October 11, 2009 02:29 AM UTC

Your Senators on the Public Option; and Why Co-ops Aren't Enough

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• by: MJD

( – promoted by Colorado Pols)

Senator Michael Bennet was one of 30 signatories on a letter to the Senate leadership demanding that the HELP Committee’s optional public insurance plan be included in the final bill. The next day, Senator Bennet, Senator Udall (not ours, but his cousin from New Mexico), and others joined Senator Brown on the floor to press for the public option in person.

As Senator Bennet said, affordability is critical. It is unconscionable that individuals would be required to purchase insurance for themselves and their families with no mechanism in place to put downward pressure on out-of-control medical inflation.

And while our senior Senator Mark Udall has been less outspoken on the issue (mainly because he’s less outspoken in general, something I can appreciate as a fellow introvert), he is also making the case:

Now we’re closer than ever before to delivering real reform that lowers health care costs, improves care, and preserves the ability of patients to choose their health insurance plan.  To that end, I’m fighting in the U.S. Senate for a fiscally responsible reform bill that includes an optional public insurance plan.

[…]

A public option can make our health care system work for everyone, particularly if it is structured fairly and without hiding costs. At the end of the day, what we’re talking about is freedom – giving Coloradans – and all Americans – the freedom to start a business, change jobs, or just have peace of mind knowing that your insurance company will keep its promises and that you’ll still have coverage if you get sick.

But, as Senator Bennet said, "is not just enough to have a public option. We need a public option, but we also need commonsense regulation of insurance so that we start driving a marketplace that actually makes sense."

Take this story from the Denver Post, for example:

By the numbers, Alex is in the 99th percentile for height and weight for babies his age. Insurers don’t take babies above the 95th percentile, no matter how healthy they are otherwise.

"I could understand if we could control what he’s eating. But he’s 4 months old. He’s breast-feeding. We can’t put him on the Atkins diet or on a treadmill," joked his frustrated father, Bernie Lange, a part-time news anchor at KKCO-TV in Grand Junction. "There is just something absurd about denying an infant."

Bernie and Kelli Lange tried to get insurance for their growing family with Rocky Mountain Health Plans when their current insurer raised their rates 40 percent after Alex was born. They filled out the paperwork and awaited approval, figuring their family is young and healthy. But the broker who was helping them find new insurance called Thursday with news that shocked them.

"’Your baby is too fat,’ she told me," Bernie said.

Rocky Mountain Health Plan has, rightly, been held up as an example of a nonprofit health plan that provides high-quality care as a result of information sharing and comparative effectiveness research (a/k/a "rationing" in Republican-speak), as well as reducing hospital re-admission rates by better managing the care of very ill patients (a/k/a "death panels"). But, as the Langes discovered, it’s not perfect. Even though there isn’t profit motive, there is still a risk management motive. And around the country, we’ve seen repeatedly that non-profit doesn’t mean inexpensive or efficient.

And as the nonpartisan Congressional Budget Office reported, the proposed co-ops "seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments. As a result, CBO estimates that of the $6 billion in federal funds that would be made available, about $3 billion would be spent over the 2010–2019 period."

In other words, they won’t reduce costs. In fact, they will be so bad at reducing costs that the CBO thinks only half of the seed money available for setting them up would ever be claimed. Not only that, but they’ve been tried before and failed. Two of the nation’s largest cooperatives have collapsed because their risk pool was never large enough, nor was their market share.

Group Health Association in Washington, DC collapsed in the early ’90s and the smoldering wreckage was sold to Humana, which a couple of years later gave up and handed the mess over to Kaiser. After 70 years in business, the remaining large cooperative in the Northeast is converting itself into a for-profit corporation because it still can’t generate enough capital to remain in business, let alone compete to the level required to put downward pressure on health care costs in America’s third-largest state.

The bottom line is that cooperative arrangements can help improve the delivery of health care, but they can not improve the cost situation. The only thing that can is a single, national plan with minimum guaranteed benefits. That must be either a single, large cooperative (which would require a costly startup) or a national public plan that can leverage the vast and highly efficient Medicare network that is already in place.

As the letter Senator Bennet signed said, "promoting more co-ops may be a worthy goal." But they are not a replacement for the public option.

Cross-posted from ProgressNow Colorado