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A couple of my friends across the political spectrum sent me these interesting articles on the Co-op idea proposed in the Senate:

http://www.huffingtonpost.com/...

http://www.heritage.org/...

In my opinion, Co-ops are the best approach to:

  1. covering the uninsured, especially those with pre-existing conditions; and
  1. replacing both employment-based and government-provided health care for many people.

 

The heart of this concept is that providing health benefits is not a core business of any employer: building power generators; practicing law; or doing roof repair is.  As a result, few employers are as good as they would like to be at managing cost; access; and quality.  Some, like GE and Safeway, are good at this, but they are mostly large, self-insured ERISA Plans, which cover fewer workers in this age of increasing contingent employment.

These Co-ops would not replace Payors, but would instead replace employers as buyers.  If you build effective Co-ops, you could give more people access to quality heath care of the type available to, for example,  GE employees or Federal employees covered by the Federal Employee Health Benefit Program ("FEHBP").  Additionally, since these Co-op entities would ideally be closer to the participant and beneficiary than either employers or the government, they would potentially have the legitimacy to say "no" when "no" is required.  This is  a vital trait as the emergence of Preferred Provider Organizations ("PPOs"), and their rapid market dominance over HMO products, demonstrated that private payors, especially for-profit ones, lacked this legitimacy.        

Workable Co-ops should:

  1. be benefit managers and buyers, not insurers and payors, essentially filling the role employers have had since World War II;
  1. be built around existing not-for-profit entities that already offer health insurance programs (e.g., ABA, VFW, Chambers of Commerce and Unions); this program should not be "earn while you learn;"
  1. be able to bargain with payors, leveraging the number of members into substantial discounts; have the protection that exists with employment-based coverage for people with pre-existing conditions;and premiums paid by members should be tax deductible or receive a tax credit;
  1. be set up so that Employers would be able to deduct or receive a tax credit for payments made to co-ops that cover their employees;
  1. be regulated as charities by the states where they operate and by the Feds as entities operating in inter-state commerce;
  1. be built from extensive revisions of ERISA and US Dep't of Labor Multi-Employer Welfare Arrangement ("MEWA") rules: and
  1. offer Plans and programs built around the needs of their members: the UAW does not need Plans covering elective cosmetic surgery; the Screen Actor's Guild might.  

Finally, this is not an attempt to vilify payors.  

Payors, generally today for-profit companies with a fiduciary duty to their shareholders, maximize their return for those shareholders by offering a popular product (PPO Plans) at the price the market will bear and by getting a low price from suppliers (Doctors and institutional providers, like hospitals).  

Employers generally don't drive hard bargains, not least because they can drop coverage if the expense becomes onerous and because they are in the "widgets" business, not the health care business.  While employers who sponsor ERISA Plans have a fiduciary duty to the participants and beneficiaries of their ERISA Plans, they also have a state-law fiduciary duty to their partners or shareholders to maximize returns.  What we need is a mechanism like the Co-ops, to bargain for lower premiums, leveraging membership and with a clear fiduciary duty to that membership, unlike an employer's naturally divided loyalty.  

Once such a working Co-op structure is in place, doctors, payors and hospitals can use statistical techniques of measuring quality and performance to justify higher prices, where demonstrated quality demands a premium.  Until the kind of market forces described with Co-ops support this, even with existing statistical tools to measure performance, the discounted-fee-for-service race to the bottom will continue and Medicine will remain a volume business.

As GEN Clark used to say, "There are two kinds of Plans:  those that can't work  . . . and  . . . those that might."  Properly executed, Co-ops are a Plan "that might work."
 

Originally posted to John Minehan on Sat Aug 01, 2009 at 09:26 AM PDT.

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Comment Preferences

  •  co opts (1+ / 0-)
    Recommended by:
    MichiganGirl

    co opts have been around for decades, they basically dont work.  They may lower your rate a few bucks evrsus trying to get is solo, but this is an already tried and true and failed ida.

    (regarding the bank mess) They want to cure the patient but not deal with the disease.

    by dark daze on Sat Aug 01, 2009 at 09:30:50 AM PDT

    •  It is difficult to answer that. (0+ / 0-)

      On one hand, these types of co-ops have been tried and have been very successful outside of health care, USAA in auto insurance comes to mind.  

      On the other hand, no, they really have NOT been tried in health care.

      Early HMOs (e.g., Group Health Cooperative of Puget Sound) were called "cooperatives", but were really payors, rather than buyers, like employers.  Even so, these worked well enough that HMOs were seen as part of the solution with the HMO Act in the early 1970s and with Clinton's reform paln in the early-1990s.

  •  works for me here in Seattle... (0+ / 0-)

    ...four blocks from the big Group Health.  But it is a ways from that to something large enough to bargain for a formulary and get the best price.  We're all pharma's customers: forcing us to purchase from pharma in local or quasi-regional co-ops is giving up that power.  Budgeting health reform to give up coverage of the poor in order to preserve an artificially fractured market -- well, it might work.  But it is quite ugly policy.

    ...j'ai découvert que tout le malheur des hommes vient d'une seule chose, qui est de ne savoir pas demeurer en repos dans une chambre.

    by jessical on Sat Aug 01, 2009 at 09:36:59 AM PDT

  •  co-ops needs lots of regulation to work (1+ / 0-)
    Recommended by:
    Odysseus

    There's a really important tradeoff that doesn't get enough attention. In order to get rid of the public option, and still drive the number of uninsured down close to 0 and reduce costs, you have to greatly increase the regulation of both co-ops and for-profit insurance companies. On the other hand, if you have a public option combined with incentives for doctors to set up salary-based systems instead of fee-for-service based systems, then you can leave the existing insurance companies with less regulation.

    If you really want to solve health care, you have to either have a public option, or more regulation. If you have neither, it won't reduce costs, and Medicare will go bankrupt in 20 years.

    car wreck : car insurance :: climate wreck : climate insurance

    by HarlanNY on Sat Aug 01, 2009 at 09:53:02 AM PDT

    •  I think this is on the mark. (0+ / 0-)

      We need BOTH more Market AND more Regulation to make this work.

      The good thing about Co-ops is that they would be subject BOTH to state regulation as charities AND Federal regulation as entities operating in inter-state commerce.

  •  maybe... (1+ / 0-)
    Recommended by:
    doinaheckuvanutjob

    Photobucket

    Cheney tortured detainees to elicit false justifications for invading Iraq.

    by ericlewis0 on Sat Aug 01, 2009 at 10:02:01 AM PDT

  •  Cockamamie. Why try an expirement likely to fail (1+ / 0-)
    Recommended by:
    CS11

    instead of what already works, like Medicare?

    Upside down thinking says that public options and govt. plans are "bad" period, so "co-ops" that haven't worked are "good" alternatives.

    Enough.

    It's amazing the pretzel logic of "centrists" when it comes to health care, who fear what's been shown to work and advocate for what's been shown not to.

    •  indeed (1+ / 0-)
      Recommended by:
      doinaheckuvanutjob

      a distinction without a difference.  Just how is a co-op supposed to be different from group insurance? Nothing has been stopping people from creating "co-ops" now. If this is such a great idea why hasn't it caught on already?

      Mebbe we should just lower the age of Medicare eligiblity to 55 right now and then by one year of age every year henceforth.

      •  Because the Part A Trust Fund will be (0+ / 0-)

        broke by 2017 and because Medicare does not have the legitimacy to say "no."  Both of these facts make Medicare a poor model at best for a universal plan.

      •  Perhaps if you read, you (0+ / 0-)

        might understand?

        For profit insurance works, it gets rewarded for providing access and quality, as with PPO products.  On the other hand, it extracts a premium for doing this because most employers don't haggle, hence Co-ops which should be buyers, not insureres.  

        •  perhaps if YOu would read (0+ / 0-)

          the horror stories posted on dkos on a regular basis, you would be aware that

          For profit insurance works

          only to make profits for the insurers.

          Just today, here andhere

          •  OK, I have no idea what your (0+ / 0-)

            background is, so I will explain what I consider (based on having been there for some of this, while you probably weren't) the  obvious for you.  

            About 15 years ago, HMO products came to dominate the market for health insurance products, because they were cheaper and employers had to cut costs to compete in a more competitive national market and in a much more competitive global market.

            HMOs were intrusive.  They put a manager between you and your doctor to "manage" care.  People didn't like these products.

            So payors, mostly for-profits, came up with a new product, PPOs, which combined the discount from providers that came from HMOs with the choice people had with indemnity insurance (e.g., your old time, 80-20% Blue Cross/Blue Shield plan).

            People liked these PPO products, since they were less intrusive.  People were willing to share more costs, through higher co-pays and with paying a premium to see a doctor outside the network.  Employers liked PPOs because employees were willing to share more of the cost and because PPOs were still cheaper than indemnity insurance.

            The market acted, within maybe 2 years, to create a new and better product.  Better stuff at a lower price in a short time is what markets give you: consider the merits of the the Lada versus the Corvette.

            To address the problems with the PPO system (docs and hospitals are getting wrung for discounts and premiums and co-apys are rising) you want more markets, not less.  You want more informed buyers who drive a hard-bargain and have the market-power to make it stick on co-pays and premiums.  You want something that makes it economically feasible to cover the uninsured.  

            In this world, nothing is perfect and there is no answer.  There are, however, answers to make things better and one of them is the Co-op idea  . . . if done effectively.        

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