Wednesday, September 9, 2009

Cooperatives: The Best Public Option

Perhaps I am too immersed these days in the novelties of the electric car's "ecosystem," or just cranky contemplating returning to Israel and trading Obama for Bibi, but I am finding various threats to the president from Democratic progressives about the public option shrill and unpersuasive. A progressive seems to be somebody who brings to analysis of public policy none of the astounding progress we've made in commercial information and social networking technology during the past generation--except, of course, when talking about the virtues of blogosphere. (Just watch this short interview with the Daily Kos' Markos Moulitsas on MSNBC and you'll get the idea.)

For God's sake, you no longer need a single, Medicare-style insurer to get efficiencies in claims processing, or buying leverage with pharmaceutical companies, or the sharing of best practices. If you did, you'd still need General Motors to tell suppliers exactly how to make every part, or one big blog to keep the cost of bandwidth low. If, as seems likely, key Senate committees will insist that the public option be delivered through non-profit cooperatives, that may not only be "good enough," it may--with certain collateral regulations--be better than any Medicare-style insurer.

I CAN'T ADD much to Steve Pearlstein's excellent observations about how cooperatives could be best in transforming medicine to the results-based care Atul Gawande famously advocates--provided, as Pearlstein writes, cooperatives are "big enough and built around networks of hospitals and physician practices that accept a fixed, annual fee for treating patients rather than billing for every procedure." I will note that Michael Porter wrote some time ago that the cost and quality of care would benefit from institutional specialization, much the way commercial ventures and universities benefit, which is exactly what cooperatives built around existing teaching hospitals and medical networks encourage.

It is through cooperatives of this kind that public health is delivered in Israel and the system works just fine. You can also find this model in Switzerland and Holland, as Matthiew Miller writes. Princeton's veteran advocate for health reform, Ewe Reinhart, has been promoting the idea for years. You could even make the case that Canada's "single-payer" system is actually based on ten insurance cooperatives, since each province is responsible for setting up its own plan.

Nor do you need one big buyer to confront drug companies, any more than you need one big school to confront text book publishers. Remember that the public option will initially cover fewer than 20 percent of Americans. Private insurers want good prices (generics, etc.) the same way Walmart wants good prices, and public cooperatives will benefit as a by-product. Besides, you could establish a buying consortium among healthcare cooperatives on nothing more complicated than Facebook (the same way, incidentally, that the Daily Kos is threatening to establish a "netroots" campaign against Obama).

Anyway, the problem with the price of drugs has much less to do with buying power (a look at Porter's "Five Forces" might help here) than with the duration of patent rights and the simple fact that, as drugs become more tailored to individual diseases and genomes, their costs are amortized over fewer and fewer patients. (Between 30-40 percent of lifetime medical costs are incurred in one's last year of life; the number is bound to rise as treatments become more personalized.)

Finally, innovations in claims processing are more likely to be developed first in the private sector, for all the obvious reasons. (Would you rather deal with American Express or the IRS?) I am not freaked-out by the word bureaucracy. But you do not need to be as big and rich as Medicare circa 1965 to buy IBM mainframes. If you haven't noticed, we no longer need mainframes at all.

What we do need, urgently, are mandated standards for digitizing medical records and common protocols for reporting patient care. These are the real roads and bridges of a knowledge economy. They will be necessary to establish not only consolidated billing systems for doctors currently being driven crazy, but also ways for them to share information about standards of care. Reporting standards will also give NIH and biotech labs, who share annually $60 billion worth of research, common access to otherwise diffuse pools of data.

ALL OF WHICH brings us to Obama's speech tonight. I have not spent my life studying healthcare, but I know a thing or two. Obama, clearly the best president of my lifetime, could use a little more obvious support from people who should know better, from Bill Maher to Bill Moyers.

If we did not have, as Rick Hertzberg tirelessly reminds us, a political system that puts veto power in the hands of "a forty per cent minority of the Senate, representing as few as one-tenth of the nation’s human beings," does anybody doubt Obama would have delivered a universal reform package by now? If we did not also have a politics in which presidents can be "put on the defensive" by people who'll say anything, and media "political directors" who chart the flocking behavior of independents who particularly disdain defensive presidents, would we really need progressives to cover the president's back?

The point is, we do have this system and this politics. Before we start threatening a revolt, perhaps we might bring our ideas up to code--and count our blessings.


Anonymous said...

I generally either agree with you or am too uninformed to make an independent judgment. However, I must say that on this topic I do disagree. Coops haven't proven strong enough in the past to compete with private insurance companies. Moreover, the idea of going back to a capitated system in which health care providers must provide care out of a predetermined amount of money is atrocious. We've already been through that and it provides a disincentive to provide appropriate care. If that is what you are suggesting, please re-think this or talk to anyone who has already had experience with this system.

Furthermore, as a psychologist in private practice, I have to say that Medicare is more efficient and pays more for my services than Blue Cross Blue Shield which hasn't raised my rates in at least a decade because they have "no incentive." Meanwhile, they are raking it in. Additionally, while best practices sounds like a great idea, one size fits all is not. In my profession, guidelines for treatment are fine as long as there is still some art to the practice. I assume this is also the case in medicine.

Best regards,
Erica Rapport Gringle
Durham, NC

Potter said...

I asked a friend of mine, who has been following this issue very closely, to read your post and comment. He said though it is full of ideas and references, he felt it uninformed:he gives just these as examples (quote):

Switzerland does have a successful private system, but it achieves fairness and cost control through stringent regulation, which is unlikely to work here (see our recent experience with lack of regulation of the financial markets).

"Private insurers want good prices (generics, etc.) the same way Walmart wants good prices, and public cooperatives will benefit as a by-product."

Everyone negotiates their own deal; just because Wellpoint gets price x doesn't mean the Cooperative will be able to do as well (and, to lower costs, we need to do BETTER).

"Besides, you could establish a buying consortium among healthcare cooperatives ..."

This is specifically prohibited in the Baucus plan! (The plan, I kid you not, is an out-and-out rip-off of the people. It is totally, thoroughly corrupt.)

Progressives generally feel that the best solution would be Medicare (popular, already up and running, more efficient than private insurance) for all. Given that this option was never even "put on the table", our fallback position has been the less elegant and somewhat more problematical "public option". We are fanatical about giving even further ground because we see no other hope for forestalling even more corruption."

(end quote from my friend)

My comment: My understanding is that the "public option" would be a safety net for a small number of people. It is important that it be there to make sure everyone has access. Also I wonder why all these new ideas about how to deliver and manage health care cannot be part of single payer, public option or cooperatives.

Pearlstein's suggestion relies heavily on regulation that, it seems to me, will be hard to get passed given the current realities- not that we give up on that too.

Obama has the promise of being the best president in my lifetime. He has the vision the ability to articulate it in his personally well written speeches but I want to see some spine. Progressives would not be pushing so hard if they did not feel that Obama wants compromise and lets' that be known, before he's even fought the battle for what he believes in.

Shana Tovah

Paul said...

Israel doesn't have co-ops. It has four giant HMOs. Basically, it looks like the Clinton system.

They do manage to cover everyone at around 8% of GDP compared to our around 20%, but the WHO ranks Israel's system number 28 -- better than our number 37 but not that much better and certainly nothing to write home about.

Further, the Israeli system involves significant cost sharing. The most recent figure I could find was from 2001, when the average out of pocket cost was 31%. For a major illness or accident, even 1/3 of the bill is potentially bankruptcy-inducing. I also found a reference to a recent survey which showed that 23% of those in the bottom income quintile reported that they avoided treatment specifically because of the cost sharing.

That's certainly better than the US, but I wouldn't describe it as working "just fine."

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