Health policy experts and politicians seem certain that a public option in the health care reform bill will never pass in Congress. Liberal Democrats say they won’t pass a health care reform bill without it, while Republicans and some Conservative Democrats disagree with any notion of government-run health insurance.

But without a public option, what’s left of the reform bill that would be of benefit to the millions of uninsured Americans? Discussions have started to focus on the non-profit health cooperatives proposed in the Senate bill. Health cooperatives are insurance companies run by its members. The members vote on the leadership of the company, and have a say in the business. But, what isn’t clear is whether the co-ops will prove to be the bipartisan solution some are expecting.

In theory, the government-run public option and the co-ops should offer the same benefit – providing competition for private insurance companies in order to keep costs down. Medicare, an example of government-run health insurance, does this already by using negotiated contracts with hospitals, physicians, drug companies, and medical equipment manufacturers. Medicare is able to pay about 20 percent less than private insurers for most services. What works in the government’s favor is volume. Buying in bulk always costs less per item.

While the idea of a non-profit consumer-governed co-op sounds promising to those who fear “big brother” and anything government-run, measuring up against private insurers may be a lofty goal.

The largest co-op of this type, Minneapolis-based Health Partners, has over 1 million members. Another co-op, Group Health Cooperative, has over 600,000 members. Both have acquired these members over five and six decades, respectively. Yet, most private insurers have enrollments in the tens of millions.

Many question whether a brand new co-op can gain the patient enrollment, the bargaining power, and the physician-base to be competitive in such a short period of time. It seems unlikely. Not to mention that these new co-ops will require seed money from the government until the co-op’s income offsets its expenses.

On the other hand, we currently have two government-run health insurance plans – Medicaid and Medicare. Both are riddled with problems, including concerns about reimbursement and financial sustainability given our large population of aging baby boomers. However, it is more sensible to utilize our resources to improve and expand on what we have – making the most of already-negotiated government discounts – than to use more taxpayer money to start new co-ops that may or may not make a splash amidst the pool of private insurers.

Will co-ops be the next failed business requiring government bailout – on top of taxpayer’s seed money? Or, will co-ops be forced to charge private insurance rates in order to stay afloat? No one knows yet without the specific details of either option.

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