Cooperatives: The Best Public Option
Perhaps I am too immersed these days in the novelties of the electric car's "ecosystem," or just cranky contemplating returning to Israel and trading Obama for Bibi, but I am finding various threats to the president from Democratic progressives about the public option shrill and unpersuasive. A progressive seems to be somebody who brings to analysis of public policy none of the astounding progress we've made in commercial information and social networking technology during the past generation--except, of course, when talking about the virtues of blogosphere. (Just watch this short interview with the Daily Kos' Markos Moulitsas on MSNBC and you'll get the idea.)
For God's sake, you no longer need a single, Medicare-style insurer to get efficiencies in claims processing, or buying leverage with pharmaceutical companies, or the sharing of best practices. If you did, you'd still need General Motors to tell suppliers exactly how to make every part, or one big blog to keep the cost of bandwidth low. If, as seems likely, key Senate committees will insist that the public option be delivered through non-profit cooperatives, that may not only be "good enough," it may--with certain collateral regulations--be better than any Medicare-style insurer.
I CAN'T ADD much to Steve Pearlstein's excellent observations about how cooperatives could be best in transforming medicine to the results-based care Atul Gawande famously advocates--provided, as Pearlstein writes, cooperatives are "big enough and built around networks of hospitals and physician practices that accept a fixed, annual fee for treating patients rather than billing for every procedure." I will note that Michael Porter wrote some time ago that the cost and quality of care would benefit from institutional specialization, much the way commercial ventures and universities benefit, which is exactly what cooperatives built around existing teaching hospitals and medical networks encourage.
It is through cooperatives of this kind that public health is delivered in Israel and the system works just fine. You can also find this model in Switzerland and Holland, as Matthiew Miller writes. Princeton's veteran advocate for health reform, Ewe Reinhart, has been promoting the idea for years. You could even make the case that Canada's "single-payer" system is actually based on ten insurance cooperatives, since each province is responsible for setting up its own plan.
Nor do you need one big buyer to confront drug companies, any more than you need one big school to confront text book publishers. Remember that the public option will initially cover fewer than 20 percent of Americans. Private insurers want good prices (generics, etc.) the same way Walmart wants good prices, and public cooperatives will benefit as a by-product. Besides, you could establish a buying consortium among healthcare cooperatives on nothing more complicated than Facebook (the same way, incidentally, that the Daily Kos is threatening to establish a "netroots" campaign against Obama).
Anyway, the problem with the price of drugs has much less to do with buying power (a look at Porter's "Five Forces" might help here) than with the duration of patent rights and the simple fact that, as drugs become more tailored to individual diseases and genomes, their costs are amortized over fewer and fewer patients. (Between 30-40 percent of lifetime medical costs are incurred in one's last year of life; the number is bound to rise as treatments become more personalized.)
Finally, innovations in claims processing are more likely to be developed first in the private sector, for all the obvious reasons. (Would you rather deal with American Express or the IRS?) I am not freaked-out by the word bureaucracy. But you do not need to be as big and rich as Medicare circa 1965 to buy IBM mainframes. If you haven't noticed, we no longer need mainframes at all.
What we do need, urgently, are mandated standards for digitizing medical records and common protocols for reporting patient care. These are the real roads and bridges of a knowledge economy. They will be necessary to establish not only consolidated billing systems for doctors currently being driven crazy, but also ways for them to share information about standards of care. Reporting standards will also give NIH and biotech labs, who share annually $60 billion worth of research, common access to otherwise diffuse pools of data.
ALL OF WHICH brings us to Obama's speech tonight. I have not spent my life studying healthcare, but I know a thing or two. Obama, clearly the best president of my lifetime, could use a little more obvious support from people who should know better, from Bill Maher to Bill Moyers.
If we did not have, as Rick Hertzberg tirelessly reminds us, a political system that puts veto power in the hands of "a forty per cent minority of the Senate, representing as few as one-tenth of the nation's human beings," does anybody doubt Obama would have delivered a universal reform package by now? If we did not also have a politics in which presidents can be "put on the defensive" by people who'll say anything, and media "political directors" who chart the flocking behavior of independents who particularly disdain defensive presidents, would we really need progressives to cover the president's back?
The point is, we do have this system and this politics. Before we start threatening a revolt, perhaps we might bring our ideas up to code--and count our blessings.




















The biggest problem I have with cooperatives is also a problem I have with my current insurer. Will I be covered in Ohio for my health care when visiting there with a coop insurance plan from Florida ???
Maybe yes...maybe not. Usually no.
C
September 9, 2009 3:01 PM | Reply | Permalink
For the future, though, I think no matter where you are, the ideal health care would be one where your "away from home" medical care is advised by a doctor and providers that know you and your history, via technology. This is why Obama is so strongly for the electronic medical records. If you had your druthers, best not to be treated in an emergency by strangers guessing with the aid tests. A coop kinda model of care, like Mayo, where you are treated wholistically, with your whole history taken into consideration, and with the interaction of a team for your care, is still ideal. Coverage of costs when you travel would be a minor thing to put into action, if there was a system where your regular "home" doctors can advise on your case.
September 9, 2009 6:54 PM | Reply | Permalink
I've said it before, the best medical record keeping system in the world is the Veteran's Administration's open source VistA system. It's been adopted by the sates of WVA and HI for their public hospitals, Germany, India, Malaysia, Finland, Jordan and 4 or 5 more countries a week come to check it out. That's exactly what we need and the $20 billion in the Hitech Act for electronic record keeping in the stimulus bill ought to go injto putting it into every hospital, insurance company and clinic's computers across the nation.
September 11, 2009 2:24 PM | Reply | Permalink
Cooperatives won't be big enough to have clout!
September 9, 2009 3:06 PM | Reply | Permalink
Co-ops are a gimme to HC Corporations...It takes years and years and thousands of people and tons of money--then they have to get the HC to negotiate with them....Never work but will give the crooks- corporate and congress- a windfall..46 million new premiums no controls and a trigger that MIGHT kick in in %years unless the congress eliminates it like they did the Medicare 'trigger' last week... Check out Conrads scandal in Dakota re _ BlueCross and their march toward being a Co-op with his help!
Call the fools..1.800.828.0498!
September 9, 2009 3:33 PM | Reply | Permalink
I'm not sure about what is motivating this tirade, Bernard. But many progressive analysts have studied the question of the currently proposed cooperatives and found them wanting. Yale's own Jacob Hacker is one such analyst. Maybe TPM Cafe's Jim Sleeper could dial a campus extension and ask Hacker to respond. In any case, your appeal is unpersuasive since you do not address any of these criticisms.
None of the actual, limited co-op proposals on the table would do anything like get us the system of Canada or Israel. Now if you would like to re-invent the wheel at this late point, and propose a whole new legislative framework and new national health care system organized around cooperatives, be our guest. But right now, you are lagging behind the state of play, and debating plans that don't exist.
People seem ga-ga for the Swiss suddenly. But the Swiss are facing the same problem of rapidly rising costs we are. They also have a system of price controls. And anyway, only non-profits are permitted to provide insurance in Switzerland, which is essential to their market power. Again, nothing like this is on the table. Not even close.
Progressive activists are just doing what Obama himself recommended they do: follow FDR's advice and "make him" enact vigorous health care reform. He didn't recommend a strategy of "having his back". Rather he seems to recognize that progressive change can only happen in America when a highly mobilized public forces change down the throats of official Washington, a system that is organized to preserve the power and prerogatives of existing stakeholders.
We light a fire under Obama, and threaten a revolt. And then he gets to say to Washington's power brokers, "Look, I have this revolt on my hands! We have to do what they want!" That's how this deal works.
September 9, 2009 3:21 PM | Reply | Permalink
"We light a fire under Obama, and threaten a revolt."
- Nice fantasy. What kind of revolt, vote Democrats out of power? Please...
Meantime, what's really lighting a fire under Obama is the fact of his complete meltdown in the polls.
To go from being an historic president to the lowest approval of anyone except Bill Clinton 8 months in just puts more fire than any amount of bloviating on the blogs and fake threats of a revolt.
As for the original post, I agree with most of the points made. But you're right that this is probably too late in the game.
September 9, 2009 3:40 PM | Reply | Permalink
- Nice fantasy. What kind of revolt, vote Democrats out of power? Please...
Nope, a revolt to run more progressive challengers against the existing incumbents.
Notice that brand new Democrat Arlen Spector supports the public option,because he is being challenged from the left.
September 9, 2009 3:44 PM | Reply | Permalink
I think it's a strategy, to be sure.
But what's the likelyhood that the outcome will be opposite (i.e. they were elected in the first place exactly because they're moderate? I assume you're talking about Blue Dogs)?
September 9, 2009 4:51 PM | Reply | Permalink
We'll never know unless we push. Whether they win or lose their re-election bids in the end, these guys shouldn't get too comfortable in their jobs. They need to know that there is a new breed of ornery, engaged and confident progressives out here who are rapidly outgrowing the "I'm just happy he isn't a Republican" mindset.
September 9, 2009 5:19 PM | Reply | Permalink
"rapidly outgrowing the "I'm just happy he isn't a Republican" mindset"
- Unfortunately, I think people who think that way are a distinct minority and those simply caught up in the frustrations of the moment.
September 9, 2009 5:38 PM | Reply | Permalink
Hey, I'm not frustrated. I think we're going to win. But as for the minority thing? Sure, probably. But even minorities have power when they act with solidarity and don't give up.
They power of principled minorities lies in the fact that they often care more about the outcome than some of those in the middle.
September 9, 2009 7:12 PM | Reply | Permalink
Huh?
No. I believe Dan is talking about any and every so-called current "progressive" who wishes to go solo on this issue.
~OGD~
September 9, 2009 5:26 PM | Reply | Permalink
Yup . . .
I see Dan answered it.
~OGD~
September 9, 2009 5:28 PM | Reply | Permalink
Most of Obama's drop in the polls are from disappointed Dems and independents. I'm guessing that their disappointment is not due to Obama's scary socialist Muslim agenda, but from the fact that it looks like he's letting right-wing losers and their corporatist bosses keep him from doing what he was voted in to do.
Not that you'd hear that from MediaCorp punditry, of course.
September 9, 2009 5:21 PM | Reply | Permalink
Which big insurance company do you work, or do you just not get it?
September 9, 2009 5:53 PM | Reply | Permalink
Yep...definitely co-sign. I have my matches at the ready...
September 9, 2009 3:42 PM | Reply | Permalink
We do not yet know exactly what regulations will govern "limited co-op proposals" that are "on the table." There are many coops that already work, even under existing conditions, but low income people cannot afford to buy into them without public subsidies--the benefit that is really "public" in public option. (I was myself in Harvard Pilgrim.) We are debating how things might work, and why you do not need a single big buyer to have 'clout.' Again, rising costs have to do with much more than buying power, in Switzerland and everywhere else. They derive from an aging population, genomic medicine, and, in America, the cost of complexity in claims processing. Profits matter too, but a non-profit should, if anything, have an advantage if it does not have meet shareholder expectations.
What's motivating the tirade is retro, dogmatic thinking about how things work. Old forms of organization do not work in business, and people thinking about public policy should learn about the innovations.
September 9, 2009 4:28 PM | Reply | Permalink
"What's motivating the tirade is retro, dogmatic thinking about how things work"
- I remember the reaction to my question about what's so wrong with coops when that news first came out.
When all is said and done, the battle over the public option will be remembered as politics. What will give Democrats an eduring "electoral majority" is the actual results in health care(costs, coverage, etc) - if they can deliver them in a way that attracts moderate voters. "Reagan Democrats" in reverse, so to speak.
September 9, 2009 4:59 PM | Reply | Permalink
First time I've ever agreed with you. WIll wonders never cease?
September 9, 2009 5:49 PM | Reply | Permalink
We are debating how things might work, and why you do not need a single big buyer to have 'clout.'
I don't think it is just market clout due to size that makes the public option appealing, Bernard, but that as Rep. Anthony Weiner has been pointing out, the public plan that now exists - Medicare - operates with much lower overhead than private firms. Let the current payers compete with that.
The moment I heard the private insurers and their Senate lackeys start to complain earlier this summer about the "unfair" competition that would be provided by the public option, I knew we were really onto something and the public option had my strong support. I have no interest in the government providing a "fair" market for insurance company competition, or in preserving the state of existing stakeholders, but in doing whatever it takes to lower costs and improve performance for the system as a whole and it's 300 million consumers. Our current system is, in my opinion, ridiculously bloated and inefficient. So I really want to put the squeeze on the payers. It's the only thing that will really motivate them to put the squeeze in turn on providers and their suppliers.
I didn't notice many of those older teabaggers yelling, "Take away my Medicare!" It seems to work. So let's have more of it.
I work in the business world, and have seen first hand what happens when a complacent company or industry is suddenly faced with intense competition. It's amazing what heretofore unrecognized savings and efficiencies, improved deliverables and productivity increases, can be achieved when firms are sufficiently motivated and really start to feel the competitive heat.
Again, rising costs have to do with much more than buying power, in Switzerland and everywhere else. They derive from an aging population, genomic medicine, and, in America, the cost of complexity in claims processing.
True, but they also have to do with incredible waste and systematic redundancies. And as you know, most of our international peers have been able to achieve substantially lower costs, even though they are facing the same upward pressures we are from graying populations, etc. You yourself may have heard a report this week on our local NPR station here in New Hampshire about local hospitals engaging in expensive "arms races" to buy their own versions of equipment that really only needs to exist in one place. There was also a report about a surgeon in California who was throwing incredibly expensive stents in a trash can during a surgical cardiac procedure after deciding they didn't fit. If there were more cost containment pressures coming from the top, and appropriate incentives on the doctors themselves to contain costs, people would long ago have devised alternative, cheaper tools and procedures. Then we can insure more people, more completely, and more fairly.
I'm convinced that much, much more fat can be sliced out of the system. Let the private insurers and plans prove they can deliver more for less with an efficient public competitor in the mix. If they can, great! If they can't, the public option will grow more dominant over time,leading eventually to single payer.
September 9, 2009 5:06 PM | Reply | Permalink
Dan, Medicare (which just paid for my wife's bunion surgery) is not constituted to lower costs. It is the "fee for service" wet dream. It could change things, if indeed the bi-partisan outside we've heard so much (and which Krugman and others endorse) insists on best practice. But then seniors might not "like" it so much. Anyway, the idea that you need the scale of Medicare to negotiate lower cost provision of service is a half-truth. You don't need a single system to get the benefits of scale; you can develop consortia. And the limitation on services requires regulations to restrict providers to good outcomes, as Gawande writes, not just buying power.
September 9, 2009 6:40 PM | Reply | Permalink
Except that you don't know what good outcomes will be until you... see the outcomes. Everything else is just probability. If a doctor tries something creative insurance should still cover it, right?
September 9, 2009 6:49 PM | Reply | Permalink
As I said before, it's not the size of the public option which promises the greatest impact. At least not initially. It is the fact that it is a public plan that can deliver what it delivers without the same percentages of cash being siphoned out of the system to make money for investors, pay gargantuan salaries, buy extravagant suites, subsidize extravagant junkets etc. The public option will also have the full power of US law and taxpayer interests on its side. That, as far as I can tell, is precisely why the existing stakeholders are so freaked out about the public plan. The existing system is a fattened cash cow, and we're threatening to put the cow on a diet. The insurers freaked-out response, to my way of looking, is their virtual admission that they are not sure they can compete with the government plan. And that means government can, at least in this instance, do better. And that's why I want a public plan.
And the limitation on services requires regulations to restrict providers to good outcomes, as Gawande writes, not just buying power.
Yes, we can regulate providers better and force them to do their jobs more effectively and efficiently. But that raises the obvious question: Why aren't existing market pressures having this effect already? Why are providers charging payers more than they have to, for unnecessary services? Because they can get away with it, that's why. They can get away with it for various reasons: two few providers in too large an area, for one, but also because the end customer is too far removed from the decision-making and shopping for health care. (This was part of the point of a recent Atlantic article on the subject.) This creates the conditions for a soft racket of tacit collusion, where providers and insurers have a common incentive to accept an overly-high equilibrium, limiting the options available for employer health plans.
So let's start with a public plan that can back up its demands for better value from providers with the threat of legislation (the public plan doesn't need a lobbyist, since it is its own built in public interest), and can also exert more competitive pressure on insurers, pressure that will be passed on to providers as the insurers are more or less forced, to avoid losses, to demand better delivery from providers. Then let's see how long the providers, suppliers and insurers continue to burden the system with their money-making schemes.
A public provider option would be a great option as well. And I would also like to see us gradually and eventually get employers out of the business of health insurance coverage altogether. But one thing at a time.
And hey, good luck to your wife with the bunions. :)
September 9, 2009 7:56 PM | Reply | Permalink
What's motivating the tirade is retro, dogmatic thinking about how things work. Old forms of organization do not work in business, and people thinking about public policy should learn about the innovations
Thank you for the post, I really am looking for more like this in my reading on the problem than the mostly political "fer or against" old paradigms available in the blogosphere. (I say thank the lord for people like Dr. Gatwande and Maggie Mahar writing on the topic the last few years, without the few like them, we'd have nothing but political pap.)
There is absolutely no reason not to remain open to all kinds of ideas, as there is no reason the still wealthiest and still most powerful nation on earth cannot eventually come up with something totally different from other countries with far better results. Just because we are starting from way behind doesn't mean as much as people make of it--see for example, JFK and the space race and the whole quest to become competitive in science with the Soviet Union within 10 years, starting from quite a bit behind. At the very least, reading such essays helps us better understand what particulars and details might be faulty as we go the process of reform after somethign is passed, and it will be a process.
I doesn't seem like it occurs to any of the "give me a public option or give me death" or "give me single payer and give me death" contingents that every first world nation is worried about major problems with health care costs in the future and is considering changes to their systems for that reason. That we are worse off does not mean everyone else has it ideal. Someone needs to invent something new and better, perhaps we can end up doing it through a process of change.
I do consider it a pity that our president did not frame the fight that way from the getgo, and instead started with Congressional confabs behind closed doors. Perhaps he will try tonight, late but better than never.
September 9, 2009 6:45 PM | Reply | Permalink
I think it's more likely that Obama says to the powerful: "Look, I've got this revolt on my hands and I've stood up to the radical left and resisted their demands for a single payer system that I used to support. Do ya like me now? What can I concede that I've not already conceded? Just tell me and I'll do it."
September 9, 2009 4:35 PM | Reply | Permalink
Okay, I'll bite: Just how old are you, sonny, to say that this seven-month presidency is the best in your lifetime? Just answer that one -- I'll be kind and won't ask for any evidence of the statement's veracity.
September 9, 2009 3:24 PM | Reply | Permalink
His age?
Bernard was born in 1949.
~OGD~
September 9, 2009 5:38 PM | Reply | Permalink
What the fuck is your point here....more of the same and we will be blled and die for the love of money. medicare for all is the best and only solution for me. I doubt you even understand how piss poor co-ops will be with no buying power and under funded they will be. Get a fucking brain here...
September 9, 2009 3:42 PM | Reply | Permalink
Well one of the problems is that, as you say "a public option would only start out representing 20%" of the people. Where does that number come from? The public option should be available to anyone who wants it. The day after the bill is passed I should get two prospectuses, one from the private employer that my company hired and one from the public option and I should be allowed to choose the one that offers the most amount of coverage of the lowest cost. A real public option would leave people free to dump their private insurers in droves. But that's not what we're getting.
The reason Medicare is better than these regional co-ops is that it already exists. All we have to do is ask people a simple question: do you want to keep your insurance and pay premiums or take Medicare and pay taxes? Every American should be offered that choice.
September 9, 2009 3:46 PM | Reply | Permalink
Another comment from a person who's certainly never called the Customer Support Line for a For-Profit Insurance company. Good luck with that.
September 9, 2009 3:49 PM | Reply | Permalink
This was perhaps a too-glib remark. But my point is that innovation in claims processing will likely come from organizations that are highly motivated to gain efficiencies.
September 9, 2009 4:31 PM | Reply | Permalink
Precisely. And that motivation will come from a "do better or die" competitive environment, not the current symbiotic racket that fails to incentivize efficiency adequately.
September 9, 2009 5:10 PM | Reply | Permalink
I think it safe to say that you're better off and have much more to offer commenting on Israel than on this subject.
September 9, 2009 3:54 PM | Reply | Permalink
Actually, I'm glad he wrote this. Remember, he's a business professor and this is what we're up against. I disagree with him entirely but this is the kind of thinking we're up against. Look how he assumes that the profit motive is actually going to serve customers, for example. We need to see this kind of thing, wrong as it is.
September 9, 2009 4:02 PM | Reply | Permalink
Look, before I was a business professor I was a Marx scholar. The profit motive does not serve customers. But competition, as Marx well knew, drives technological innovations. Can we have some reasonable comments here?
September 9, 2009 4:34 PM | Reply | Permalink
Sheesh, what's unreasonable about my earlier comment, that you didn't respond to where I said that people should have a choice between a government system and the private insurer they have now? How on Earth is that unreasonable?
September 9, 2009 4:45 PM | Reply | Permalink
It's unreasonable to expect insurance companies to compete against an oh-so-inefficient government option. I mean, how would their CEOs continue to collect megabucks for their innovative work denying payments for the health care people need?
Won't someone think of the downtrodden millionaires? Have we no sympathy for their plight?
September 9, 2009 5:34 PM | Reply | Permalink
Don't tell me, tell it to the Marxist scholar.
September 9, 2009 5:38 PM | Reply | Permalink
Gee ... I can't help but notice . . .
There has yet to have been a reasonable response from Bernard.
It's great to see that Bernard had good results with his co-op Harvard Pilgrim. My wife and I are currently in a non-profit co-op of 8+ million strong. It does nothing for lower costs. A year from now I'll be eligible for the largest co-op of all ... Medicare. With the umbrella of my lifetime retirement coverage of my current non-profit plan and Medicare my costs will be reduced by a margin of 76 percent.
~OGD~
September 9, 2009 5:57 PM | Reply | Permalink
What competition Bernard? We supposedly had a market that was competitive and we've ended up here. Time to give the market some 'real' competition courtesy of the US government. I don't think a lack of technological innovations are the problem...the problem is that even with innovation they are allowed to keep costs up. In a prefect world the market should keep costs down but I can't envision that happening. So I see no way to affect change that is needed other than the government becoming a player in the market.
September 9, 2009 4:51 PM | Reply | Permalink
"We supposedly had a market that was competitive "
- Key word: supposedly.
September 9, 2009 5:39 PM | Reply | Permalink
Effective competition can come from regional coops if--and this is key--premiums are subsidized for people who are otherwise not insured. Why not expand existing coops and let them network among each other. Why not local boards responsible to coop members? Why top down and not bottom up, so long as care is universal, is based on best practice? It is like the charter school model, as opposed to one-big school system. The point is, you no longer have to be big to get the advantages of scale. That's what's new. Look at TPM.
September 9, 2009 6:48 PM | Reply | Permalink
But why not open these up to anyone who wants them, rather than just the uninsured? Why not really compete with private industry for its customers?
September 9, 2009 6:55 PM | Reply | Permalink
Trading Obama for Bibi? Does that mean you want the US to go war with Iran as Bibi does? Who would he ethnically cleanse to parallel Bibi's ethnic cleansing in East Jerusalem and the West Bank? I'd rather Bibi get traded for the Dalai Lama.
September 9, 2009 4:25 PM | Reply | Permalink
Mr. Avishai is a smart guy with a very long published record of perceptive, reality based commentary, books and publications.
I would not lightly dismiss his evaluation and advice.
September 9, 2009 4:43 PM | Reply | Permalink
Unless, of course, he made a complete ass of himself.
September 9, 2009 5:54 PM | Reply | Permalink
Gee, you sure know how to hurt a guy.
September 9, 2009 6:49 PM | Reply | Permalink
As an accomplished ass, myself, I consider it something of a compliment.
September 10, 2009 9:52 AM | Reply | Permalink
This doesn't seem like reality based commentary to me. It's a contemptuously toned lecture.
September 9, 2009 6:26 PM | Reply | Permalink
We don't need a public option if we all really believe in healthcare for all.
Believe, and it will happen. Bernard says, so it must be so. The magic of... magic will solve our problems.
September 9, 2009 5:46 PM | Reply | Permalink
It is like the charter school model, as opposed to one-big school system.
This would be a relevant comparison, if we were debating co-ops vs. single payer - which would be analogous to one big school system. But we aren't. We are debating whether or not co-ops alone can do the trick or we need a public option in the mix. So that's more analogous to the question of whether we should have a system that includes only not-for-profit private schools, or one that contains a mix of public and private schools.
September 9, 2009 8:07 PM | Reply | Permalink