Are insurance co-ops a reasonable alternative to the public option?

Source: The Washington Post

Dan Roam’s visual presentation of the issues involved in health care reform lists three possible options for health insurance: Private insurance, non-profit insurance exchanges or co-ops, and a government insured plan (the “public option”). There’s been much media speculation lately that the public option is now out of the picture. There are also rational voices who believe this conclusion may be premature.
There are many commentators who argue that insurance co-ops are an inadequate alternative to a public option. For example, Nobel Prize winning economist Paul Krugman:

[T]he supposed alternative, nonprofit co-ops, is a sham. That’s not just my opinion; it’s what the market says: stocks of health insurance companies soared on news that the Gang of Six senators trying to negotiate a bipartisan approach to health reform were dropping the public plan. Clearly, investors believe that co-ops would offer little real competition to private insurers.

Clinton Labor Secretary Robert Reich calls co-ops a “bamboozle”:

Nonprofit health-care 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’s why the [Democratic Senator Kent] Conrad compromise is getting a good reception from across the aisle.

MediaMatters includes, as #10 on its list of health care myths, “Co-ops are an adequate substitute for a public option.”

Numerous media figures and outlets have characterized Sen. Kent Conrad’s (D-ND) cooperative health insurance proposal as a “compromise,” “hybrid,” or bipartisan “alternative” to a public insurance option without noting the view by progressive experts that a public option is necessary for health care reform to be successful and that any departure from that will result in the failure of reform efforts. These experts dispute suggestions that Conrad’s co-op proposal is a plausible midway point between competing methods of addressing health care reform, because, they say, it precludes a fundamental component of effective reform: bargaining power against the health care industry.

From euphoria to diminished expectations

Insurance co-ops are a compromise to placate those who label the public option socialism or worse. Clearly there are solid, rational economic arguments in favor of the public option, but the public debate in America this summer is far from rational.
This is a major disappointment for supporters of President Obama. Hopes for the possibility of real change following his election had been high.

What a change from just six to nine months ago. During that period, from the wake of Barack Obama’s victory through the first 100 days, liberal optimism was higher than it’s been in this country for 40 years. One could believe, on a good day, not only that America would pass healthcare reform and climate change bills (that’d be the easy part), but that Israelis and Palestinians and Iranians and Syrians and Indians and Pakistanis and North Koreans and you-name-it just might all wake up one day and text one another: you know, Obama’s win suddenly makes us aware of how silly we’ve been all these years. Let’s grow up and make peace.

This is from Michael Tomasky’s excellent article in The Guardian. He provides some historical perspective on the difficulties of health care reform and then concludes:

So the interesting question of the near future will be: can the Obama movement go from the euphoric phase, in which everything seemed possible, into a more realist phase in which people come to terms with the very difficult and far less exhilarating tasks associated with governing, and the often dissatisfying victories that result from the legislative process? …
It’s been a rocky month or six weeks, no denying it. The White House has made its share of errors. At the same time, I don’t think anyone could have anticipated the rightwing response to the healthcare proposals. Forceful opposition and lies here and there, sure. But death panels and armed citizens coming to presidential rallies and comparisons to Hitler and polls showing that more than half of Republicans aren’t convinced Obama is even an American citizen? No one saw this coming.
So now, liberals have to fight hard for something they’re not terribly excited about. A health bill will likely have a very weak public option or it won’t have one at all. But liberals will have to battle for that bill as if it’s life and death (which in fact it will be for thousands of Americans), because its defeat would constitute a historic victory for the birthers and the gun-toters and the Hitler analogists. In the coming weeks, building toward a possible congressional vote in November, progressives will have to get out in force to show middle America that there’s support for reform as well as opposition, even though they may find the final bill disappointing. …
It takes years, which is a bummer, in a political culture that measures success and failure by the hour. The end of euphoria should lead not to disillusionment, but to seriousness of purpose.

Health care can’t wait

Health care can’t wait because there are millions of uninsured Americans, because too many families go bankrupt due to medical costs, and because the rising cost of health care threatens the economic prosperity of the country.
The public option can’t wait because, as a political reality, this may be the last chance for reform for a long time. As Jacob Hacker and Rahul Rajkumar conclude in a New Republic article:

“If the disaster starts to happen, we can always set up the public plans later, no?”
In theory, yes, we could just set up a public plan later. But this strikes us as naive. This is a once in a generation chance to pass health care reform. Does anyone really think that we’ll get another shot at this in the next ten years?

Related posts:
Why is it so hard to reform health care? The issues are complex
Without the public option, it’s not health care reform
Health care reform: Politics and substance
Health insurance industry to consumers: You’re financially responsible for your behavior
Health Culture Daily Dose #11: Health care reform