Cooperatives: The Best Public Option

Perhaps I am too immersed these days in the novelties of the electric car's "ecosystem," or just cranky contemplating returning to Israel and trading Obama for Bibi, but I am finding various threats to the president from Democratic progressives about the public option shrill and unpersuasive. A progressive seems to be somebody who brings to analysis of public policy none of the astounding progress we've made in commercial information and social networking technology during the past generation--except, of course, when talking about the virtues of blogosphere. (Just watch this short interview with the Daily Kos' Markos Moulitsas on MSNBC and you'll get the idea.)

For God's sake, you no longer need a single, Medicare-style insurer to get efficiencies in claims processing, or buying leverage with pharmaceutical companies, or the sharing of best practices. If you did, you'd still need General Motors to tell suppliers exactly how to make every part, or one big blog to keep the cost of bandwidth low. If, as seems likely, key Senate committees will insist that the public option be delivered through non-profit cooperatives, that may not only be "good enough," it may--with certain collateral regulations--be better than any Medicare-style insurer.

I CAN'T ADD much to Steve Pearlstein's excellent observations about how cooperatives could be best in transforming medicine to the results-based care Atul Gawande famously advocates--provided, as Pearlstein writes, cooperatives are "big enough and built around networks of hospitals and physician practices that accept a fixed, annual fee for treating patients rather than billing for every procedure." I will note that Michael Porter wrote some time ago that the cost and quality of care would benefit from institutional specialization, much the way commercial ventures and universities benefit, which is exactly what cooperatives built around existing teaching hospitals and medical networks encourage.

It is through cooperatives of this kind that public health is delivered in Israel and the system works just fine. You can also find this model in Switzerland and Holland, as Matthiew Miller writes. Princeton's veteran advocate for health reform, Ewe Reinhart, has been promoting the idea for years. You could even make the case that Canada's "single-payer" system is actually based on ten insurance cooperatives, since each province is responsible for setting up its own plan.

Nor do you need one big buyer to confront drug companies, any more than you need one big school to confront text book publishers. Remember that the public option will initially cover fewer than 20 percent of Americans. Private insurers want good prices (generics, etc.) the same way Walmart wants good prices, and public cooperatives will benefit as a by-product. Besides, you could establish a buying consortium among healthcare cooperatives on nothing more complicated than Facebook (the same way, incidentally, that the Daily Kos is threatening to establish a "netroots" campaign against Obama).

Anyway, the problem with the price of drugs has much less to do with buying power (a look at Porter's "Five Forces" might help here) than with the duration of patent rights and the simple fact that, as drugs become more tailored to individual diseases and genomes, their costs are amortized over fewer and fewer patients. (Between 30-40 percent of lifetime medical costs are incurred in one's last year of life; the number is bound to rise as treatments become more personalized.)

Finally, innovations in claims processing are more likely to be developed first in the private sector, for all the obvious reasons. (Would you rather deal with American Express or the IRS?) I am not freaked-out by the word bureaucracy. But you do not need to be as big and rich as Medicare circa 1965 to buy IBM mainframes. If you haven't noticed, we no longer need mainframes at all.

What we do need, urgently, are mandated standards for digitizing medical records and common protocols for reporting patient care. These are the real roads and bridges of a knowledge economy. They will be necessary to establish not only consolidated billing systems for doctors currently being driven crazy, but also ways for them to share information about standards of care. Reporting standards will also give NIH and biotech labs, who share annually $60 billion worth of research, common access to otherwise diffuse pools of data.

ALL OF WHICH brings us to Obama's speech tonight. I have not spent my life studying healthcare, but I know a thing or two. Obama, clearly the best president of my lifetime, could use a little more obvious support from people who should know better, from Bill Maher to Bill Moyers.

If we did not have, as Rick Hertzberg tirelessly reminds us, a political system that puts veto power in the hands of "a forty per cent minority of the Senate, representing as few as one-tenth of the nation’s human beings," does anybody doubt Obama would have delivered a universal reform package by now? If we did not also have a politics in which presidents can be "put on the defensive" by people who'll say anything, and media "political directors" who chart the flocking behavior of independents who particularly disdain defensive presidents, would we really need progressives to cover the president's back?

The point is, we do have this system and this politics. Before we start threatening a revolt, perhaps we might bring our ideas up to code--and count our blessings.