Tags: obama | co | ops | healthcare

Obama's Healthcare Co-Op Plan Slammed by Both Left and Right

Tuesday, 18 Aug 2009 06:49 PM

By David A. Patten

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President Obama's willingness to substitute healthcare co-ops for the public option — a shift that has enraged members of his party's left wing — already faces vigorous attack from all sides in the healthcare-reform debate.

Democrats on the left, ranging from House Speaker Nancy Pelosi to former Sen. Howard Dean to union bosses, are digging in for what appears an all-out, public-option-or-bust strategy.

Conservatives, meanwhile, say healthcare co-ops are largely unproved on the national level, would require billions of dollars in federal funding to get started and could compete unfairly against private health-insurance companies.

One indicator of the administration's profound difficulty in finding a workable healthcare compromise: The one thing both the left and right seem to agree on is that, generally speaking, neither likes co-ops.

Co-ops are simple enough in concept: They are organizations that members own and manage, and they are designed to advance their members' economic interests.

Co-ops enjoy a long, proud tradition in the history of the American economy. Many different types of co-ops thrive in the American marketplace: food co-ops, farmers' co-ops, rural electric co-ops, and credit unions, to name just a few. Because every member of a true co-op has a voice in its operation, the concept in its ideal form can be a model of democratic governance.

Co-ops proposed by leading Democrats such as Sen. Charles Schumer, D-N.Y., for example, would be funded, operated, and controlled by the government – quite a different vision from what co-ops originally were intended to be. And that, predictably, has conservatives dashing off to man the barricades.

Some healthcare co-ops do operate successfully now. The Group Health Cooperative of South Central Wisconsin; the Group Health Cooperative in Seattle, Wash.; and the Arkansas River Valley Rural Health Co-op are three examples.

Most of the co-ops already in existence, however, play a small role in the nation's menu of healthcare choices. Skeptics question whether tiny health co-ops in mostly rural areas, usually with a fraction of the 500,000 members that experts say are required to negotiate effectively with healthcare providers, could provide a useful model for addressing the nation's rapidly rising healthcare costs.

One major hurdle: The start-up task of setting up a sophisticated information technology infrastructure, enrolling thousands of members, and negotiating contracts with doctors, hospitals, and other healthcare providers, are formidable indeed for an upstart organization that its own members are supposed to run.

"How are you going to organize this to run it as a business?" says Mark C. Stewart, a Toledo, Ohio, attorney whose firm has helped establish many different types of co-op.

Stewart, a proponent of co-ops under the right circumstances, tells Newsmax that it's too soon to pass judgment on whether scores of new co-ops would help address the nation's healthcare woes, because the details of how they would be structured are not available yet.

But he does point out: "The co-op doesn't come with trained staff. You're going to have to develop that. And how are you going to make it big enough that it has any benefits or competitive advantage?"

In part, the administration faces the same problem in defending the co-op concept, Sen. Kent Conrad, D-N.D., originally proposed, as it does in championing healthcare reform: Details are scant about how such a program would actually work, and that fact alone raises plenty of doubts.

Several figures pulling President Obama toward the left have been quick to attack the viability of healthcare co-ops as a substitute for the public option.

SEIU President Andy Stern wrote on his twitter account: "Health care co-op is distraction from need for real competition and cost control. Good idea and attempts to avoid important debate on costs."

And former Democratic presidential candidate Howard Dean, who is also a medical doctor, told MSNBC: "These co-ops are going to be too small to play in this marketplace, with these huge behemoth health insurance companies that push patients around, doctors around, and nonprofits around."

Already, the government is talking about $6 billion in seed money to get the co-ops up and running, but some experts believe at least $10 billion would be needed. And that's just to get them started.

Moreover, there is no assurance that co-op organizations would remain profitable. Dean points out that private firms already have gobbled up several mutual insurance and nonprofit insurance companies. He and other liberal Democrats complain that the remaining nonprofits behave in the marketplace like private health-insurance firms. So why go down that road again, they ask?

Nor is the skepticism of co-ops coming only from the leftward pews of the American body politic.

"Why is the left fastening to co-ops now?" the conservative Heritage Foundation's blog The Foundry asks. "Because their public plan idea — a way for the government to take over healthcare — has run into a buzz saw of opposition among the American people. Liberals have concluded, it seems, that there’s more than one way to skin a cat.

"So if the public plan was a Trojan horse for single-payer (which means a complete government takeover of your healthcare decisions), a co-op (the way liberals mean it) is a Trojan horse for a public plan."

As those remarks suggest, conservatives generally have voiced suspicion that healthcare co-ops could be a backdoor method for making private insurers less competitive.

And that is exactly the concern of Robert Zirkelbach, spokesman for the America's Health Insurance Plans trade organization.

"We have not seen any specifics yet on what the proposed co-op might look like," he tells Newsmax. "That being said, any time an entity can be both a player on the field and the referee there is every reason to believe there will not be fair competition. Also, every bill currently making its way through Congress includes a new government-run plan that would significantly disrupt the coverage people rely on today."

It's important to point out that, despite the president's aspersions to the contrary, most health-insurance trade groups have been cooperating with bipartisan efforts to reform the healthcare system. As one example, they have agreed not to refuse coverage for preexisting medical conditions any more, a feature that Obama often claims his healthcare reforms will provide.

So with brickbats being thrown at the co-op concept from both left and right, is there any chance it could play an important role in enhancing the nation's healthcare system?

Those actually involved in the establishment and operation of various co-ops say that will depend on how the co-ops are structured.

Will they be independent of federal control once they're established? Will they be expected to be self-sufficient, and if so, what will happen to co-ops that are unable to compete effectively in the marketplace? And how precisely will they be expected to fulfill the administration's goal of providing "competition" to private insurance firms in order to "keep them honest"?

These and many other questions remain to be answered.

"I don't think, from what I've seen in the national media, that it's really been thought through in detail," Stewart says. "A lot of people fall in love with this idea of a co-op, and sometimes it's not advisable."

When member-run co-ops fail, Stewart says, it's usually because of management issues or a poor business strategy – in other words, the same stumbling blocks that prove the undoing of many a profit-driven enterprise. Rarely, he says, is the co-op model itself to blame.

Another expert intimately familiar with the mechanics of co-ops is Larry J. Zanoni, the executive director of the Group Health Cooperative of South Central Wisconsin. That co-p[ has been in operation since 1976, and Zanoni well remembers its early days: "We had to get every member the hard way, find one at a time who would believe in it."

Today, the co-op has 62,000 members. And unlike some of the proposals congressional Democrats have floated, the co-op operates independently and is member-governed.

In fact, every year, all 62,000 members receive an invitation to vote on the board of directors. And Zanoni proudly reports that his co-op has one of the highest satisfaction rates of any health provider in the country.

"It's an alternative," Zanoni tells Newsmax. "I'm not saying we should be the only healthcare plan out there for all the nation's problems. But we are a good option, and I think we have things aligned the right way."

He does find the idea of expanding co-ops to a national scale a bit daunting.

"To get 45 or 50 million uninsured, boy!" he says. "I know how long it took us to get traction, and fight that journey, for the first 10 years before we became pretty well known in town."

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