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We (the People) Need to Give Ourselves a “Public Option”

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At the outset of the debate over health insurance reform, two goals were established: expanding coverage and controlling costs. The recently enacted legislation expanded coverage significantly, but did little to accomplish meaningful reductions in the cost of heath care. This is a problem that we, the people, can fix without any help from the government.

Forming health insurance cooperatives is the key to achieving a dramatic reduction in the cost of health care, without sacrificing the quality or quantity of care. During the period when a public option was being stripped from the legislation, one alternative proposed by opponents of a government-run plan was health care cooperatives formed by groups of private individuals.

I suspected at the time that private health insurance companies and their lap-dogs in Congress were confident that health care cooperatives would not materialize, or that if they were formed, they would not succeed. The American people stand to save a lot of money if their confidence proves to be misplaced.

Health care costs are presently consuming approximately 16% of our GDP and the percentage is steadily rising. All of the other major industrialized countries are spending 9% to 10% of their respective GDPs. Nearly all of the difference between our costs and other advanced countries is attributable to the involvement of private, for-profit health insurance companies. Administrative costs for Medicare add 3% to the cost of the care provided. Administrative costs and profits at private health insurance companies add about 30% on average.

Do the math. If we eliminate the middlemen (private health insurance companies) we can reduce the cost of health care by roughly 27%. That would reduce the percentage of our GDP devoted to health care to somewhere around 11%.

The inclusion of a public option was favored primarily by progressives. The mandate to purchase health insurance from private companies has been taking fire from the tea-party people and other advocates of limited government who are justifiably concerned about a law that forces people to purchase insurance from private companies.

What we have here is a clear opportunity for both wings of the bird to work together the way wings are supposed to work. We can improve the flawed legislation passed by Congress and make it fly right.

Both tea partiers and progressive organizations have demonstrated the ability to organize large numbers of people. Progressives organizations, such as Move On and Health Care for America Now, should utilize their cumulative (and sizeable) organizing abilities to spearhead a movement to form a health insurance cooperative.

During the debate over health insurance reform, Health Care for America Now created a list of principles for “Comprehensive Health Care Reform.” (They are listed on the organization’s web site (www.healthcareforamericanow.org). The second principle listed is:

“A choice of a private insurance plan, including keeping the insurance you have if you like it, or a public health insurance plan that guarantees affordable coverage without a private insurer middleman.”

Health Care for America Now is among the progressive organizations that have cheered the passage of health insurance reform, having accepted the reality that, even with its flaws, the new system will be an improvement over the previous, even more deeply flawed system. There is something to be said for that point of view, but if we succeed in forming not-for-profit health insurance cooperatives, we can achieve a much more dramatic reform.

To keep health insurance as affordable as possible, a health care cooperative should work the way insurance is supposed to work — covering only major medical events. Since the plan would need to be self-funded, there is an inverse relationship between premiums and deductibles. The higher the deductible amount, the lower the premiums and vice versa. Keeping premiums low and the deductible relatively high would reduce the cost of health care significantly by doing away with any middleman in most doctor-patient interactions.

A separate type of cooperative (or plan) could also be offered with higher premiums and a very low (or no) deductible. Such a plan, modeled closely on the “Medicare-For-All” model that many progressives favored, would cover most, if not all, medical expenses. Such a plan could more accurately be described as a health care cooperative. (As opposed to a health insurance cooperative.) If such a cooperative was managed as efficiently as Medicare, it would also be an improvement.

Establishing not-for-profit health care cooperatives can be done under existing laws. We don’t need a super-majority in the Senate. We don’t even need Congressional approval. Can we do it? Yes we can

Angry tea-partiers and disappointed liberals unite We have nothing to lose but higher health care costs. We have a much-improved health insurance system to win.

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About Winston Apple

Winston Apple is the author of "Edutopia: A Manifesto for the Reform of Public Education." He is a former teacher. He has a Masters Degree in Curriculum and Instruction from the University of Missouri at Kansas City (1990). He is also a singer-songwriter and recording artist.
  • http://www.republicofdave.com Dave Nalle

    I’ve advocated health care coops for years, but apparently they are not commercially viable or capable of competing. I doubt that this will change under the new health care proposal. When writing the new policies the should have looked at coops and figured out ways to help make them more feasible, but of course, that’s not a big government solution, so of no interest to the Democrats.

    Dave

  • http://joannehuspek.wordpress.com Joanne Huspek

    What Dave said. If it makes sense, the government will have nothing to do with it.

  • http://www.republicofdave.com Dave Nalle

    The problem with health care coops is that in the process of providing incentives to HMOs they effectively directed all efforts away from other options like health care coops, which area much better option. The government doesn’t like the idea of coops because they make expensive health insurance more or less unnecessary.

    Dave

  • cannonshop

    #4 Bingo. Check Sunlight Project-the Health Insurance Industry spends millions upon millions buying the effective loyalty of major fundraisers in both Parties (The RNC and the DNC), as well as contributions to individual candidates. The ‘mandatory’ language in the Healthcare bill is an example of a sop to the industry-most people tend to stop reading after “Required to purchase” comes up-the weasel-words afterward about suspending criminal penalties is exactly that-weasel-language that opens the door for future changes to apply those criminal penalties, and is buried in the two-thousand-pages of the bill-which has to be amended to do what it ostensibly is supposed to do, though it is a superb instrument for protecting the profits and power of the Insurance Industry at the expense of taxpayers.

    A few years ago, my folks were involved in a group called “Business Exchange”, it was a ‘company’ that arranged favours between small businesses-basically a co-op. It was shut down by regulators whose basis was that the “business x” certificates (Promissary notes, basically, “I promise to render you this favour inthe future for that favour now”) were illegally competing with…Money. That they WERE money, in other words, and that it’s illegal to create money not backed or regulated by the government. One of the little impromptu civics lessons I got in my teen years, was listening to the nice man from Treasury explain to my folks why they needed to get out of it, and get out NOW.

    So there are legal minefields involved in setting up a co-op, and Lawyers don’t take an exchange of services, they want cash. The other problem with cooperatives, is that there’s a risk that the guy who’s responsible for paying the cash out to buy things that require money (drugs, tests, equipment, buildings) might take said money, and run off to the Bahamas without paying the bills (or just dash off to Cleveland with his mistress…which happened with a Farmer’s Co-op out here about twenty years ago.)

    Coops well run by people who’re committed to them work, these aren’t the average.

  • http://ruvysroost.blogspot.com Ruvy

    What Cannonshop said. Whenever the little guy tries to set up a self-help plan, government regulators come in and destroy it under the guise of one bullshit line or another.

    Winston, your heart is in the right place. Unfortunately, you need several brigades with thousands of clips of ammo to make the change in the States. The powers that be will not surrender without a very bloody fight that kills most of them – or most of those who believe in popular action. They are no different than despotic trash elsewhere in the world.

  • cannonshop

    #5 Ruvy, there ARE ways around it that don’t involve killing people, it’s just complicated and difficult. (What things that are worth having aren’t?)

    Most of the time, the trick is to stay small enough that they don’t notice, or be organized enough that when they DO notice, there’s not a lot they can do without changing the law.

    I hold this belief because, in the end, if people bleed, what you’re fighting for is lost, regardless of what happens otherwise.

  • Winston Apple

    Dave,

    I think there is a critical difference between health CARE cooperatives and health INSURANCE cooperatives. What I am proposing would provide affordable INSURANCE for individuals (and businesses) before the mandates kick in and millions of people realize that even with subsidies from the government, they are paying an arm and a leg to private, for-profit, health insurance companies for coverage.

    The cost savings with a catastrophic plan, functioning the way insurance is supposed to operate, would be significant. Plans with a low premium and a high deductible are available now through private insurers, but they are not very popular. I predict they will become more popular when mandates take effect.

    A lot of people, not all of them young and “invincible,” will realize that the cost of insurance is, by far, their biggest health care expense. If more and more people lose their fear of paying doctors directly and sign up for catastrophic plans, we could see a significant reduction in the fees doctors and hospitals charge.

    If doctors and hospitals could no longer hide behind deals with insurance companies and the true cost of an office visit, a few stitches, or a broken bone became more transparent, competition in a genuinely free market for health care would bring prices down.

    If properly administered, a catastrophic plan through a not-for-profit health insurance cooperative, would get the bureaucrats, from private health insurance companies and the government, out from in between patients and their health care providers. We could save both money and trees.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    The only solution is to eliminate private insurers. The healthcare industry has got to be nationalized, period – lock, stock and barrel. Single payer, single provider.

    MDs could still have private practice on the side for those who can afford it.

    No social injustice there.

  • http://handyfilm.blogspot.com handyguy

    Roger, if that is indeed “the only solution,” we just took a rather large step in the opposite direction. The private health insurance industry is about to get 32 million new customers.

    But this also undercuts the conservative sound bite “a government takeover of health care.” A single payer system, or a requirement that all insurers become nonprofit corporations, could conceivably fit that label, but not the bill that just became law.

    I don’t happen to think there is only one solution, to this or to most problems. I would welcome a single payer system, but I believe this one will do a lot of good as well.

    The expansion of the risk pool and the setup of insurance exchanges in each state should bring market forces to bear and lower premiums.

    The only part of this program that is Washington-centered are the subsidies to help individuals not poor enough for Medicaid to buy health insurance. Yes, it will be expensive to do that, and yes, it could be described as income redistribution [and that is the real reason people who hate the bill feel the way they do]. But it will have the very desirable effect of insuring a lot of currently uninsured people.

    And as I will point out yet again, most people aren’t even affected by the program in any big, tangible way. Only if you don’t get insurance from your employer, from Medicare, from Medicaid, or your parents will any of this “government takeover” apply.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    “The private health insurance industry is about to get 32 million new customers.”

    I don’t care for this fact, Handy. I think it’s an abomination. Private insurers ought to be put out of business, for the good of everyone.

  • John Wilson

    Certainly, the privileged position afforded insurance companies by the 1945 McCarran-Ferguson has to be eliminated. Maybe that’s enough. But if we must nationalize the insurers, then the experience of Medicaid/Medicare proves that can be done at a tremendous reduction in cost.

    In addition to the 28% burden that the insurance cos, impose on premium payers, there is also a 12% burden imposed on providers in the form of paperwork and clerical support.

  • Winston Apple

    During the debate over health insurance reform, Tom Bowser, the CEO of Blue Cross and Blue Shield of Kansas City, was interviewed by the Kansas City Star. He stated, with considerably more frankness than I have come to expect from corporate leaders, that if a public option was included in the reform, private insurers would go out of business.

    He’s right. They couldn’t compete with a not-for-profit done right. (As conveniently outlined above, by yours truly.)

    Although I’m not a big fan of huge corporations, I would not favor non-for-profit organizations taking over most industries. Health insurance is an exception.

    Corporations, by their very nature, often put profits ahead of people. Keeping health insurance affordable for people is far more important than keeping private insurers profitable.