium costs by being nonprofit and creating large risk pools, an equally crucial question is when they would be created. Even with federal seed money, setting up 50 co-op boards, signing up enough members to make each co-op viable and establishing administrative systems to set premium rates and pay claims would not happen overnight. "The principle of eliminating some of the profit motive and placing it with the motive to get value out of care is a good principle," says Karen Davis, president of the Commonwealth Fund, a nonpartisan health-policy think tank. "But there are a lot of ifs, and it's not a strategy for a nation in an economic crisis when we need a solution soon."
But why would we want more Medicare? Isn't Medicare a mess? Well, yes and no. The fabulously popular free health-insurance program for the elderly is running out of money, thanks to exploding costs. But the administration of Medicare is a miracle of low overhead and a model, despite all the fraud and abuse, of what government can do right. Three percent of Medicare's premiums go for administrative costs. By contrast, 10 to 20 percent of private-insurance premiums go for administrative costs. Roll that figure around on your tongue. When you swallow and digest it, you'll understand that any hope of significantly reducing health-care costs depends on a public option.
That takes us back to a public option, which would force insurers to redraw their business models and accept lower profits. The House bill will include it, but the Senate's almost certainly won't. Instead, moderates there are pushing health-care "cooperatives." Nobody has a clue what that means. Would the co-ops be like utilities? Farm cooperatives? Starting fresh with a quasi-public/quasi-private organization might bring some much-needed creativity to health-care financing. But without a federal charter and some seed money to help them enroll millions, co-ops will get swamped by the private-insurance lobby, which has become expert at marginalizing state-run experiments.
When it comes time to hammer out the final plan in the House-Senate conference committee, Obama and Rahm Emanuel will likely make the House accept a reduction in the deductibility of employer-based plans and make the Senate accept some kind of public option or co-op with teeth. Anything less means the president didn't get the sucker.
Media figures and outlets have characterized Sen. Kent Conrad's cooperative health insurance proposal as a 'compromise,' 'hybrid,' or bipartisan 'alternative' to a public insurance option without noting the argument by progressive economists that a public option is necessary for health care reform to be successful.
North Dakota Sen. Kent Conrad not only buys into the notion that health care reform should require a 60-vote supermajority, but he seems to forget that by the time the legislation is voted on, Al Franken will almost certainly be the Senate's 60th Democrat
It is pointless to worry about what they will support - so lets go for the only plan that really will help fix the economy and provide care to everyone - Single Payer - Expanded and Improved Medicare for All.
Here's the latest contortion from Senate Dems trying to win over a few Republicans to a "public option:" Let nonprofits create health-care cooperatives, and call them the public option. Kent Conrad came up with this bamboozle. Finance chair Baucus is impressed, and some Republicans -- even Grassley -- seem interested. Watch your wallets.
Nonprofit health-care cooperatives won't have any real bargaining leverage to get lower prices because they'll be too small and too numerous. Pharma and Insurance know they can roll them. That's why the Conrad compromise is getting a good reception from across the aisle, just as Olympia Snowe's "trigger" (whereby no public option until some time down the pike, and only if Pharma and Insurance don't bring down and extend coverage a tad) is also gaining traction.
The truth is that there's only one "public option" that will truly bring down costs and premiums -- one that's national in scale and combines its bargaining power with Medicare, and is allowed to negotiate lower drug prices and lower doctor and hospital fees. And that's precisely what Pharma and Insurance detest, for exactly the same reason.
Whatever it's called -- public option or chopped liver -- it has to be able to squeeze Pharma, Insurance, and the rest of the medical-industrial complex. And the more likely it is to squeeze them, the more they'll fight it. And the greater the opposition from Republicans, and from Dems who either believe any bill has to have some Republican support or who have sold themselves out to the medical biggies.
As long as single payer is off the table, then we need a real public option. Don't be fooled by labels. Demand the real thing.
Here's the latest idiocy from Senator Max Baucus, who chairs the Senate Finance Committee, on the public option AND the Conrad so-called co-op proposal.
Baucus signaled his willingness yesterday to compromise on a controversial provision of President Obama’s health care overhaul plan in a bid to attract enough GOP support to pass the legislation in the Senate this summer with as many as 70 votes.
The Montana Democrat emerged from a morning session with key Republicans and Democrats saying he was “inclined toward” jettisoning a proposed government-sponsored insurance program endorsed last week by Obama in favor of a new proposal to create national, state and regional health care insurance cooperatives.
Republicans bitterly oppose the public insurance option, saying it would undermine the private insurance industry and lead to a national health insurance system. Some conservative Democrats also are skeptical of the public plan option, even as they and Baucus support Obama’s overall reform goals.
Total Bullshit!
Please CALL Senator Max Baucus at (202) 224-2651 Call the Senate Finance Committee at (202) 224-4515
TELL your Senators and Representatives that you are OPPOSED to the Conrad co-op proposal, and that you WANT Expanded and Improved Medicare for All in the form of Single Payer and if not that, we NEED a strong, robust Medicare-like public option in health care reform open to all citizens to enroll in with NO TRIGGERS or CONDITIONS!
