CBO on Co-Ops

Ezra has posted the CBO’s initial estimates on the costs of MaxTax–some of the assumptions for which seem to pretend that insurance companies will not react in any way to the new rules imposed by MaxTax.

But before I get into what CBO’s assumptions, here’s what CBO thinks of Baucus’ crappy co-op option.

(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.)

That is, as designed, the co-ops would not be more attractive than the private insurance options, nor would they bring down subsidies (which means they wouldn’t bring down costs to us, either).

As designed, the co-ops are totally worthless.

64 replies
  1. fatster says:

    And, looky here.

    Rockefeller to Baucus, Conrad: Co-ops Are a Sham, Public Option Is a Must
    Brian Beutler | September 16, 2009, 3:31PM

    “When it became clear several weeks ago that negotiators on the Senate Finance Committee were planning to pursue a private co-op model instead of a public option in their health reform bill, Sen. Jay Rockefeller (D-WV)–a senior member of that committee, and chairman of the Senate Commerce Committee–undertook a study into the history and effectiveness of health insurance co-operatives.

    “As part of that study, he asked the Government Accountability Office to bring together all of the research it had done over the years into the effectiveness of co-ops in the insurance market. Today, he sent a fairly scathing letter to Finance chairman Max Baucus (D-MT) and chief co-op advocate Kent Conrad (D-ND) regarding the results.”


  2. Gnome de Plume says:

    But they do help to feather the insurance provider’s nest, don’t they? If so, then they succeed with the “profit enhancement” plan.

  3. Hmmm says:

    In Max’ grand vision (that’s a joke son, I say, that’s a joke) would the exchanges be national vs. only statewise? IOW, would the current de facto regional near-monopolies be broken in any significant way?

  4. emptywheel says:

    Someone on a list I’m on made a brilliant observation.

    MaxTax sets subsidies to to the second-cheapest plan available to a person at a particular level. The HELP bill, by contrast, sets it to the average of the three cheapest.

    See what that does? Even if the co-ops were successful in offering the cheapest option, the subsidies would still be tagged to a private option (the second cheapest). So the insurance companies could always be sure their subsidies would pay for ever-increasing increases in costs.

    • prostratedragon says:

      So, the private insurers collectively get to treat us as a common resource, which is always the case of course, but this way they know that they’re never out of the game, and instead of competing for our business by offering the cheapest version of some policy that we’ll find acceptable, they now merely scramble for the subsidy dollars that each of us can garner, a much funner game for them I’m sure. Is that roughly it?

      Never let it be said that economists are useless. This was probably set up as an exercise in mechanism design; the link is to a wiki article that will tell more than you probably want to know, but with absolutely sound refs. And the implication that there might be an element of, let’s say, joint action among the companies is intended.

  5. AZ Matt says:

    I don’t know why the insurance companies didn’t do the presentation since they wrote it. Baucus is a dummy.

  6. Hmmm says:

    BTW I just checked the MaxTax draft PDF and the only metadata info I can find in there is that the creator is “SAA”. Is there a well known lobbyist or staffer with those initials?

    Alternatively I suppose it could be an acronym for a previous bill title — Sick America Act, anyone?

    • Hmmm says:

      Never mind. Looks like Sergeant At Arms (SAA) is an umbrella name that includes the office services in the Senate.

  7. fatster says:


    Howard Dean Blasts Baucus Healthcare Bill
    September 16, 2009 05:51 PM ET | Paul Bedard, Nikki Schwab | Permanent Link | Print
    By Nikki Schwab, Washington Whispers

    “Howard Dean, former Democratic National Committee chairman, minced no words about Sen. Max Baucus’s healthcare proposal, unveiled to the public this morning. “The Baucus bill is the worst piece of healthcare legislation I’ve seen in 30 years,” Dean said last night at a healthcare town hall and book signing in Washington. “In fact, it’s a $60 billion giveaway to the health insurance industry every year,” he said. “It was written by healthcare lobbyists, so that’s not a surprise. It’s an outrage.”‘


      • fatster says:

        I got a huge “HOWARD DEAN FOR PRESIDENT” t-shirt with “WANT YOUR COUNTRY BACK?” on the back. Wish to heck I had a nifty hat like yours to top it off.

        The message on my t-shirt is as right-on today as it was then. Dammit!

  8. Hmmm says:

    Program Note: There appear to be two versions of this post, one in Ew and one in FDL, with separate/independent comments threads. Just in case anyone else gets confused.

  9. Hmmm says:

    Totally minor side observation on the semantics of ‘MaxTax’ — another discussion forum I participate in is currently thrashing out ad nauseum the tax vs. levy question (if anyone must know, that discussion is wrt blank media surcharges that are disbursed to copyright owners to ‘compensate’ for private music copying). That makes me think that in some ways you could say the Max Tax is a levy rather than a tax per se, in that it uses the muscle of the state to enforce collections of money that ultimately go into private hands, as opposed to taxes which go into the public treasury. Now there may be excellent rhetorical reasons to keep calling it a tax, because people hate being taxed, but ‘levy’ also has an unpleasant feeling that could perhaps be useful, reeking as it does of bureaucracy, artificiality, and rule-bound thinking. Just a tiny thought.

    • LabDancer says:

      It’s clearly a levy not a tax; a number of western democratic nationstates organized as federations have been through this dispute, all the way to their highest court. But I still prefer the take of a higher authority, like max headroom or fearless leader.

  10. GulfCoastPirate says:

    Someone help me out here. Why does the Finance Committee bill matter so much? Didn’t the Senate HELP committee bill come out much better? How do the two differing versions get reconciled in the Senate?

    Second question – why are we supposed to support Obama again after this? This was the number one priority and this is what we get? This is worse than nothing at all. Let the system crash and we’ll get a better deal later.

    What is Obama thinking on Afghanistan, the Patriot Act, financial regulation, the deficit and other things I’ve read about lately? I don’t have the time to keep up as much as some of you but this guy is turning out to be a chump. We’re going to get used the same way the religious right was used by the Republicans when it came to social issues in the 80’s, 90’s and 00’s.

    From what I’ve read (here and elsewhere) this bill is horrendous. Let the system implode before anyone agrees to support this bill. There will be a better result after the implosion. If it does pass, let the Democrats get thrown out. Otherwise, we’ll all end up in the same place as the Moral Majority. How are they doing these days?

    Bmaz- if you’re reading, how about them Coogs?

      • GulfCoastPirate says:

        LMAO – see, I told you I didn’t have the time to keep up.

        Don’t you folks have our email addresses. Give me a shout out when the subject of the BCS comes up – I want to VENT. Let’s see, UH, BYU, TCU, Utah, Tulsa, Southern Miss – none of these people have a chance at the national championship, can someone tell me why?

        ASU’s recruit played the local high school down the street last Saturday night. About a hundred yards in catches to go with the same when they beat the number 1 team in the state last week. Could be a good one.

        • bmaz says:

          Believe it or not, I actually thought about ringing you up, but figured you would be along to boast. You already know my feelings on the BCS I would imagine – hate it.

          • GulfCoastPirate says:

            LOL – boasting isn’t my style. Played a lot of sports but mostly basketball and golf, which I played a little professionally when I was younger. Very humbling, one day’s 68 is the next day’s 78.

            I haven’t heard your take on the BCS but I think your remark more than gives me a good hint. It’s a joke.

            Obama – what a disappointment. Don’t know what else to say.

      • readerOfTeaLeaves says:

        Perhaps, and maybe I need my eyes checked, but I seem to be spotting something strange as I check the news videos tonight: for the life of me, it looks as if Sen Rockefeller, Sen Wyden, and some other Dems are trying to keep their tinder dry.

        Is it possible that Rockefeller is not ‘Jello’, but in fact thoroughly fed up with the shenanigans after all these years being stalled by Republicans — and now, to add insult to injury, the Baucus bill?

        It’s possible that I’m nuts, but it sure seems as if there has some kind of subterranean upheaval among some of the Dems (and perhaps out of sight, a Republican or two who are also fed up with Limbaugh, teabaggers, and the relentless stupidity of ‘No’)?

        The GOP has exposed itself as a pack of unreasonable ‘death panel’ tools, and the Baucus bill has exposed the Blue Dogs as corporate toadies.

        Once they realize they’re exposed and that the healthCo’s can’t cover their political reputations, this could get interesting. If my hunch is apt, then the power just shifting to the the Wydens and Rockefellers.

        And Howard Dean castigating the Baucus bill, along with Wendell Potter calling it ‘ludicrous’ doesn’t hurt any ;-))

        (In that KO link, he mentions at the end wishing some of those Senators would come with him to visit his dad in hospital, not b/c he wants to make a spectacle of his father, but b/c he doesn’t think they have a flipping clue. I believe the word ‘competition‘ was raised once or twice in that interview.)

  11. freepatriot says:


    this guy’s bill set a record for being politically DEAD

    from proposal to dead in point three seconds

    call Guinness

  12. fatster says:

    O/T. Is it possible that justice might be done here?

    Report: KBR employee raped by co-workers wins right to sue
    Employee contract developed under Cheney’s tenure prevented Jamie Leigh Jones from pursuing justice

    “Jamie Leigh Jones made headlines two years ago when she alleged that, as a KBR employee on assignment in Iraq, she was raped by her co-workers, then imprisoned by her employer and threatened with firing.

    “Now, Jones has won the right to sue KBR, a subsidiary of Halliburton, the company once run by Dick Cheney.”


    • bmaz says:

      Is it possible that justice might be done here?

      That is yet to be determined, there will be a lot of procedural and legal roadblocks in Ms. Jones’ path to come, but at least that path will be in a proper forum and visible to the public. As bad as this looks, hanging it on KBR will be harder than you might think. Still, this is a very positive step.

  13. radiofreewill says:

    Just flying by…it looks like eyes for style are everywhere in this connected world!

    The Dutch are giving my Orange Gator baseball cap much eye-love! A high compliment from them!

    See you guys for Saturday’s trashing of Tennessee!

  14. JamesJoyce says:

    A “Life Tax” imposed on the governed for the benefit of corporations, under the “color of law?” There can be no doubt both Jefferson and Madison would be pounding their fists on the table screaming “CORPORATE SERVITUDE!” The concept of a “LIFE TAX” is so inconsistent with what the founders intended and consistent with what they feared!

    There is nothing more “monopolistic,” than corporations who leverage your “Life,” for profit? “Life” and Liberty” now subject to the dictates of corporate America, who enjoy the same tax exempt status as the King’s…… “East India Tea Corporation!” Corporate Aristocrats are protecting corporations just as Justice Taney’s decision in “Dred Scott vs Sanford,” under the color of law, protected the owners of slaves, while the slaves had no protections and where now considered property? Max the ass…. my “Life” and “Liberty” are not property, to be manipulated for profit at my expense!!

  15. JamesJoyce says:


    Would you please do an expose on not for profit corporate tax status? The reason I respectfully ask this is simple. If one where to conduct a survey asking this one question; “Do you know the corporate tax status of your health insurer?,” I wonder what the responses would be? Most people would look at you as if you have three heads! Most Americans are ignorant of the interaction of Subsection F of the IRS Code “Exempt Organization” and State Public Charity Law.

    The 14th Amendment while giving protection to the “Dred Scotts” of America gave to corporations at the state level the same due process rights as individuals. Those who justified slavery and segregation claimed states rights! Today corporate health insurers and providers at the state level operate as tax exempt not for profit corporations, public charities for tax law purposes because they “lessen a burden of government,” a standard utilized by the IRS when determining to grant a corporation tax exempt status? Now Max et als proposes a health insurance “Life Tax” on individuals? Lets protect corporations because my life is now treated as Dred Scott was treated by Justice Taney? EW, please educate the readers. Jefferson and Madison both wanted restrictions on corporations and monopolies, with good reason! Corporate Servitude enabled by aristocrats under the color of law are usurping constitutional precepts, to protect the interest of corporations, not the Lives and Liberties of of Americans. This is enemy from within, Jefferson feared. Servitude to a King or corporations is what the founders feared. What is being proposed is leverage economic servitude to corporations monopolizing “Life.” DISGUSTING!!!!!!!!

    • klynn says:

      Great comment. Great points.

      bmaz, I see you and Mary having some great resources to post on this. In fact, this could make a good salon with a high profile constitutional law expert.

  16. klynn says:

    JamesJoyce @ 47:

    …my “Life” and “Liberty” are not property, to be manipulated for profit at my expense!!

    That would be great on a t-shirt.

    ROTL Thanks for the link. KO pulled out every point made here at EW’s and the Lake. That is helpful that our insights are getting airtime in the MSM.

    With that in mind. I asked yesterday, ”Now that we know the language and concepts in the bill dictated by the industry, what are we going to do about it? In addition to calls and letters, do we as progressives have any written policy document that we could develop and present?”

    Have we taken the best ideas from Wendell Potter, Sam Brock, Dean and Krugman and come up with our own language?

  17. TarheelDem says:

    some of the assumptions for which seem to pretend that insurance companies will not react in any way to the new rules

    Of course the insurance companies will not react in any way to the new rules. They are implemented by a 50-state model regulation created by the National Association of Insurance Commissioners. States will have the opportunity to implement them at their leisure. What is the penalty for the state that just opts out? And insurance companies have been running circles around state insurance commissioners for years.

    When I saw the way that the restrictions on denial of coverage and benefits were written, it was clear that this was enshrining the status quo in legislation–with a few ornaments like the CO-OP program (don’t even dignify it by calling it co-ops) slathered on to make it look like reform.

    And while the GOP wants the status quo, they don’t want to vote for the status quo.

  18. fatster says:

    Pardon me for this, EW, but perhaps your statement “As designed, the co-ops are totally worthless” could be amended to “By design, the co-ops . . . “

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