The centrist healthcare alternative

Senate Democrats debating how to overhaul America’s healthcare system are moving toward a showdown over whether to create a government-run insurance program or set up a system of cooperatives instead.

A government plan, an idea President Obama endorses, is a centerpiece of the legislation being developed by Sen. Edward M. Kennedy (D-Mass.) and fellow liberals. Many Democrats have indicated they would settle for nothing less, arguing that only a federal plan can compete effectively and offer a real alternative to the private insurers that many blame for denying people coverage and driving up costs.

But a bipartisan group of centrists on the Senate Finance Committee is leaning toward cooperatives, saying that alternative could offer customers more choice without enlarging the government’s role in the healthcare market -- something many Republicans fear.

Generally, cooperatives are owned by their members, are structured as nonprofits and either offer a system of healthcare providers or contract out for their members’ medical services.

Seeking consensus

The bipartisan group, led by finance committee Chairman Sen. Max Baucus (D-Mont.), is planning to present its proposed bill by the end of next week, before the August congressional recess. Senate leaders plan to merge the proposals from Baucus’ panel and Kennedy’s health committee and bring a bill to the Senate floor for debate in the fall.

Baucus and others in his group, including Sens. Charles E. Grassley (R-Iowa) and Kent Conrad (D-N.D.), have argued that their healthcare plan offers the only hope for achieving the kind of consensus that could prevent a GOP-led filibuster.

“Every single Republican is opposed to a public plan,” Conrad said in a recent interview. “If one just does the numbers, it’s very clear to get the votes, you’ve got to find some compromise here.”

Conrad is the leading champion of insurance co-ops, which he has said would be controlled by consumers rather than the government or profit-driven companies that have to answer to their shareholders.

Under his proposal, the federal government would provide “seed money” to help set up the cooperatives, but would require them to sustain themselves with the premiums they charge customers.

Current models

Though once much more popular, several insurance cooperatives exist nationwide in various forms.

In California, the United Agricultural Benefit Trust -- a state-licensed association of growers -- has been offering health insurance to its members and their employees for more than a quarter of a century.

Like a commercial insurer, the trust negotiates rates with a network of doctors and hospitals and maintains reserves to cover the costs of claims from its customers. The trust is owned by its members, who serve on its governing board, and it does not need to turn a profit, leaving more money to cover its members.

More elaborate healthcare cooperatives in Minnesota and the Pacific Northwest employ doctors themselves and own a network of healthcare providers, including hospitals.

Cooperatives often bring together primary-care doctors, specialists, clinics and hospital staffs in a coordinated system of patient care. Many healthcare experts believe that such integration offers the best hope for improving the quality of care while reducing costs.

Mike Foley, a spokesman at Seattle-based Group Health Cooperative, which has about 600,000 members, said the co-op model does generate a different atmosphere. “There is a little extra focus on the patient experience, because the patient is the boss,” he said.

Replicating that nationwide would not be impossible, said Karen Davis, president of the nonprofit Commonwealth Fund, a leading authority on health systems. But, she said, it would probably be more difficult than setting up a government plan, which would have the advantage of using the leverage of the Medicare system to get more providers to participate.

“Setting up new cooperatives is just going to take longer,” Davis said.

And there is still some question among Senate Democrats whether it could be done at all.

“It’s pretty clear what the overwhelming number of Democrats want . . . and it’s a strong public option,” said Sen. Sherrod Brown (D-Ohio).

Others say they have little experience with cooperatives, which are more popular in rural states that have relied on them for electricity and to market agricultural products. “We don’t have agricultural co-ops in Rhode Island,” said Sen. Sheldon Whitehouse (D-R.I.) “It’s not part of our world.”

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noam.levey@latimes.com

janet.hook@latimes.com

James Oliphant in the Washington bureau contributed to this report.