The entire health care reform debate can be boiled down to a single proposition, which I repeat as stated by Minnesota State Representative Linda Berglin (DFL), a leading Minnesota health care reform advocate:

Co-ops are very prevalent in our society. They've been a very successful business model, of course. We have hundreds of them here in my home state of North Dakota. We have rural electric cooperatives in 47 states.

Land O'Lakes is a cooperative. Ace Hardware is a cooperative. The Associated Press is a cooperative. We have successful cooperatives in health care. Group Health in Seattle has 600,000 people and it's the most highly rated plan in the state of Washington.

This statement has provided the germ of one of the most inane public policy initiatives to see the light of day in, well, since the last one.  So Senator Conrad has a fondness for co-ops.  They work well, he thinks, for farmers in his state.  They use them for milk, wheat, grains and what have you.  They are market-making tools, giving the individual access to a mass market and, at least in theory, some kind of leverage with regard to pricing.

            Here’s what I think:  Offering co-ops as a solution to our health insurance crisis is like suggesting that charter schools take over the responsibilities of the American university system.

            Here is why co-ops are a ridiculous solution to the need for a risk pool for the rest of us:  Starting co-ops from scratch in each of the 50 states offers a virtual guarantee that the result will be a bunch of scrawny, underfunded, underenrolled little do-nothings that have about as much of a chance of impacting health costs as your vote on American Idol has on picking the winner.

            Our crisis comes down to access and cost.  The idea of a government-sponsored plan is to provide a massive market mover of millions of participants capable of driving costs down by virtue of its sheer size.  We are talking about hardball here, and some hard math, too, especially for the insurance industry.  That is why they hate the idea.  And that is why those who hate the government (and love insurance companies??) hate the idea.

            So why would you balkanize risk pools into entities encapsulated in states?  You think some little wheat co-op in Bismark is going to dictate price to Cargill?  Experts guesstimate that is would take five years to even get all these co-ops up and running.  Each would require federal start-up funds, massive administrative infrastructure and expertise that, as of this moment, could only come from the existing universe of profit-driven insurance companies.  Once operational, these pipsqueak co-ops would have zero chance to move the markets.  Wait a minute, they are beginning to look like the perfect Republican response to health care reform!

Existing Co-ops as a Model

            Senator Conrad mentions Group Health in Seattle as a co-op model.  Minnesota has the other one, HealthPartners.  Both of these companies have strong reputations in their field.  Of the two, HealthPartners should probably get top billing because it has 1.25 million members to Group Health’s 600,000.  Both are nonprofits and both are successful in their markets.  But here is the rub:  neither has the slightest effect on health care costs.  Both have costs that are average or slightly below in their markets.  So even if we change the playing field by saying that everyone must have insurance and insurance companies must cover everyone, these model organizations could do little to lower the cost of insurance such that those who are required to buy it could afford it.

            I have nothing against the co-op structure of these providers per se.  I have met with HealthPartner’s CEO, Mary Brainerd, and know her to be an enlightened executive who would really like to provide higher quality, lower cost care to more people.  At her direction, I worked with one of her senior vice presidents on an initiative to increase the cultural competency of new practitioners facing a more diverse patient base.  That’s pretty progressive.

            HealthPartners offers its own in-network care through a system of clinics.  This fact alone makes it vastly different than the model proposed by Senator Conrad.  Its physicians are paid in part via salaries and in part through fee-for-service arrangements.  Members of record (those named as policy holders within a family) have the right to vote on candidates for the board.  About 10 percent of those eligible to vote choose to do so.  They don’t nominate candidates, however; we are not talking about a civic election here.  This is more like the proxy voting that goes on at corporate annual meetings.  That is to say, the whole exercise is functionally meaningless.  HealthPartners returns about 2 percent as profit on operations, an amount far less than would be accepted at a for-profit. 

            Another thing about HealthPartners—in Minnesota all insurance providers must be nominally nonprofit.  So they are protected from competing with some of the for-profit behemoths present on the national stage.  We still pay through the nose for health care.  And when I try to find an individual policy for my twentysomething kids, HealthPartners isn’t even a contender.

            Ace Hardware?  Ace Hardware is about co-op ownership by franchisees.  What does that have to do with health care?  Who beyond Senator Conrad thinks they represent the model we need?  Some have mentioned mutual life insurance companies, as State Farm used to be, before it just dropped the mutual ownership charade and reorganized as the shareholder-owned corporation it was destined to be.  Seriously, I don’t even know why we are talking about such outlandish propositions.  The point is, we have large nonprofit providers already, and under the current system they have done nothing to ameliorate the central problems we face, even if they do provide better than average service.  So who are we trying to kid? 

            I understand that if we outlaw the exclusion of those with pre-existing conditions, nonprofit providers could serve more people.  But that will not lower premiums.  And if people can't afford the premiums the rest doesn’t matter.  As one executive of a co-op health care provider said on CNN the other day, “We’re not charity.”  Indeed.  Get it through your thick head, Senator Conrad, these are not your grandfather’s co-ops.

One Big If—a National Co-op Model

            If—and this is a big if—we were to look at a co-op model, why wouldn’t we form some kind of national co-op or charter corporation?  I am talking about one, humungous co-op, one step removed from the government.  Think FannieMae, FreddieMac, or GinnieMae, only with co-op governance.  And yes, I know, some of these federally-chartered companies have been subject to scandal.  I am not advancing the notion of a panacea here, I’m just sayin.’  If a national co-op is too monolithic, how about three national co-ops, each with a specialty focus, that would compete with each other and with the existing array of heath insurance offerings?

            I’ll go you one better.  Let’s opt for a true non-profit health plan, a 501(c)3, governed by a board that represents the interests of those it serves, the policy holders, funded by premiums and government contracts—government funding to subsidize the cost of premiums for the least fortunate among us. But even this option is an untested proposition, while a nonprofit government-owned corporation along the lines of Ginnie Mae would at least have some kind of track record as a model.

Final Answer Please

            So we come to final answer time.  What’s it going to be, Blue Dogs?  Will you support a solution at one remove from the government itself, knowing Republicans will oppose the move with every fiber of their corporatized beings?  Or are you really trying to sell us fake reform?—some cockamamie idea that we won’t really figure out for what it is until too late?

            The infatuation with co-ops reflects a naïve, romantic notion of some frontier “let’s stick together” mentality that has nothing—nothing—to do with the realities of the health care marketplace.  You can bet health insurance CEOs are laughing right now, incredulous at their good fortune that some hayseed senator from North Dakota would have handed them such a perfect canard with which to deflect real reform.