Health Co-Ops Are Not The Answer

Sen. Max Baucus (D-Mont.), is proposing to spend $6 billion to create government sponsored health care co-operatives that he believes will create needed competition with private insurers. He is wrong about co-ops. They are not likely to drive down costs or compete with private insurers on a level playing field, says Dr. William Winkenwerder, a health care consultant.

Any effort to create a new health care co-operative for five, 10 or 50 million Americans would be an extraordinary undertaking.

It took decades and billions of investment dollars to build some of today’s major insurance companies.

The proposed health co-ops will have to develop from scratch the many insurance functions that is performed by the insurance companies.

The start up of such capacity by co-ops will cost billions of dollars and take years to achieve.

Some of the complex and hard to duplicate functions performed by private health insurance companies are identified by Dr. Winkenwerder:

  • They issue policies and accept financial risks associated with the costs of providing care.
    They perform actuarial analyses to track costs and price policies.

  • They assess evidence for which technologies and treatments provide value, and provide information to assist millions of individuals and employers with a range of health care and health coverage issues.
  • They assist with the coordination of care and management of chronic conditions.
  • All the functions performed by private insurance companies took years and untold billions to develop, and are facilitated by highly sophisticated and expensive information systems, and many trained nurses and physicians, says Dr. Winkenwerder.

    If we want greater competition for today’s health care to drive down cost, the doctor suggest a revision of ground rules and creation of a competitive landscape across the nation for existing companies. This he thinks can be achieved by:

  • Allowing health plans to compete across state lines.
    Reducing the number of mandated benefits states impose on plans.

  • Promoting benefit designs that offer more affordable coverage.
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    Source: William Winkenwerder, “Health Co-Ops Aren’t the Answer,” Wall Street Journal, September 29, 2009.

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