So Fades The Co-ops

The CBO's brutal analysis of Conrad's proposal for small, state-based co-ops may have been the final fatal blow for the idea. The Hill reports that prospects for the co-ops are fading fast; it is an idea with few defenders and many detractors:

“It doesn’t have much of a constituency beyond Conrad because it doesn’t please any critics of public plan on the right and doesn’t satisfy any of the ardent public plan advocates on the left,” said a Senate aide. “You don’t gain anything by putting it in the bill.”

Just because the co-ops idea is on its deathbed, it does not mean the prospect for a real public option has increase. Snowe's worthless trigger--that is designed to never be pulled--is seen by many in the Senate as a way to make the claim that they included a public option.

The aide said that most Democratic lawmakers would vote for a public option with a trigger before embracing co-ops. Sen. Olympia Snowe (R-Maine) supports the trigger plan, which would set up a government insurance program only if private insurance companies failed to meet certain standards.

The good news is that progressive grassroots pressure has made it almost impossible for Democrats to pass health care reform without a “public option.” That bad news is that Democrats in the Senate are looking for anything, regardless of how worthless, on which they can slap the label “public option":

At this point, Senate Democrats are signaling they could get behind just about anything they could plausibly call the public option — from a “trigger” that could kick in a public insurance plan later, to Delaware Sen. Tom Carper’s proposal to give states an option to create a government program.

The battle is now over the shape and viability of the public option. Will it be a real public option or a worthless fig leaf with a pretty label?

If Kent Conrad and Ben Nelson Like It, It Must Be Bad

Sen. Kent Conrad and Sen. Ben Nelson have been among the few Democratic senators who have been actively working to kill the public option. When there is an “alternative” that they are both rushing to jump on board, you know something must be fishy. Nelson said about the new "alternative":

“This is a new concept that came out and, I think, gained some steam last week,’’ Mr. Nelson said, adding, “and it seems not to have lost any momentum since then.’’

This new concept for the public option is the brain child of Sen. Tom Carper. You can read his one page proposal here. The proposal is not just bad, it is worse than nothing.

Technically Carper's "concept" would allow states to form incredibly weak and highly restricted public plans, only if both the governor and state legislature agreed. In reality, this idea would not increase the chances of states forming public options. It would, in fact, create new restrictions preventing the formation of state-based public options. Carper's proposal would make it harder, not easier, for grassroots progressives to get their state governments to form viable state-based public options.

In the plan, there are so many clever restrictions placed on the possible state-based public option that it is impossible to imagine any functioning state-based public options would ever form or survive. Carper's proposal is trying to ensure the failure of the state-based public option, and, as a consequence, would discredit the whole idea of any real public option.

Fortunately, Sen. Jay Rockefeller is not falling for this fake “compromise” meant to kill the public option:

[R]eflecting divisions that could lie ahead on the Senate floor, Mr. Rockefeller said this approach was unacceptable to him. State health plans would not be strong enough to compete effectively with big private insurance companies, he said.

Of all the possible fake “compromises” that have been floated (triggers, co-ops, state opt out, etc.), I consider this one to be the most worthless “alternative” (that is saying something) and the most sneaky attempt to kill a real public option. As as a general rule of thumb, if a health care reform proposal is strongly backed by Nelson and Conrad, but strongly opposed by Rockefeller; there is probably a 99% chance that it is a terrible idea.

Kent Conrad: Government-run Plan Doesn't Fit Our “Culture”

Sen. Kent Conrad has come up with a new argument against the public option. When asked by Ezra Klein, why he opposes a public option he said, he doesn't “think a government-run plan best fits this culture.”

I would be very curious to know how Sen. Conrad came to his conclusion. Just today a new NYT/CBS News poll was released showing that 65% of Americans favor creating a Medicare like public option open to everyone.

Government administered health insurance programs are not a foreign concept in this country. There are currently tens of millions of Americans who are currently very satisfied with the coverage they get from our country's existing government-run plans (Medicare, Medicaid, Tricare, VA system).

If Sen. Conrad meant to say that a government-run plan doesn't best fit the Washington DC culture of high paid corporate lobbyists, I would be inclined to agree with him. Out in the rest of America, where people are struggling with the crush cost of health care, most Americans think the idea would fit our culture just fine.

Conrad: I Only Trust The CBO When They Agree With Me

Throughout this entire health care reform debate Senator Kent Conrad has been the biggest advocate of the CBO. He demanded that CBO score health care reform over ten years. He also demanded the CBO must examine the bill and conclude that it would not increase the deficit over the next 20 years.

Yet, when the CBO disagrees with him, he had no problem simply ignoring their findings. Conrad has been pushing his idea of co-ops despite the growing evidence that they would have little or no effect. When the Star Tribune ask Conrad, If he agreed with CBO director Doug Elmendorf's conclusion that, "They seem unlikely to establish a significant market presence in many areas of the country," Conrad answered,

I do not agree with the Mr. Elmendorf's assessment on co-ops. Based on the advice of leading actuaries, we are providing enough federal seed money for these co-ops to insure 12 million Americans.

I think this should be defined as the new Conrad CBO Standard. It is the belief by Kent Conrad that everyone must follow the conclusions of the CBO, unless the CBO disagrees with Kent Conrad.

Demand The Draft

Politico is reporting that Senator Snowe asked Senator Baucus to provide every member of the “coalition of the willing” a draft of what they have so far in their health care reform bill. Senator Baucus should by now have provided Senator Conrad, Bingham, Enzi, and Grassley with this document.

The American people have the right to see this draft. Too many millions of lives will be affected by this legislation. It is unconscionable that the draft has been kept secret. We have the right to spend the August recess scrutinizing their proposal just like the senators are. Secret negotiations are the antithesis of a free and open democracy.

Some of their ideas are so dangerous ill advised that they deserve real public scrutiny.

I think every member of the media and the public should demand the the release of the draft. The goal of the media should be to inform the public not help a group of senators keep secrets.

The Long Arm Of Chuck Schumer

New York Senate Democrat Chuck Schumer is a natural deal maker. He is the type of guy who was born to be in politics. As health care reform moves forward, it is interesting to see how much he is shaping the debate behind the scenes. His public plan, his campaign language, and his strategy to promote reform are all slowly being adopted by the vast majority of Democrats.

A few months ago Baucus asked him to come up with a compromise public plan which could win over the conservative wing of his party. Chuck Schumer did as he was asked and created his “level playing field” plan. It would be a government-run plan but would not use Medicare's payment rates. I suspect Schumer worked with his party to find a compromise that would be acceptable to over 50 Democratic senators, but probably not all 60.

Senator Grassley threw a hissy fit over any public plan, so Baucus scrapped Schumer's well constructed compromise. Baucus than asked Conrad to come up with anything that would make Grassley happy, and he completely cut Schumer out of the negotiations.

Conrad created the idea of co-ops with federal seed money. Schumer told Conrad his idea was unacceptable, but would work with him to find a compromise of his compromise. He created an outline of a national co-op that might be acceptable to enough liberals. Reporting indicates that Conrad rejected Schumer's suggestions. Not surprisingly, there is now a near full blown rebellion against the Conrad's co-ops in the Democratic Party.

While Conrad and Baucus have remained cloistered in their secret meetings, Schumer's “level playing field” public plan has caught fire. The Senate HELP committee adopted a public plan nearly identical to Schumer's compromise. Not surprisingly, in the House the Blue Dogs and the Progressive Caucus have tentatively agreed to a public option nearly identical to Schumer's compromise. In fact Blue Dog Ross' amendment which changes the structure of the public plan used the subtitle: “Level Playing Field for Public Option.”

I expect to hear the phrase “level playing field” a lot in the coming months. Schumer was also railing against the insurance company villians long before it started getting fashionable.

Currently all the focus in the Senate has been on Senator Baucus because he is the Chairman of the Senate Finance Committee. But Baucus works in near isolation from his party and is sowing an incredible amount of ill will with the rest of his caucus.

All this time Schumer has been unusually quiet about an issue that he is personally invested in. Schumer got almost a fourth of all Democratic senators elected while head of the DSCC in 2006 and 2008. I'm very interested to see when and how he plans to weigh in on co-ops versus the public option. Indications are that Schumer could put together a large group to bring down the co-ops proposal.

Conrad's Co-ops Plan Is Worthless

I previously wrote how you would be able to tell if Conrad's co-ops proposal is worthless. The point of the public plan is to provide strong competition for the for-profit health insurance companies. Competition would steal some of their customers and drive down their profit margins. Real competition would be bad for their corporate bottom line.

Yesterday, following reports that the Senate Finance Committee might embrace Conrad's co-ops as a replacement for the public option, stock prices of for-profit health insurance companies soared. From Reuters:

The S&P Managed Health Care index of large U.S. health insurers closed 6.5 percent higher.

Aetna rose 12.6 percent, Coventry was up 12.7 percent and Cigna was 7.7 percent higher, all on the New York Stock Exchange. Centene rose 7.9 percent.

It is clear that the people who have billions invested in health insurance believe that Conrad's idea of a loose association of co-ops simply will not provide strong competition. They believe it would not drive down the cost of premiums for average Americans and will not hurt the massive profits of the insurance companies. Wall Street has spoken, Conrad's “alternative” is worthless compared to a real public option.

Simple Test To Determine If Conrad's Co-ops Are Worthless

The Senate Finance Committee bill will likely include Senator Conrad's private co-ops idea instead of a public option. I plan to eventually write a piece explaining why Conrad's co-ops will likely prove unworkable. But there is a simple test to determine if Conrad's idea is completely worthless.

Obama has repeatedly explained that he wants a public plan to provide competition to drive down cost and keep insurance companies honest. Any student of economics would know that no business wants to face competition. Competition takes away market share and reduces profit margins.

The health insurance industry will (and frankly should) fight anything that would provide real competition. Competition will take away customers, drive down the premiums that they can charge, and reduce their profits. Competition would be good for average Americans but bad for the large health insurance corporations' bottom line.

Whether it be a public plan or private co-ops, the for-profit health insurance companies will fight anything that has a good chance of reducing their profit margins through real competition.

If the private health insurance companies do not fight Conrad's co-op proposal as vigorously as they are fighting against the public plan, you know they don't think it has a chance of driving down the premiums they are charging Americans. If the insurance companies do not fight Conrad's co-op proposal tooth and nail, you will know his idea worthless and useless. If the health insurance lobby endorses a bill that includes Conrad's co-ops proposal, that is proof it is a terrible idea.

Co-op In Name Only

In an AP story, there is a very interesting small piece of news. The report indicates that Senator Baucus is pushing hard to abandon the public option and create a non-profit cooperative instead. What is new, though, is that “Grassley said nothing was finalized yet, and indicated the sticking point was Baucus' insistence that the federal government play a behind-the-scenes role.”

Just how much power the federal government would have “behind the scenes” could dramatically change the nature of the co-op. It is possible that Baucus' goal is to produce a co-op in name only or a true public plan with just a more palatable name.

There are several ways to create a co-op that is directly or indirectly controlled by the government. You could, for example, write the co-op's charter so that its procedures, coverage, and payments are directly tied to Medicare. You could also create a government “health insurance best practices” board that would give “recommendations,” and the co-op would just happen to follow them exactly.

A co-op in name only is unlikely to win the support of almost any Republican, but it might provide the political coverage that a few moderate Democratic senators and two to three Republicans might need, while still winning the support of more liberal businesses.

If Senator Baucus eventually gives into Senator Grassley's demands and makes the co-op completely useless as a replacement to the public option, I predict there will be outright war within the Democratic party. The public option is simply too important to the party's grassroots. It is the one issue that can really rally supporters to make calls and knock on doors. If there is no public option, instead of working hard to pass reform the grassroots may end up killing it.

Public Option Could Save $250 Billion

Now that I have some official numbers from the CBO I can do a better analysis of just how much the public option would save the taxpayer. Since in the HELP committee's bill, the size of government subsidies given to individuals to buy health insurance is based on the average of the three cheapest plans (the “reference premium”), offering a cheaper plan would reduce the size of the subsidies given out.

I'm assume, as is widely agreed, the public option would be the cheapest plan offered. If there was a strong public option (basically a full Medicare opt-in) it would be about 30% cheaper. If there was a weak public option (the Schumer plan) it would be about 10% cheaper.

With the weak public option the “reference premium” would be 5% less, and the total size of subsidies should be reduced by roughly 7-10%. That means a weak public option will make the HELP committee's health care reform bill roughly $90-130 billion cheaper.

With the strong public option the “reference premium” would be 10% less, and the total size of subsidies should be reduced by roughly 15-20%. That means a strong public option will make the HELP committee's bill roughly $200-250 billion cheaper.

I have not seen the details to Conrad's co-op plan, (because they do not exist) but similar co-ops currently operating are not significantly cheaper than other private insurance plans. Conrad's co-op should have almost no impact on reducing the cost of the bill.

*all numbers are rough estimates and can change dramatically based on the size of subsidies, eligibility, and structure of the public option.

Progressives Begin To Push Back Against Conard's Plan

The supporters of a public health insurance option have began to push back against Senator Conard's “alternative”. Health Care for America Now (HCAN), one of the largest health care reform advocacy groups, has rejected Conrad's idea of eliminating the public option and only offering private cooperatives instead.

More importantly, the Congressional Progressive Caucus today reaffirmed that they will vote against any health care bill which does not contain a public plan. Their statement is a powerful rebuke of Senator Conrad's proposal. The House Progressive Caucus is the largest Democratic caucus in the House.

While most of the media coverage has been focused on efforts to gain the support of Republican senators, the Progressive Caucus is arguably more powerful. It is possible to pass health care legislation against united Senate Republican opposition, but it would be impossible to get legislation through the House if the majority of the Progressive Caucus votes against it.

The big question mark is just how determined the Progressive Caucus is. Will they abandon their principles for some moderate improvements to our health care system? Or will they keep their promise and reject health care reform without a public option? If they remain resolute they have the power to shape the debate to their goals.

“Private” Health Insurance Co-ops Are Not A “Public” Option

Dear Wall Street Journal, New York Times, Minneapolis Star Tribune, and the Rest of the Mainstream Media,

A privately-run cooperative is in no way, shape, or form a public option. By definition, a “privately” run entity is not “public”. It is not a public plan compromise. It is not a watered-down form of a public option. It bares no resemblance to a public plan. It would lack the benefits of a public plan and would do nothing to reduce cost.

Senator Conrad admits the privately-run cooperatives already exist. There is nothing legally stopping someone from creating health insurance cooperatives right now. This "compromise" is the status quo. Senator Conrad's plan is simply a complete and total defeat for supporters of the public option. It is ethnically irresponsible to report it as anything else.

Senator Conrad Is Trying To Kill The Public Plan

Democratic Senator Kent Conrad has created an “alternative” which will kill the public health insurance option. Instead of a public option, the government would give loans to help create many small, independent health insurance “co-ops”. This is not a compromise between Progressives and the GOP minority. This would be a complete sell out on principle.

The “co-ops” would be nothing more than small, regional non-profit private health insurance companies. (There already are “non-profit” insurance companies, and they pay their top management millions a year.) The “co-ops” would lack the accountability and the cost saving benefits of a public option.

The “co-ops” would be too small to benefit from economies of scale. The different “co-ops” would create hundreds of redundant positions, offices, and systems. They would lack the negotiation power of size to lower prices. Since they would not be the large, default public plan, they would be forced to waste millions on advertising. There would also be no guarantee that the “co-ops” would adopt the best practice recommendations from the government. Unlike a national public option, the co-ops would do almost nothing to lower cost for millions of Americans struggling with the high cost of health care premiums.

The “co-ops” plan would do almost nothing to help promote real health care reform. It is not 50% between the Progressive and Republican position on the of the issue of the public plan. It is not even 5% of the Progressive position. It would be a complete and total victory for the Republicans. The “co-op” plan is nothing more than fancy language to kill the public option.

Update: the Minneapolis Star Tribune and the New York Times are falsely reporting that, "Senator Kent Conrad, Democrat of North Dakota, suggested that the public plan might take the form of an insurance cooperative, owned and operated for the benefit of its members." This is completely factually inaccurate. If the cooperatives are owned privately they are by definition not a "public" plan. The "co-ops" would not be in any way, shape, or form a public plan.