Senate Considers Alternative to Public Healthcare Option

The Finance Committee has chucked the public option in favor of health cooperatives.

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To get a glimpse of the possible future of American healthcare, a good starting point might be England, 1844. That year, some British laborers got together and opened a small store in which they sold butter, oatmeal, and other goods. Their goal was not to make money but to create a way to buy food in bulk at cheaper prices.

The store was a success, giving rise to a global explosion of what are known as cooperatives, or co-ops. In the United States, co-ops have formed to sell everything from electricity to agriculture to healthcare, and the model is rapidly gaining traction among moderates in Washington as politicians struggle to complete healthcare reform.

Until recently, the healthcare debate has focused on a government-run insurance plan. But last week, that changed as word leaked that the Senate Finance Committee's bipartisan group of six senators, led by Max Baucus, a Montana Democrat, and Chuck Grassley, an Iowa Republican, has chucked the public plan in favor of something else: healthcare cooperatives. While negotiations on the overall healthcare plan are continuing, the idea seems to have the backing of many moderate Republicans, whose votes will determine whether healthcare reform is a partisan or bipartisan affair. There's also some interest in the House, although the political deal reached lastweek between House leaders and fiscally conservative "blue dog" Democrats sticks with the public option.

But what exactly are health co-ops? A few exist in the United States, and they share some basic features with their 1844 ancestor. They are nonprofits, and, like for-profit companies, they sell insurance, but they also tend to own hospitals and clinics, acting in some ways as a one-stop shop for healthcare needs.

"You really do hear the voice of the consumer with co-ops," says Karen Davis, president of the Commonwealth Fund, a widely respected national foundation that specializes in healthcare. "A lot of their initiatives to slow the growth of their premiums come straight from their members."

One of the most successful cases is HealthPartners, which covers more than a million people in Minnesota and Wisconsin. It started in 1957, and Donna Zimmerman, who oversees HealthPartners' government policy, says it provides better care at cheaper prices than competitors, in part because it's run by the same people who pay for its services.

There are data to back her up. A June study by Commonwealth Fund researchers found that HealthPartners has cut tobacco use among its members at twice the Minnesota state rate, in part because the co-op has instructed doctors to help patients find ways to quit. Since 2002, the co-op has made a deliberate effort to shift from prescribing brand name drugs to generics, saving, in total, tens of millions of dollars. It's also put in place programs that identify high-risk patients — smokers, obese people, etc. — before they have major problems and financially reward them if they go to educational sessions.

Policy people in Washington face a big, difficult question: Can health cooperatives be a national solution, or are they just a weaker alternative to a public option? The Senate Finance Committee's draft plans call for setting up a national network of co-ops, maybe one in each state or at least one in every region of the country.

But Davis calls that plan "high risk." For one thing, several efforts to start co-ops have failed, largely because of pressure from for-profit competitors. New co-ops will need billions of dollars from the government to get started, as well as a guaranteed large customer base. Because of these challenges, health co-ops exist today in only a handful of places; HealthPartners owes at least some of its success to Minnesota's supportive healthcare laws. A public option, on the other hand, could start up faster and be more powerful. But for many, it's also politically a nonstarter.