Only Senate Democrats seem to be moving toward the idea of providing seed money to form health care cooperatives as an alternative to a government option in the new health insurance exchange. Republicans call it "public option" lite, while the public option forces -- most of whom were single-payer advocates and then retrenched to support the public option -- don't buy it. Part of the problem is that no one understands how a cooperative might work. To shed some light on the politics and the policy, I spoke to Julius Hobson, a former top lobbyist for the American Medical Association and now a policy adviser at Bryan Cave, LLC in Washington. (The firm works with a variety of health care clients.)
As I understand it, the prevailing theory of cooperatives would essentially create quasi-life insurance companies that can enter into deals with providers. Government would provide start-up money, essentially, like venture capital. Is the difference between a "strong" cooperative and a "weak" cooperative simply a matter of scale? In other words -- the cooperative system will be too small unless the cooperatives are of a certain size...with a certain number of people buying into them, and encompassing all types of medical services.
I think it's going to have to be the size. And that's one of the questions I have about the cooperative is: can it acquire enough people to purchase services on the scale that makes it economical? And that part isn't clear to me. The federal government would have to provide seed money. The question is: how much, and how long would that last? Are states such as Montana, and I'm talking people wise, not geography wise, Montana, Wyoming, and North and South Dakota, are they large enough? The answer to that is, probably not. One of the conflicts is that insurance is regulated by states. For a cooperative to work, it would need to be regional. So, who's the regulator? Is the federal government going to be the regulator? If the federal government puts up seed money, would it be willing to let the states regulate? Maybe they can [get] insurance companies to agree to national regulation of health insurance, but I doubt that. One other part to that is, assuming you want the cooperative to be competitive, can it get large enough? If you divide Pennsylvania right in half, you've got two [Blue Cross, Blue Shield companies] that control over 90% of the market. Tell me how a cooperative can compete with that.
There are successful cooperatives like Seattle Group Health. What makes them successful? Is their success replicable?
almost of the option that they are unique because of where they are and
when they got started. It's not clear to me that you can duplicate what
they have done throughout the country. There are some places where you
can do that, if you do it from a regional perspective, you might be
able to get enough people. But could you duplicate that in Washington,
D.C. or Maryland? Not likely.
Doctors are going to take a hit, inevitably, right? Would they take less of one with a cooperative?
as a group would not want to take reimbursement less than Medicare. The
problem that physicians have is an anti-trust problem in that they
cannot collectively bargain with any entity as if they were a union --
but not a union. So what happens is ... where insurance companies have
had leverage over individual physicians and in some cases hospitals
too, is because the physicians can't come together. Each physician has
to bargain by him or herself with that insurance entity, and that's not
a bargaining situation.
cooperative and a public plan, how do you foster competition and
innovation in the insurance industry, assuming that the new pool of 47
million uninsured people won't do it?
47 million are scattered all over the country. Without an individual
mandate and guaranteed issue, it would be hard to foster the
competition. The cooperatives are going to need seed money, and the
question is going to be, how much seed money would it take to bring
them to a level where they could be competitive? Are the private
insurance stand by and watch the Congress authorize monies? This is
common sense -- they will lobby to maintain their position. I'm one of
those who doesn't believe that there is any real competition between
insurers now anyway, which is why I'm wondering how the cooperative
would work. I talked about states that regulate insurance -- where does
the cooperative charter go? Delaware? Is it going to be state by state
or could you form one or two cooperatives that would operative over a
wide geographical area? It's exceedingly complicated.
If the objections to a cooperative are so obvious, why has it gained traction?
essentially gained traction because it's an alternative to a public
plan. And that's really where we get to cooperatives in the first
place. But is it an alternative that can work? That's on some real
shaky ground. You'd have to determine the grounds under which a
cooperative would operate.