By Kip Sullivan, JD
Advocates of a “public option” have been extremely critical of the health insurance cooperatives proposed by Sen. Kent Conrad last June and incorporated in the draft legislation released by Senate Finance Committee Chairman Max Baucus on September 16. “Option” advocates claim the co-ops either will not survive or will be so small they will be unable to force the insurance industry to lower its premiums. This is legitimate criticism.
But “option” advocates should level the same criticism against the “option.” The “option” is no more likely to survive and thrive than the co-op program. A comparison of the legislation that would create “option” programs with the provisions in the Baucus bill that would create co-ops indicates there is only one reason to be less pessimistic about the “option,” namely, the “option” legislation requires that someone (the Secretary of the Department of Health and Human Services) attempt to get the “option” program going. There is no similar requirement for the co-op program.
Review of the “option” and co-op proposals
I have described the “option” programs in the Senate Health, Education, Labor and Pensions (HELP) Committee bill and HR 3200 in previous papers.
The Senate HELP Committee “public option” will be multiple “options,” and these will be run by insurance companies
“Public option” advocates circle their wagons around two useless sentences in HR 3200
HR 3200’s “public option” will not resemble Medicare
As I demonstrated in those papers, there is no meaningful difference between the “options” in the two bills. Both bills use vague language and provide few details. Both authorize the Secretary of Health and Human Services (HHS) to hire corporations to set up insurance programs (“options”) that will sell health insurance to the non-elderly. The “options” will be available for sale to only a small percent of the population, namely, that portion which will be eligible to shop for insurance within one-stop-shopping centers called “exchanges” and which will be eligible for subsidies. Both bills call for an “option” program that will consist of numerous insurance companies, not a uniform national program like Medicare. Neither bill gives the Secretary the tools necessary to guarantee that these “option” insurance companies will survive in most markets, much less become large enough to influence the behavior of the insurers in their areas.
The description of the co-ops in Sen. Baucus’ draft bill, which is entitled America’s Healthy Future Act of 2009, is just as vague as the “option” language in the HELP Committee bill and HR 3200. The co-op program – which the Baucus bill calls the Consumer Operated and Oriented Plan program – is described in a two-page section that begins on page 36. Here are the features of the co-op program described in these two pages:
- Six billion dollars will be available to co-ops around the country as either loans or grants that will be authorized by the Secretary of HHS. In making these loans and grants, the Secretary is to give high priority to ensuring that at least one co-op begins in each state and the District of Columbia.
- Co-ops must be non-profit.
- They cannot be sponsored by government agencies or insurance companies.
- “Substantially all” of the insurance it sells must be to small employers (as defined by state law, typically employers with 50 or fewer employees) and to individuals.
- Co-ops may not band together to negotiate with providers, but may band together to negotiate with businesses selling goods and services (such as computers and actuarial services) related to the co-ops’ administrative tasks.
One difference between the co-op and “option” programs
As sparse as this description of the co-op program is, it is no sparser and no vaguer than the language describing the “options” in the HELP Committee bill and HR 3200. In none of the three bills are readers told who will step forward to create the co-ops/”options,” how they will do that, or what the co-ops/”options” will look like. We know only that the Secretary will be making loans (and in the case of the co-ops, grants as well) to unidentified entities which will in turn create co-ops/”options.” Will the people who set up the co-ops/”options” create limited networks of clinics and hospitals, or will they let patients see any provider they want? Will clinics and hospitals agree to work for the co-ops/”options” for less money than they get from the insurance industry? There is no point in asking these and numerous other questions about the logistics of creating the co-op/”option” programs and what they will look like because the bills offer no answers.
There is one difference between the co-op provision in the Baucus bill and the “option” provisions in the HELP Committee bill and HR 3200 that could turn out to be significant. The Baucus bill does not require anyone to attempt to create co-ops, while the HELP bill and HR 3200 instruct the Secretary of HHS to hire corporations to create “option” programs throughout the country. But this difference is probably meaningless. Under all three bills as they are currently written, the task of creating insurance companies from scratch will be so difficult (this will be true whether we call the insuring entities “co-ops” or “options”) that it may not matter whether someone is ordered to attempt it or is merely encouraged to do so. To use a military analogy, if Hamburger Hill cannot be taken, it doesn’t matter whether we put a general in charge of ordering the troops to storm the hill or we simply wait for soldiers to rush up the hill on their own initiative. In either scenario, the hill remains in enemy hands.
The mote in Baucus’ eye
“Option” advocates do not share my conclusion that there is little difference between the Baucus co-ops and the “option.” The leaders of the “option” movement, including Sen. Jay Rockefeller, Howard Dean, and Jacob Hacker, excoriate the co-op proposal and, in the same breath, lionize the “option.” The following statements by Sen. Rockefeller illustrate the “option” movement’s tendency to project onto the co-op proposal the very criticisms they should be leveling at the “option”:
These little tiny entities [referring to the co-ops] that will be starting up in states where there have never been any before — remember, there aren’t any in the South, there aren’t any in the Northeast, there aren’t any in the Mid-Atlantic, there aren’t any in the Southwest. They’re only in the upper Midwest and the Northwest. They’re not a good idea. They’re untested. They are unlicensed. They’re unregulated. They’re unstudied.
Why would we even think about putting them in as a control on this massive insurance industry instead of the public option? (Interview with Ed Schultz on MSNBC, July 30 http://www.dailykostv.com/w/002004)
I feel very strongly about that [the “option”] as a discipline on the private health insurance market. The public health insurance option doesn’t have to make a dime. It doesn’t have to make Wall Street happy or shareholders happy. It just has to sell a product at cost. That will put pressure on private insurance companies to bring down their premiums. … My staff has done extensive research on co-ops and everyone says they can’t do health insurance. The best health care co-op exists in the state of Washington, and both of Washington’s senators are adamantly for a public option. That ought to tell you something. (Interview with Ezra Klein in the Washington Post, September 18 http://voices.washingtonpost.com/ezra-klein/2009/09/whats_wrong_with_the_finance_b.html).
Rockefeller’s criticisms of the co-op model – the co-ops will be very small compared with the insurance companies they will compete with, they are untested, and they have not been studied as a national model – apply with equal force to the “option.” Conversely, Rockefeller’s praise of the “option” programs – they won’t “have to make a dime,” they won’t have to “make Wall Street happy” – is equally applicable to the non-profit co-ops.
Explaining the double standard
What accounts for this strange behavior, this willingness to see no problems in the “option” proposals and to see calamity in the co-op proposal? The explanation lies, at least in part, with the failure of the “option” movement’s leadership to acknowledge that the puny version of the “option” written up in the HELP Committee bill and HR 3200 does not resemble the large version originally proposed by Jacob Hacker.
The most important difference between Hacker’s original model and the version drafted by congressional Democrats is that Hacker solved or at minimum greatly reduced the start-up problem by pre-enrolling tens of millions of Americans in the “option” before it opened for business.
If “option” advocates had acknowledged this important difference and had discussed it publicly, obvious questions would have arisen, such as, If the “option” can’t be guaranteed a large customer base on day one as Hacker originally proposed, where will the customers come from, who will recruit them, and at what cost? But the very significant differences between Hacker’s original version of the “option” and the Democrats’ version were never acknowledged by the “option” movement’s leaders. In fact, leaders of the movement have aggravated their failure to discuss the watered down version of the “option” by routinely comparing that version to the highly successful Medicare program. This combination of tactics – the failure to acknowledge how weak the Democrats’ “option” is compared with Hacker’s original version, and the constant comparison to Medicare – induced sloppy thinking by leading “option” advocates. It induced them to project onto the co-op model the doubts they should be having about the “option.” It facilitated groupthink.
Rockefeller, Dean, Hacker and their colleagues in the “option” movement are doing a great job of leveling legitimate criticism against the co-op proposal. Their criticisms are aimed squarely at the question of how the co-ops will get started and whether they will ever grow large enough to take substantial market share away from the insurance industry. But they adamantly refuse to level the same criticism at the “option.” They should tell us why. I doubt they will do that. I doubt it because there is no rational explanation for this double standard. And no one likes to admit to behaving irrationally.
Kip Sullivan is a member of the steering committee of the Minnesota chapter of Physicians for a National Health Program. He is the author of The Health Care Mess: How We Got Into It and How We’ll Get Out of It (AuthorHouse, 2006).