With health-care reform bogged down over the public plan, centrist Democrats and a few Republicans lit on an old idea – the cooperative.
It’s an intriguing idea. Neither public nor private, they’re member owned. The object isn’t to make a profit but to save money for members and pool resources for a common goal.
Electric co-ops were hatched in circumstances that parallel the present health-care crisis. And they offer some lessons.
In the 1930s, city folks had enjoyed electricity for decades, but 90 percent of rural America was still in the dark. The ice box, washboard and wood-burning stove were appliances, not antiques.
New Mexico, with its vast distances and small population, was more challenged than many states. Electric companies needed large concentrations of customers to make a profit, and it just cost too much to extend lines into the country.
Some argued that electricity was a commodity to be enjoyed by those who could pay for it; others, especially farmers and ranchers, argued that they were entitled to electricity like everyone else. FDR and Congress agreed and launched the Rural Electrification Administration in 1935.
Just 3 percent of New Mexicans had electricity then.
The Administration offered low-interest loans, but utilities weren’t interested. Rural people answered the call by turning to a familiar model – the cooperative. Organizers went door to door signing up members and collecting a $5 membership fee. In 1937 Central Valley Electric in Artesia became the state’s first co-op. It borrowed $164,000, and members got electricity in 1938. Today 20 co-ops serve 21 percent of the state’s utility customers on 85 percent of the land area.
The co-ops have served well, for the most part, but they maintain their federal umbilical cord. The Reagan administration tried repeatedly to pull the plug, and the American Farm Bureau crabbed in 1983 about a “$7.9 billion bail-out.” The co-ops fought back, arguing that their loans were a minuscule part of the national debt.
One astute player at the time was Carl Turner, the New Mexico Rural Electification Cooperative Association’s executive and lobbyist, who cultivated relations with Sen. Pete Domenici and Rep. Manuel Lujan.
Turner liked the air and the politics better in New Mexico than in his native Mississippi. He practiced law in Socorro and became a state representative before joining the Association in 1960. One of his first challenges was keeping 800-pound utility gorillas from cherry-picking the co-ops’ more profitable customers, usually industry. For 29 years Turner was a thorn in the side of utility companies.
Somewhere up there, Turner is smoking his pipe and following this debate with interest.
So how would health-care co-ops work? They would be nonprofit, member-owned organizations that could assemble a network of health-care providers and negotiate payment rates. The federal government would provide up to $6 billion to get them started. In time they would become self-sustaining.
One big assumption is that co-ops could compete directly with private insurers. I’m not so sure. Electric co-ops are usually too small to compete with private utilities. And their remote locations and small customer base limit their growth and keep them tied to the government.
So far, the Left thinks co-ops are Popeye without spinach; the Right thinks co-ops are the public option in drag.
The Heritage Foundation recently argued that co-ops could work if the government allows co-ops to be both nonprofits and insurance mutuals. Federal funding would be unnecessary, the foundation says. I’m not so sure about that either. I doubt that co-ops could simply be bootstrapped, and commercial financing in the current climate is iffy.
Presently, the nation’s 300 health-care cooperatives only negotiate rates on preexisting plans with health-insurance companies; they don’t underwrite and sell health insurance, , according to Business Week. They’re too small to negotiate directly with doctors, hospitals, and drug companies.
Like the reform itself, this proposal needs work.
© New Mexico News Services 2009