Critical Condition

Clear Thinking on Co-ops

I read Reihan Salam’s blog post on cooperatives yesterday with interest. Thought-provoking, as usual. But not very persuasive, I’m sad to say. There are several things to keep in mind about the proposal.

First, there is no shortage of alternative business forms in health insurance. Cooperatives already exist. So do firms that integrate insurance, prepaid care, and even direct provision of services, in cases where HMOs employ providers or hospitals own both physician practices and insurers. Obviously, nonprofits have always played a major role in the health-insurance field in the form of Blue Cross and Blue Shield associations. Early on, before the Blues organized themselves as an effective lobby in state capitals and manipulated tax and regulatory policies to their advantage, there were both for-profit players trying to get into the market (life insurers, primarily) as well as member-owned benevolent societies that look an awful lot like the picture people have today of a health-care cooperative.

Conservatives should not declare for or against any particular business form. It’s a question about which the federal government should be entirely neutral. It isn’t, but it should be. Now, we can and should champion consumer-drive health care as an alternative to today’s costly, bureaucratic, and illogical system, but that’s a concept encompassing many different potential approaches and arrangements. It’s not a new system of politically controlled health plans set up, financed, and favored by Washington.

If there are federal or state rules that inhibit the formation and operation of cooperatives in health care, by all means let’s call for their reform or elimination. But don’t be fooled — politicians who favor a government monopoly in health insurance, recognize its political impossibility, and then come out for co-ops haven’t changed their mind. They haven’t even changed their strategy. They’ve changed their tactics.

The original plan was to set up a federal government “option” to which tens of millions of Americans would inevitably be steered by imposing new rules and costs on current employer-sponsored health plans. The new plan is to set up a network of government-controlled cooperatives to which tens of millions of Americans will be steered by the same sort of new regulations and mandates/taxes intended to make current insurance arrangements less viable.

Students of history will recognize this as not all that different from how the Blues achieved market dominance in so many states decades ago — not through real market competition but by having friendly politicians rig the system in their favor through regulations and taxes with disparate impact on competing insurers.

Conservatives shouldn’t fall for this. We should argue for gradual policies (yes, they’ll better fit the public mood) that given families more control and choice within a truly competitive marketplace. We should stress themes such as personal ownership, medical privacy, portability, flexibility, and innovation. We should favor states over Washington, and private initiative over states. And we shouldn’t be tempted to make a bad deal just for the sake of looking like a problem-solver. Just ask former governor Romney.