Senate prospects for healthcare co-ops dim

The prospects for setting up membership-run healthcare co-ops, an idea favored by Senate Finance Committee Chairman Max Baucus (D-Mont.), are growing dimmer in the Senate.

Baucus has included healthcare co-ops in lieu of a government-run health insurance program in the legislation the Senate Finance Committee will vote on Tuesday.
 

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In recent days, speculation has swirled around the question of whether Senate Majority Leader Harry Reid (D-Nev.) would include co-ops or a public option in the legislation he creates from bills passed by the Finance and the Health, Education, Labor and Pensions Committees.
 
While Baucus’s bill gained new momentum because of a favorable cost analysis from the Congressional Budget Office, the same CBO report may have delivered a fatal blow to a major element in his plan, health insurance co-ops.
 
Democrats such as Sen. Chuck Schumer (N.Y.) and Sherrod Brown (Ohio) have pounced on this development to push the public option or a slightly modified alternative.
 
The newest proposal to gain momentum would create a national government health insurance plan and give individual states the option of not participating. It’s a variation of a compromise floated by Sen. Tom Carper (D-Del.) and remains in its preliminary stages.
 
“That’s one of the things being very seriously considered,” said Schumer, who indicated that Carper, a member of the Finance panel, may support it.
 
“Sen. Carper and I met for quite a while last night and made progress; and I’ve talked to a large number of members last night, yesterday,” Schumer said during an interview on MSNBC Thursday.
 
The proposal could be significant if it gains backing from centrist Democrats such as Carper because leading liberals appear willing to accept it.
 
“At first blush, that sounds good,” New York Times columnist Paul Krugman wrote on his blog. “It’s true that the states most likely to opt out will probably be small states that really need the competition. But many states, with probably a majority of the population, would opt in. And if the public option works well, there will soon be pressure on politicians in the others to do the same.”
 
Senators have felt a renewed sense of urgency to explore new ways to modify the public option in the wake of the CBO report, which blasted the co-op.

“The proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments,” CBO wrote.

In addition to Baucus, Sen. Kent Conrad (D-N.D.), a senior member of Finance, has championed the idea.

But Senate insiders and healthcare experts say that co-ops will likely not take the place of the public option in the healthcare bill that is expected to reach the Senate floor. These confident predictions come even as the Finance Committee is poised to approve a bill that includes co-ops.

“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.”

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.

Karen Davenport, director of healthcare policy at the Center for American Progress, a think tank allied with the White House, said the CBO “doesn’t see co-ops proliferating or making a very big impact on the market.”

Davenport noted that CBO expected the creation of so few co-ops that they would only require $3 billion of the $6 billion in start-up money set aside by Baucus’s bill.

Davenport said the report “makes it much harder for co-op to be one of the key parts of a merged bill.”

Conrad, who also serves as Senate Budget Committee chairman, argues that CBO’s analysis failed to take into account how co-ops would operate in the context of other reforms, such as the creation of a nationwide or statewide health insurance exchanges.

"The way CBO does their work is all based on precedent," he told Salon.com in a recent interview. "They really aren't free to look and look at the changed circumstances [that the legislation would produce], so I try not to be too critical of them."

But liberal critics are trumpeting CBO’s analysis of co-ops.
 
Richard Kirsch, national campaign manager of Health Care for America Now, a coalition of liberal and labor groups, said, “The CBO analysis proves you cannot perform the role of government, lowering prices and competing with insurance companies, without having the government involved.”
 
Roger Hickey, co-director of Campaign for America’s Future, a liberal group, said it would be difficult for Democratic senators to vote for a healthcare bill that requires Americans to buy health insurance but does not also give consumers an affordable option to private insurance plans.
 
“If we’re going to force people to buy insurance, we should make sure we give them alternatives to the private insurance plans that bring down costs,” he said.
 
Hickey said that CBO’s conclusion that co-ops would do little to bring down costs has given lawmakers impetus to re-evaluate the public option.