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On Co-Ops

As an addendum to the last post, since Jane Hamsher and Firedog Lake accused me of being part of the "Co-Op Squeeze Play," I should probably say a word on the proposal.

I'm not an opponent of the co-op idea. So far as alternatives to insurance go, the more the merrier. But as a midpoint between a real public option and private insurance, it's the most bankrupt sort of compromise. Writing policy is, in theory, about finding persuasive arguments and putting them into legislation. But the the co-op compromise takes two important and opposing arguments and refuses to choose between them.

Liberals say that the private insurance market is a fatally flawed enterprise and it needs a strong, public competitor with entirely different incentives that can act, essentially, as an alternative. The idea is that the public plan introduces so much competitive pressure that it reshapes the insurance market or simply takes over. Conservatives, in contrast, say the private insurance market is, if not just fine, then simply in need of some tweaks, and we should continue to put our faith and trust and energy into it.

One of these arguments is correct. One of them isn't. But a co-op plan doesn't join the two theories. It's just off to the side somewhere. It is neither an alternative to the current market nor a tweak to the way private insurers operate. It's not even clear if it'll work. If the conservative approach to this question is right, then the legislation should take that seriously. If the liberal approach is right, then the final bill should reflect it. But making policy is about choosing the right approach to hard problems. The co-op compromise doesn't do that.

By Ezra Klein  |  July 29, 2009; 3:30 PM ET
 
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Comments

Jane Hamsher is a joke. She was probably upset that you haven't bought blog ads on her site or something. It's all about her bottom line.

Posted by: BHerring | July 29, 2009 3:53 PM | Report abuse

As I understand it, the current versions of public plans are supposed to be self funding and exist totally on payments taken in. Could someone explain to me the difference between this and a co-op?

Posted by: spotatl | July 29, 2009 3:59 PM | Report abuse

They did have a nice picture of you, though. Although I didn't realize you were so short...

Posted by: davestickler | July 29, 2009 4:04 PM | Report abuse

Hey, if credibility is the price of getting to ride on the President's shoulders, outside of your office while, while dressed like Punky Brewster, then that's a small price to pay.

Seriously though, even if I agree with Jane Hamsher 95% of the time, it's stuff like this that caused me to take FDL out of my RSS reader. As best as I can understand her argument, by trying to give an academic analysis of the relative merits of different aspects of the bills, you're undermining the bargaining position of those who want a public option. That might be a valid argument against someone who is actually negotiating the bill. After all, if you want to settle at 30, you should open at 100. But it seems kind of silly to use against someone who is trying to inform.

Posted by: jleaux | July 29, 2009 4:29 PM | Report abuse

Right, while I'm pretty skeptical of the co-op idea, if it's a national co-op, and receives startup funding from the federal government, is is substantively different from Schumer's "weak public plan"?

Meanwhile, (from what I learned from your blog) I've been making the same argument about the public plan and the exchange - a weak public plan on a strong national exchange is better than a strong public plan on a weak, restricted exchange.

Posted by: Isa8686 | July 29, 2009 4:34 PM | Report abuse

How does the Government get away with screwing things up and then using their own mess as an excuse to exert more control of our daily lives?

The main problems with private insurance are the Government's fault. Health insurance is attached to employment because of the tax code and Government regulation. Private insurance premiums are expensive because they partially subsidize the below market reimbursement rates of Medicare and Medicaid. Regulations that restrict interstate competition also inflate private insurance premiums. So does mandating one size fits all policies and forbidding risk adjusted premium rates. How can you even judge private insurers fairly given these restrictions?

And now you want private insurers to compete against a taxpayer subsidized entity that doesn't have to worry about losses and waste and you want them to comply with an even longer list of restrictive regulations?

There are more equitable ways to referee an economy and there are better ways to help poor people.

You haven't actually thought any of this through. You're just mindlessly spewing leftist babble like a zombie. You should stick to food columns.

Posted by: fallsmeadjc | July 29, 2009 5:08 PM | Report abuse

I have zero problem with a public plan that is given initial funding but then is on its own after that. I simply don't think that our politicians can set something up that both covers what people consider to be "fair" and charges only what people consider to be "fair"- I think its absolutely inevitable it fails. The question to me is what happens when the government plan becomes insolvent. If its simply bailed out then call it a subsidized plan up front but ot me thats awfully dishonest. If you aren't going to bail the public plan out then call it a co-op so there is less temptation.

Posted by: spotatl | July 29, 2009 5:37 PM | Report abuse

From the libertarian/small gov't perspective there are very important differences between a public plan and co-ops. The biggest by far, is that a public plan would be controlled and administered by the federal government and likely would be open to congressional meddling. A co-op would be administered by an independent board of directors unaffiliated with the federal government. Huge differences.

I agree with ezra that co-ops are pointless, but the difference is that I think that's a good thing.

Posted by: mbp3 | July 29, 2009 6:42 PM | Report abuse

"Liberals say that the private insurance market is a fatally flawed enterprise and it needs a strong, public competitor with entirely different incentives that can act, essentially, as an alternative."

No, that's not what liberals (like moi) say; that's what center leftist like you say. Here a few things that liberals say:

The goal of a well run corporation is to make money for shareholders. In the case of health insurance companies this is in conflict with providing good efficient health care to the country.
The for profit insurers have learned that the way to get a high stock price is to have a low Medical Loss Ratio which is the percentage of inflow (premiums) paid out in medical benefit to patients. Notice that they consider medical benefits as "losses."

They do this in two ways. They make the numerator smaller by making it difficult for doctors and patients to collect. They make the denominator larger by obscene executive compensation, high profits, billions spent processing complicated forms they require of physicians and patients, and still more billions spent on fighting with doctors and patients over coverage and payments. See the SEC fillings for the Medical Loss Ratios and a recent Commonwealth Fund Study for the difficulty patients and physicians have with coverage and payments.

Because all of the current proposals try to fix health care but keep the cancer of for profit insurance, they are horrendously complicated. They run about 1,000 pages. HR676, Medicare for All, not only gives good health insurance to everyone, it solves the problems of pre-existing conditions and the situation where loss of job implies loss of health insurance. Furthermore, it costs less than any of the current proposals because it will save us $500 Billion each and every year by the elimination of the high overhead (= 1 - Medical Loss Ration) and huge compliance costs of both physicians and patients. Also it will make it easy to crack down on the wasteful "marketing" of drug companies. In fact, studies have shown that we can get all this and it will not cost us anymore than we are already paying and probably less.

HR676 is 70 pages long.

Posted by: lensch | July 29, 2009 7:24 PM | Report abuse

Ezra,
I'm going to have to agree with lensch that you are engaging in a little bit of sleight of hand in saying that the public option plan as currently proposed is what "liberals" advocate. I don't call myself a "liberal" but most who are left of center actually support public insurance not as an option but as the default for basic insurance. It is too bad that the debate has been cast in terms of how politicians have sculpted the debate without reference to international standards of how to structure universal insurance. In any case, I support single payer with optional supplemental insurance for things like orthodontics or private rooms. So the rational response to the failures of the private market in insurance is not to construct a public option that is modeled on the marketplace model of insurance but one where there is a default insurance that covers almost all basic medical needs, either supplied by the government or by heavily regulated non-profit or for profit entities with risk-pooling and subsidies for the poorest.

Posted by: michaelterra | July 29, 2009 9:19 PM | Report abuse

Yeah, what the last two comments said.

Liberals in good standing actually say that the private health insurance market is fatally flawed, and should either be shut down, forced to run as a non-profit under heavy regulation, or have their remit sufficiently curtailed that your premium covers fresh flowers and cable in your hospital room, or reimburses your copays.

I'm in the "shut down" camp. They've demonstrated sufficient bad faith over the past decades that they can't be trusted in the supplementary role that they occupy in France (or the UK, for that matter).

Your definition, Ezra, really doesn't help against the general charge that you're ready to jump on board a weak bill just because it promises jam tomorrow.

Posted by: pseudonymousinnc | July 29, 2009 10:38 PM | Report abuse

How come Fed ex runs circles around the US Post office? The US Post office is the public option to send mail. The US post office gets tax payer money because it runs at a huge loss. If Fed Ex ran at a loss, it would have to borrow money from a bank and pay interest. A bank may say, no, you can't get any more funds. You are bankrupt. This is what will happen to private insurance companies. Like Fed Ex, IC are more efficient and offer better quality service, yet they can't compete against a public option like the Post office.

Posted by: HayeksHeroes | July 30, 2009 1:08 AM | Report abuse

HayeksHeroes, when's the last time you mailed a letter with FedEx? Bet it cost a lot more than 45 cents, or whatever it is the PO charges today.

No private mail carrier will touch regularly delivered letters. Only USPS will do that efficiently and cheaply.

Posted by: KathyF | July 30, 2009 1:38 AM | Report abuse

Groveling triangulation at its best. Ezra, you look to have a promising career as the heir to George Stephonopolous in the O White House.

You know quite well why "liberals" view the public plan as significant, it is effectively more efficient because it has no interest in earnings. As such, programs like are VA have better costs and provide better service than their insurance competitors. So please stop misrepresenting an idea that is proven the world over.

As a journalist, you are more EJ Dionne and less Seymour Hersh. I choose the latter and will likely stop patronizing this site.

Posted by: dside | July 30, 2009 1:40 AM | Report abuse

KathyF- fedex and UPS are prohibited by law from competing against USPS in that area.

Posted by: spotatl | July 30, 2009 7:12 AM | Report abuse

KathyF, spotatl is correct. Fedex and UPS are prohibited by law from delivering non-urgent letters and using mailboxes. This suggests that the private carriers would do it more cheaply and efficiently, otherwise why would USPS need the legal protection from competition?

And Ezra, you can oppose a public plan and think that the insurance market is in need of serious regulatory changes (for instance, the removal of community ratings or removing the option to deny coverage). The idea that it the options are public plan or nothing or just "small tweaks" is a false dichotomy (trichotomy?) and incorrect framing of the debate.

Posted by: moziek | July 30, 2009 9:03 AM | Report abuse

In fairness to Hamsher, Ezra was a bit breathless and over-the-top when he introduced the co-op idea to readers. I felt that because I was a member of Group Health, the now-famous PNW co-op, for 35 years.

In fairness to Ezra, he was not slow to see some of the downside and quickly took a "just the facts, ma'am" approach to the whole idea. And his description here is spot-on.

Posted by: serialcatowner | July 30, 2009 10:08 AM | Report abuse

moziek--You're saying that if FedEx and UPS and DHL and whoever else were permitted to carry letters, they'd be able to do it cheaper than the federal government's monopoly? Seriously?

How many mail carriers would walk past my house every day? How much would they earn, in total? How many trucks would they drive, and how fuel efficient would they have to be--granted, they would only be carrying 1/3 or so of the weight in letters?

Does. Not. Compute.

Posted by: KathyF | July 31, 2009 2:45 AM | Report abuse

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