The “co-op plan” for health care reform is barely a week old as a concept, and only days old as a draft proposal by the Senate Finance Committee, but already many have declared that it can’t work. These claims have often involved personal attacks against anyone who supports the idea.
Robert Reich has looked into the Republican soul and declared that the reason they support the idea is that cooperatives “won’t have any real bargaining leverage to get lower prices because they’ll be too small and too numerous. Pharma and Insurance know they can roll them.” That may be true. It may also be true that Republicans realize that the market has failed to solve the problem and co-ops represent a way to do that with minimal government interference. Or perhaps it is a complex mix of motivations from many different individuals with different degrees of integrity and coziness with “Big Pharma and Insurance.”
In any case, this was written a full week before a skeletal draft proposal came out, so it is hard to imagine that it is based on much beyond bias. I don’t doubt for a second that Reich could support his claim; he just hasn’t bothered to do so in anything I’ve found. He repeated his claim last week, but without further elaboration.
A few days later, Jacob Hacker delivered a similar dismissal. But to his credit, he at least provided some standards (three “B”s) by which he was dismissing the idea: “We need a national public plan that is available on similar terms in all parts of the nation as a backup. This plan has to have the ability to improve the quality and efficiency of care to act as a benchmark for private insurance. And it has to be able to challenge provider consolidation that has driven up prices to serve as a cost-control backstop.”
I’ll briefly address each of these with evidence that health co-ops could achieve these standards. Each of my examples provide some support for each of the “B”s but they particularly illustrate evidence that one of Hacker’s claims need more support.
Backup: Coop Italia is Italy’s leading marketer of packaged groceries, owned by 155 consumer cooperatives. It has a nearly 20% national market share through almost 1300 outlets, which are collectively owned by about 10% of the national population (which probably understates their true penetration because there may be only one member shopping for a household). My own research found that it provides organic fair trade products at prices that sometimes rival conventional competitors.
Backstop: Quebec funeral cooperatives have a 14% market share, and a 2006 study shows that they have had a dramatic impact on costs industrywide. In 1972 (before co-ops) funerals in Quebec cost 20% more than in the rest of Canada. By 2000, the gap had been reversed, AND co-op funerals were 40% cheaper than the provincial average and 45% cheaper than the national average. Incidentally, this industry has a counterpart in the U.S. – Seattle-based People’s Memorial Association provides dramatically better prices than the competition, and is also a part of the Funeral Consumers Alliance (a nonprofit for all sorts of nonprofit providers, whose Web site mentions that some of its members negotiate through cooperative purchasing).
Benchmark: Group Health Cooperative is directly relevant to the topic at hand. A 1984 article in the New England Journal of Medicine concluded that Group Health delivered roughly equal care for about 25% less than fee-for-service care. But what I found really interesting about this report was that it also revealed that Group Health members had 40% fewer hospital visits (over a five year period). If keeping all those people out of the hospital isn’t improved quality, I don’t know what is.
Reich and Hacker each know more about economics than ten of me rolled up in a ball, but there’s no way they did a feasibility study before making their declarations. I haven’t found any online evidence that either has particular expertise in cooperatives. It may be that they have papers on this subject somewhere, and even though they are obsolete in the wake of a game-changing federal plan, I would still love to see them.
I would also appreciate a clear explanation of how a public plan will be sustainable in the long run; we are already dealing with serious problems for Social Security and Medicare, as well as general insolvency of the government.
Before we commit to relying on cooperatives for health care, we’d better be pretty sure that they can work. Even in ideal circumstances (i.e. large states with well-organized co-op movements), it will be very challenging to pull this off, and any proposal will need some level of support for the development process. In places like Nevada or Wyoming, the challenge will be greater. I have my doubts, but the reason I’m making all this noise is that I want our decision to be based on more facts than assumptions. What is needed is an unbiased and expert study.