Are health care cooperatives the right medicine for health care reform?

Who is prescribing?

Liberals want to create an insurance plan that keeps down costs, plays fair with Americans with pre-existing conditions and doesn’t leave anyone out in the cold. The problem? Fiscal conservatives, not just Republicans, aren’t playing ball. Not a single Republican, or fiscal conservative, has expressed support for a public plan.

Some Democrats led by North Dakota’s Kent Conrad have proposed a middle-way solution: instead of a public plan, create government-supported cooperatives. Cooperatives are non-profits owned and operated by their members, in this case patients who would buy into the program. With no need to turn a profit, and operated by patients themselves, fans think cooperatives could remedy the problem of nasty insurance companies that refuse to treat patients like people.

Progressives are not sold. They argue that cooperatives have been tried before, and failed. Or they became eaten up by a drive for profits and evolved into the kinds of insurance companies they tried to challenge.

Have co-ops worked? We have tried cooperatives before. During the 1930s and 1940s,the heyday of the cooperative(socialist) movement in the United States, the Farm Security Administration encouraged the development of health cooperatives. At one point, 600,000 mainly low-income rural Americans belonged to health cooperatives. The movement failed. Although had it not been for the advent of WWII to stimulate the economy of the times - it is difficult to say whether capitalism would have survived. At the time the cooperatives were small and undercapitalized. Physicians opposed the cooperative movement and boycotted cooperatives. When the FSA removed support in 1947, the movement collapsed.

So far, not so good. It seems that the consensus is that cooperatives just face too much pressure to be like for-profit insurance companies. Even the Group Health Cooperative of Puget Sound, an example that supporters of the co-op option have pointed to, has faced some criticism, according to The New York Times: “Group Health is a rare survivor among the hundreds of rural health insurance cooperatives that formed in the 1930s and 1940s in the face of fierce resistance from organized medicine.” In the 1980s, it ended the practice of charging all enrollees the same premiums, regardless of their health status, and it has since introduced deductibles, co-payments and out-of-network benefits. Only seven-tenths of 1 percent of enrollees voted in the last board election. Group Health’s 2007 informational tax filing lists tens of millions in government grants and double that in government revenues from programs like Medicare and Medicaid. Additionally this coop owns an insurance company affiliate that sells - guess what, the much vilified Medicare Advantage products.

However you package it: the history is bleak. Either cooperatives fold, or they sell-out.

But if history says that health co-ops fail, can’t we learn from those mistakes and find a way for them to succeed? Many skeptics think if cooperatives got strong government backing—and went national, instead of regional—they might have a fighting shot. That will take tens of trillions of dollars over the next 10-15 years. And likely drive private completion out of the market.

My bet: Democrats will cave on the public option and accept the co-op approach. And I don’t think they’ve read their history. They will not remember that if they give in to co-ops like the ones we’ve seen in the past, we’ll get the same result failure.

So in exchange for the monster concession on a public option, they will create a tightly regulated, national co-op that has so many government controls it’ll be a private solution in name only. We know what happens when government controls anything. We lose!