Public option and cooperatives

Today the New York Times reported that Obama is ready to drop the public option in order to gain Republican support for health care reform:

The White House, facing increasing skepticism over President Obama’s call for a public insurance plan to compete with the private sector, signaled Sunday that it was willing to compromise and would consider a proposal for a nonprofit health cooperative being developed in the Senate.

The “public option,” a new government insurance program akin to Medicare, has been a central component of Mr. Obama’s agenda for overhauling the health care system, but it has also emerged as a flashpoint for anger and opposition. Kathleen Sebelius, the health and human services secretary, said the public option was “not the essential element” for reform and raised the idea of the co-op during an interview on CNN.

For those who have learned how to read the bourgeois press, there is a phrase that sticks out like a sore thumb: the public option has “emerged as a flashpoint for anger and opposition”. Now when you read about opposition, the first thing that springs to mind is public opinion polls. For example, if the New York Times reported that there was widespread opposition for charging admission to Central Park, I wouldn’t need to check any poll numbers. I would assume that this was a fact.

But I seemed to remember a different take on what the public thought. Sure enough, this was what I found. A poll conducted by the Wall Street Journal and NBC news in mid-June asked respondents: “In any health care proposal, how important do you feel it is to give people a choice of both a public plan administered by the federal government and a private plan for their health insurance––extremely important, quite important, not that important, or not at all important?” This was the reply:

Extremely important	41
Quite important	35
Not that important	12
Not at all important	8
Not sure	4

A month later it was the same story, even if the numbers had slipped, largely a function of White House dithering:

A majority of Americans are in favor of having a public, or government-run, option in the US health care system as proposed by President Barack Obama, a poll showed Tuesday.

Fifty-two percent of 2,276 US adults surveyed online by Harris Interactive between July 9 and 13 said they were in favor of a government-run health plan, while just 30 percent were against.

Okay, the only conclusion you can be left with is that even after all the noisy protests, there was a solid majority supporting a public option. So what happened to allow the NY Times, newspaper of record, to report that there was opposition?

Essentially, the N.Y. Times was taking the side of the insurance industry on this question and failed to qualify the nature of the “opposition” mentioned in the second paragraph of their article. In effect, they were doing the same thing that the television networks used to do during the Vietnam antiwar movement. The lead-in to the coverage would be something like “People took to the streets today to both protest the war in Vietnam and support President Nixon.” It didn’t matter to CBS news that there were 500,000 antiwar demonstrators and 5,000 Nixon supporters in the streets just as long as they could frame the debate on the war as having equal weight on both sides. It is this kind of crap that has turned Jon Stewart and Stephen Colbert into a primary source of news for young people and to put circulation numbers for the N.Y. Times into a nose dive. People are just sick and tired of the distortion and the lies.

In order to cover his ass, Obama has raised the possibility of replacing the public option with insurance co-ops, a seemingly progressive approach that might mollify those liberals and even erstwhile radicals like Carl Davidson who still hold out hope that we are entering a new New Deal. In my small town, there was an insurance co-op that reflected the socialist ideals of many of its Jewish participants—something I wrote about in a piece titled “Borscht Belt reds”:

The agrarian socialism of these settlers was very much influenced by the Utopian experiments of the 19th century. When the 20th century arrived, the farmers retained their left-wing culture but began to identify with the cooperative movement of the German Social Democracy instead. When they couldn’t get fire insurance from anti-Semitic insurance companies, they started their own cooperative fire insurance company. When they needed cheap grain to feed their poultry, they started a cooperative feed-mill that bought grain directly from the National Farmers Union during the 1930s.

The feed-mill was down the road from my house and used to go down there on summer afternoons with my b-b gun to shoot at pigeons. (Yes, I have some of Sid Caesar’s personality disorders, I’m afraid.) Everybody referred to it as the “coop” but I thought that this had something to do with chicken coops rather than politically-inspired cooperatives.

My best friend Bobby Wasserman’s father Harry was head of the Fire Insurance Co-op. While browsing through Steinberg’s book, I found a statement by Harry explaining the goals of the Co-op:

Cooperation does not charge that our profit system of production and distribution is malevolent, but does contend that it is bungling and extravagant because it has no other way, other than by guessing, to measure, in advance of production, the kind, quantity and quality of goods which consumers want. So it produces more or less in the dark and tries to dispose of the products by acute competition, enormously expensive advertising, high pressure salesmanship and the battering down of consumers’ sales resistance. Over-production and recessions necessarily occur, in cycles; and consumers pay all the bills–all the costs and all the profits.

But this is not likely to be the outcome of cooperatives spawned by a White House that has shown deference to the health insurance industry on a par with its Republican predecessor. For the most astute analysis of health care reform, I urge my readers to check in regularly on veteran journalist James Ridgeway’s blog. This is what he had to say about cooperatives:

Much is being made of the fact that the co-ops would be non-profits. But really–so what? Almost half of Americans with private health insurance are currently covered by non-profit plans.  As a whole, they haven’t proven themselves much—if any—better or cheaper than the for-profit insurers, and they still fail to cover 50 million Americans.

The giant Kaiser Permanente is a non-profit. And while some of them have privatized, many of the Blue Cross-Blue Shields are still non-profits as well—and, in fact, got started as co-ops. Some of these non-profit insurers are well known for paying huge executive salaries and hoarding huge reserves, while charging the same high rates and offering the same rationed care as private plans—and enjoying tax exemption to boot. One report by the Consumers Union found the non-profit “Blues” stockpiling billions in cash even as they raised premiums and co-pays.

Supporters of the co-ops also insist that they will offer real competition to the private insurers, and bring down costs for their members by giving them bargaining power with health care providers. Tim Foley made short work of this claim in a post on Change.org:

Former Labor Secretary Robert Reich articulates well most people’s gut-reaction: “Nonprofit health-care cooperatives won’t have any real bargaining leverage to get lower prices because they’ll be too small and too numerous.” Conrad’s answer to that has been consistently to say, “But you know, one of the interesting things when we talk to experts, is that they say critical mass is probably around 500,000 members.” Let’s skip over the difficulties in finding half a million people for a co-op. Let’s just say that 500,000 non-profit customers doesn’t change the game. Know how I know? Because, as pointed out by Bob Laszewski, Conrad’s home state of North Dakota has 475,000 people enrolled in the not-for-profit North Dakota Blue Cross Blue Shield. That’s not just competition–it’s a monopoly, 60% of the market. Guess what? It hasn’t helped. Premiums jumped 74% in the past seven years.

In fact, as the State of the Division blog  points out, it’s conceivable that private, for profit companies could “get in the back door” of the co-op plan: What’s to stop a co-op from actually licensing itself out to a private insurance company–or hiring one to administer its fledging business? The publicly traded (and scandal-ridden) Wellpoint is currently the largest Blue Cross and Blue Shield licensee. (In an instance of true bipartisanship, Wellpoint’s Board of Directors includes the wife of Democratic Senator Evan Bayh, as well as George W. Bush’s uncle.)