Health care co-ops: a placebo or a cure?

A federated system of health care cooperatives could serve as the delivery mechanism for a national health care system in America, if cooperative experiences in Minnesota, Wisconsin and Washington state can be duplicated nationwide.

That remains the big “if.” Little information on the nuts and bolts of what might emerge from the so-called “cooperative option” for a national health care plan has come from the Senate Finance Committee in Washington. Sen. Kent Conrad, a Democrat from North Dakota, is the leading advocate within the committee, and for good reason; his constituents are as actively engaged in co-ops as citizens of the states mentioned above.

This is the second article in a series. Click here to read part 1.

Successful, working health co-ops were identified and described in part one of this two-part series. None of these models would work as a national health insurance program by themselves. But all could be effective, independent partners in a national health care cooperative system.

A hitch to the cooperative models cited in part one is also their strength. They are cooperatives, and that means they are voluntary associations of members. As such, they are not a logical substitute for universal health care nationwide or statewide, although they could be within a community or region.

Looking at what these co-ops do well, they could be converted and incorporated into a national system only if they are supported by federal legislation designating them as a surrogate for a national system. Without enormous government support, they cannot provide the service associated with universal health care programs common in other major industrialized nations of the world.

But that isn’t impossible. Again looking at backyard experiences, local and regional health care co-ops could be integral parts of a national co-op system in the same way local grain elevator associations and regional dairy groups are both independent cooperatives and federated owner-members of larger co-ops such as CHS Inc. (Inver Grove Heights) and Land O’Lakes (Arden Hills). In much the same fashion, regional cooperative farm lending organizations like AgStar at Mankato and United FCS at Willmar are federated members of the huge AgriBank FCB in St. Paul.

How feasible a cooperative option is for serving America’s universal health care needs hinges on where public policy goes from here. There is nothing like CHS, Land O’Lakes and AgriBank now linking and bringing market power to the health co-ops.

Political Paranoia: A pre-existing condition
It’s been nearly 64 years since President Harry Truman proposed a national health care plan. His message to Congress in November 1945 spelled out every weakness in America’s health system then and since.

Only part of Truman’s recommendations, that being Medicare for senior citizens, was eventually adopted 20 years later under President Lyndon Johnson. President Barack Obama has called on Congress to finish what Truman and his congressional allies started.

Anticipating the opposition, Truman told Congress that Americans are the “most insurance-minded people in the world. They will not be frightened off from health insurance because some people have misnamed it ‘socialized medicine.’ I repeat – what I am recommending is not socialized medicine.” (Truman, referenced below.)

But then as now, massive campaigns to scare people silly created enormous odds against universal health care. Marketing fear for profit or political advantage didn’t start with Lon Chaney and didn’t end with Dick Cheney. By various accounts from lobby registrations, special interests are spending either $1.2 million or $1.4 million per day to stall health insurance reform (Hamburger, and others.)

Partly for these reasons, Senator Conrad and other congressional leaders are exploring a “cooperative option” that might achieve national health insurance goals. Minnesota 2020 has warned that a durable economic recovery from the current national recession most likely hangs in the balance. Strong evidence suggests we cannot crawl back onto the road to prosperity unless health care costs are controlled and lifted from the backs on business and entrepreneurs.

“A cooperative approach is superior to the current (health care) delivery system,” said Mark Glaess, general manager of the Minnesota Rural Electric Association trade group for electric co-ops.

“Having said that, imposing a co-op on the current system doesn’t improve the delivery system all that much given its likely imitation of the current system,” Glaess added. How that would work on a national scene is uncertain. Co-ops often work best, Glaess said, when they have a limited number of members; but he said limited memberships can also hinder economies of scale.

Rationalizing these problems with policy makers will largely fall to the National Cooperative Business Association (NCBA) in Washington that represents the nearly 30,000 cooperatives of all industries and sectors currently in existence. It, in turn, will need to draw heavily on Upper Midwest experts who know how to operate successful health co-ops, such as HealthPartners’ chief executive Mary Brainerd; and Cooperative Network president and chief executive Bill Oemichen.

Oemichen, a former state official for Republican and Democratic governors in both Wisconsin and Minnesota, is the nation’s most knowledgeable person about starting health co-ops. In a relatively short time, he said, new health co-ops for farmers and steelworkers in Wisconsin have produced better premium rates than individuals could access on their own.

Unanswered Questions
Amy Fredregill, Minnesota Division vice president of Cooperative Network, said the NCBA has recognized that the “cooperation option” is hypothetical until more information emerges from its supporters in Congress.

It is NCBA’s view, she said, that whatever system may come out of legislation, health care cooperatives need to be legitimate cooperatives. That is, they must be democratically governed by members. And profits – or surplus revenue – should either be used for improving the company for members’ benefit or returned as dividends to members.
  
At the same time, NCBA says these questions need answer: What laws will regulate health co-ops? Will these federal standards supersede state law? Will new co-ops be seeded by government grant, and how long will they have to get started and pay back any government loans?

Going Forward
The cooperative models now in place were designed to work for their members in the absence of a national health care system and in the void of free market forces. They serve their members as purchasing agents or deliverers of medical services even though special interest legislation prevents co-ops from using market power to negotiate drug prices and shop around for drug supplies.

Finally, and this is often overlooked, the co-ops make a wonderful workplace for medical professionals who are called to practice medicine and don’t want to split their time between medicine and running a business.

At the federal level, some regulatory body must be created to support development of the co-ops in the vast majority of states where none now exist. Those states also lack local expertise to start and operate such enterprises. Included in this federal service, agency or administration would be loan or grant programs to assist the startup of co-ops in the way rural utilities are supported, or the way the Farm Credit System uses its federal charter to access bond markets.

At the state level, policymakers must determine how, and if, state health programs might fit into a cooperative system even though taxpayer costs for supporting participation will not likely be reduced. And secondly, states like Minnesota must be watchful that national “average” standards for health care don’t lessen what we have.

This latter is no small matter. The Mayo Clinic and University of Minnesota set standards for medical diagnostics and treatment. HealthPartners sets and constantly raises the bar on health care delivery.

We have much to gain if America adopts a rational health care system built on or including co-op options. At the same time, raising the bar nationally should not inadvertently lower standards and services in states like Minnesota, Wisconsin and Washington.

References and Suggested Reading

Cooperative Network. “COOPCARE.”
 
Egerstrom, Lee. “Entrepreneurship and Health Care.” Minnesota 2020. Aug 19, 2009.

GAO Report: Cooperatives Offer Small Employers Plan Choice and Market Prices. March 2000.

Hamburger, Tom. “Obama gives powerful drug lobby a seat at healthcare table.” Los Angeles Times. Aug. 4, 2009.

Truman, Harry S. “192. Special Message to the Congress Recommending a Comprehensive Health Program.” Nov. 19, 1945. Harry S Truman Library and Museum: Public Papers of the Presidents.