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?
I'm 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?
Physicians 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.
Outside a 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?
The 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?
It's 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.
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