Kent Conrad appeared tonight on the Ed Show, arguing againt a robust public option in health care reform, and for his idea of health co-operatives that would supposedly provide a non-profit alternative to the for-profit insurance industry. Watch:
Conrad's co-op idea is yet another attempt to create an approach Republicans will find palatable. They'd get federal seed money, operate as non-profits, and would negotiate directly with medical providers either on a national or regional basis.
In an interview with Ezra, Conrad likens it to agricultural growers cooperatives, rural electric cooperatives, and telephone cooperatives. Ezra's questions are in bold.
Tell me a bit about your idea for chartering co-ops in the health insurance market.
Maybe it would be most useful to tell you how I got into this. The G-11 group, which is the members of the Senate, Republicans and Democrats, chairmen and ranking members of the key committees, who've been given the overall responsibility to coordinate health care reform in the Senate, asked me 10 days ago to come up with something to bridge the divide between those who are strong adherents to the public plan and those who are strongly opposed.
The co-op structure came to mind because it seems to fulfill at least some of the desires of both sides. In terms of those who want a public option because they hope to have a competitive delivery model able to take on the private insurance companies, a co-op model has attraction.
And for those against a public option because they fear government control, the co-op structure has some appeal because its not government control. It's membership control, and membership ownership.
Also the co-op model has proven very effective across many different models. Ocean Spray in the cranberry business, and Land of Lakes in the dairy business, and Puget Sound in the health care business.
How do you respond to someone who says, this is a terrific idea. More competition is always welcome. But why instead of a public option? Why not do it alongside and let a thousand coverage models bloom?
Votes. The problem is this. If you're in a 60 vote environment in the Senate, and I believe we are, because I believe reconciliation simply won't work, if you begin tallying up the votes, I believe that virtually all Republicans are against the public option and some democrats are. So how do you get to 60?
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Then let's go back to why this works as a compromise. I understand why it would be preferable for Republicans. But for supporters of a public plan, the key advantage is that the public plan is big. It can negotiate discounts with providers. In the form Sen. Rockefeller offered, it can even use Medicare payment rates. These co-ops don't seem like they'd have that size or weight. How would they compete with large private insurers?
They might have that weight. one option is for a national cooperative. That would give it the heft and weight to compete. But you know, one of the interesting things when we talk to experts, is that they say critical mass is probably around 500,000 members. Puget Sound is probably around 580,000 and they compete successfully against much larger entities. The experts tell us that there are probably advantages of size up to a point, but after that point, the law of diminishing returns sets in.
Who would charter these? What is the process? Do I go over to my local health insurance exchange and put in an application?
The way co-ops typically are formed, people who feel they're not appropriately served, or not served at all, band together. They form an org, elect a board, hire people to do the work, pool their money, and the organization goes forward. These cooperative entities would provide their contracts through the exchange just like everyone else, be subject to the same rules as everyone else, in terms of reserve requirements, in terms of what kind of contracts they could offer. People would go to their exchange, they'd see the option, and if they liked it, they sign up, and then they become one of the members, because every member is an owner. And they have elections and that elected board chooses leadership.
Ezra asks some very smart questions about the bargaining power of these cooperatives. The "they might have that weight" just isn't a good enough answer to whether these cooperatives would be truly competitive. He invokes the "progressive" ideal of the rural electrical cooperatives, the farmers' cooperatives and the old prairie populist tradition, but the health care industry is not analogous to any of those utilities or industries.
He also, as he does in the interview with Schultz, brings up a "Puget Sound health cooperative." He's talking about the Group Health Cooperative, which still calls itself a cooperative, but operates just like an HMO. I'm a GHC "member," so I'm familiar with how it works, which is quite well from the standpoint of a healthy person who only needs routine care. But be careful when you hear it being held up as the the model for how a cooperative would work because of its unique history. It, together with Kaiser Permenante, was created right after World War II, when few employers offered health coverage. The founders got a bunch of individuals, small businesses, etc. who were willing to put up a $100 in membership fees and a handful of doctors who were willing to work on salary to provide prepaid care. It got off the ground in 1947, about the same time as Kaiser.
This is some important background to keep in mind when Conrad and other co-op proponents talk about the success of this program. It rose up in a vacuum, in an almost entirely fee-for-service health care environment where employer-provided coverage was rare, and insurance companies didn't rule. The major opposition they received was from doctors' organizations, which barred cooperative physicians from medical society, working at non-cooperative hospitals, etc. That opposition was significant, but it wasn't the entire health care system of insurers, pharmaceutical companies, equipment manufacturers operating on a national basis. That's what any cooperative now trying to get established would have to face.
But the final question and answer from his interview with Ezra really just boil the whole situation down:
Let me ask you one last question on that. I understand why this proposal wouldn't satisfy liberals who want single-payer. But why does it arouse Republican opposition? It seems, in a way, to be very small-r republican.
Because they don't...ah, you know, you'd have to ask them. It would just be my surmise on why some of them don't like it. They really don't want a competitive model, at least some of them.
The majority of Republicans don't want a competitive model because they don't want a Democratic health care reform plan to work, They recognize that Democrats fixing the health care mess would cook the Republicans' electoral goose for at least a generation. That's what Conrad and all of the Democrats working so hard on this reform need to keep in mind when trying to placate their colleagues on the other side of the aisle.