Monday, August 10, 2009


The idea of Non-profit Health Insurance Cooperatives is a concept being thrown around as a potential compromise on the public/government option in Obamacare. I'm not reflexively hostile to the idea of co-ops, but what people envision when they mention co-ops must be more fully fleshed out before I can get on board.

Conservatives believe the health insurance bill, as it currently exists in the House, is a thinly veiled attempt to undermine private insurance and move toward a government single-payer monopoly. It's hard to disagree. It's the type of incrementalist Fabianism I've come to expect from Obama.

So what do co-ops do for this?

I can envision two models for Health Co-ops:
  1. Relatively small, perhaps regional or local independent co-ops that operate and are regulated just as normal insurance companies are regulated. The analogy would be what credit unions are to for-profit banking institutions, or agricultural co-ops.
  2. Relatively large, monolithic Government-Sponsored Enterprises closely tied to public policy objectives of the federal government. Think Fannie Mae/Freddie Mac, or the Post Office. "Fannie Med".

When Republicans say they're open to the idea of co-ops, they're probably talking about the former. When Democratic pols assure their supporters that co-ops are the same or equivalent to the "public option", I have to think they're referring to the latter.

A government plan would have several distinct unfair advantages over private insurance: It would not pay taxes; it would wield outsized power to "negotiate" (fix) prices, driving providers to increasingly pressure the private market for profit; and it would be able to hide behind the same kinds of government accounting that have provided us with the demographic time bombs in Medicare and Social Security.

Type-1 co-ops have only the first advantage, but, judging from the credit union analogy, would not meaningfully undercut private insurance. Whether this type of co-op solves many problems is unclear, but at least it would remove the much-maligned profit motive from the equation. More of a co-op's revenues would likely be used for actual health care rather than marketing, and premiums might be marginally lower than for private insurance. It would represent "competition" in a much truer sense than Type-2 co-ops or a government plan.

Type-2 co-ops would have all three problems, and would essentially be the equivalent to a government plan. Moreover, it would be more subject to political influence from Washington.

Of course, even if we get a workable co-op framework there's still a lot to dislike about the House bill.


Anonymous said...

Hey Joe - big picture question for you. How is American Democracy supposed to work in this hyper-partisan age? There are some interesting graphs from a week or two ago on that showed the distribution of political beliefs along the Left to Right Axis in the population and relative to the elected officials (highlighting that elected officials are generally further from center than the means of the Liberal and Conservative populations). The town hall meetings are a perfect example (one could also draw comparable examples from Bush presidency around Iraq) - democracy depends on a conversation and it seems that we have created - through conservative talk radio, liberal papers, the uninformed blogosphere - a fundamental breakdown that we are incapable of bridging. I think the Town HAll meetings are a great example - many people have very strong feelings about things that they either incompletely or incorrectly understand (opposed to Socialized Medicine but pro-medicare - Alaskan's who are anti-federal stimulus money on the basis of big govt while ignoring that ~30% of AK jobs at baseline comes from Govt spending). How should Obama/Left work past this - how should Conservatives bridge the gap? Is this possible - or are we just screwed?
- Matt

JoeCollins said...

First, too much emphasis is placed on those voter distribution charts. There's the "old" problem of what issues constitute right or left and why, but there's a more fundamental problem that has gotten more attention recently - voters, particularly centrist voters, are often not technically rational. They don't hold anything resembling a consistent set of beliefs and vote based on factors not terribly related to policy preferences. This makes spatial modeling of ideological voting behavior very difficult at best, or at worst totally useless.

Bridging the gap... Vietnam-era turmoil was much more intense than post-Vietnam turmoil, so I think we're not in any immediate danger of driving over the cliff of irreconcilable social division just yet. Get back to me when the tear gas starts flying.

Obamacare (or any issue du jour) will eventually be reconciled one way or the other and we'll move on to something else. Hey, it happened with Iraq. Not that opponents are satisfied, but it's almost a non-issue now.