Public Option, Cooperatives or a Cooperative

Robert Waldmann

can’t resist writing about health care reform. The actual debate seems very focused on the public option — will the minority of Americans who have access to the new insurance exchanges have the opportunity to buy health insurance from the US government.

Notably this is the aspect of reform opposed by the health insurance industry, and, almost as if they want to make it clear that they work for special interests, some key senators are absolutely opposed. They can’t even think of an argument against except that it will be bad for the insurance companies.

Instead Kent “chainsaw” Conrad proposes the creation of non profit cooperativeS (plural) but hasn’t thought about how many (fewer than 50 in any case). There is no particular logic to this proposal, it is just a compromise. It is generally viewed as similar to creating no new options at all as cooperatives will be smaller than the minimum efficient scale, won’t be able to borrow at Treasury rates and won’t get off the ground.

I propose a compromise over the compromise. How about one (singular) cooperative ?

Already supporters of the public option insist that the new agency must be self financing and not subsidized from the general fund. Making it a separate legal entity would make this restriction constitutionally binding. One cooperative would be of roughly efficient size (as in medicare and medicaid are big enough but no private insurance company is).

Now part of the point of this proposal is to show that Conrad’s aim is, and must be, to cripple whatever entities he is setting up. Roughly my improvement on his proposal is “set up something like Fannie Mae or Freddie Mac (but non profit). Remember how well that worked out?”