The Irony of Seattle's Group Health Coop as Conservative Compromise

Cross-posted DKos, Tue Aug 25, 2009 at 11:59:33 AM PDT

Like most single payer activists, I would LOVE for Seattle's Group Health Cooperative to become the model for the United States health care. And like anybody who actually knows what they are talking about, fell out of my chair laughing when it was proposed as the conservative's disingenuous compromise.

Now don't get me wrong. I am not proposing the the phony Co-op compromise in place of public option is a good idea. In reality, as they propose it, co-ops would be too small, too weak, and too prone to corporate capture to play the competitive role that the combination of a strong public option coupled with a strong widely-open exchange are hoped to play.

But Group Health Co-Op of Seattle is a mostly wonderful example... of socialized medicine!

From last week's front page article in the Seattle Times:

When Mike Kreidler joined Group Health Cooperative as a staff optometrist in 1972, the co-op's reputation for innovation and quality was such that a Soviet delegation toured the Seattle headquarters to learn how a member-run collective managed to flourish in a capitalist country.

As salaried employees, the doctors and nurses at Group Health "paid a lot of attention to patients because they were effectively your bosses," said Kreidler, now the state's insurance commissioner.

Ya' gotta love it: the co-op that the lying right throw out as their alledged compromise to public option, is in fact socialism so good the 1970s Soviets wanted to copy it.

Founded in 1947 by maverick-minded physicians and supporters, Group Health was the first organization in the nation to offer both insurance coverage and comprehensive medical care. The integrated approach was so radical at the time that the King County Medical Society — derisively referring to the co-op as "Group Death" — denied membership to its physicians and blacklisted its patients.

Group Health was one of the original HMOs, in their original conception of being a progressive rational model of care including medical home, before the term HMO took a right-wing corporatist turn.  Remember that it was only during the early 1940s and World War II's wage freeze that health insurance became common at all. Coming out of that period, this was a progressive development and opposed by the then powerful AMA and organized medicine.  In fact their blacklist of it had to be overturned by Courts.

It's a health-maintenance organization (HMO), essentially accepting fixed payments in exchange for providing all necessary medical care for members. Most of that care is delivered through clinics it owns and doctors it employs, although it does contract for hospital care and other specialized services.


By philosophy and structure, Group Health emphasizes preventive medicine centered on primary-care providers.

Its founders regarded traditional fee-for-service medicine as expensive and corrupting. By employing its own doctors and operating its own clinics, Group Health has a built-in incentive to keep quality high and costs low, said Scott Armstrong, the co-op's chief executive.

The co-op takes a deliberate, evidence-based approach to coverage decisions. When federal authorities ordered a massive recall of the popular arthritis drug Vioxx in 2004 because of elevated risks of heart attacks and strokes, it was a nonissue for Group Health. The co-op had never added Vioxx to its list of covered drugs.

Let's summarize all of that shall we:

  1. Co-op owned by the employees and patients.
  1. Not for profit and not publicly traded; no stock market demands to increase quarter-on-quarter profits.
  1. Physicians and staff are employees, on salary. No entrepreneurial minded physicians need apply. In fact, the way this actually works is not just flat salary, but a salary plus incentive bonus, with the incentives being a mix of quality of care and productivity (generally capped).
  1. Forced to follow objective evidenced-based clinical practice guidelines, with selected formularies and allowable procedures.
  1. Global budgeting and planning.

It is, in principal the best of socialized medicine, similar to the VA in America and the British NHS. I am sure that is what the Repuglicans had in mind.

Its dual role as an insurer and a health provider shapes its economic motives. Last year, the co-op shuttered its remaining hospital, in Redmond, saying it didn't make financial sense to keep the facility open as hospital stays grew shorter. Except for its maternity ward on Capitol Hill, Group Health now relies solely on partner hospitals to provide inpatient care.

"If your [only] business is hospitals, then you have to recruit patients," explained Mike Foley, a Group Health spokesman.

In other words, as both insurer and provider, their incentives are different then either what a for-profit insurance companies' incentives are (deny care to make profit) or a hospital's incentives are (fill beds with paying patients only, maximize billable charges).

State Rep. Eileen Cody, D-Seattle, chair of the House Health Care Committee, has seen firsthand how different medicine can be when physicians aren't paid for each visit or procedure. Cody, a neuroscience nurse who has worked at Group Health for 31 years, said the co-op's doctors and nurses routinely consult with patients via e-mail or telephone.

"The doctors don't feel like they have to bring people in all the time," she said.

It is also ahead of the curve on high tech innovation:

Group Health's integrated nature gave it the means and the incentives to become one of the nation's leading adopters of electronic health records. Its members enjoy conveniences like secure e-mail exchanges with their doctors and online appointments unavailable to most Americans.

And the trove of electronic medical and billing data gives the co-op a bird's-eye view of each patient's medical care as well each doctor's performance.

Given that this is a teeny tiny carve-out within the reality of the U.S. health system, this all works better with an educated and relatively well-off patient clientele.

But ascertaining whether all this leads to less-costly care is difficult. The average premiums for Group Health policies are higher than for its main competitors. But that may be because the co-op generally sells richer benefits plans or has relatively few leaner individual policies.

Complaint rates against Group Health are less than a third of that for Premera or Regence [the two largest insurers in the area; Group Health is number 3], according to state insurance records. The September issue of Consumer Reports ranks Group Health as the nation's best HMO, based on member-satisfaction surveys.

But Group Health hasn't escaped some of the same pressures buffeting the health-care industry. In recent years, the co-op has raised its premiums sharply to offset higher claims costs. Last month, for instance, rates for Group Health individual policies jumped by an average of 13 percent. That followed a 9.7 percent increase the year before.

Still, Group Health premiums generally have risen more slowly than those of Regence or Premera, according to state records.

So what about Co-ops as an increased part of the mix of options?

Proponents of the co-op option are banking on the nonprofit, consumer-first ethos of cooperatives keeping a lid on costs and spurring health plans and providers to join in collaborative networks.

Lyle Mercer, who served on Group Health's board of trustees for more than two decades, is skeptical.

Mercer, 88, has been a member of the co-op since its inception. His wife, Barbara, is a former Group Health nurse.

Mercer said Group Health has moved far away from its democratic origins. A fraction of 1 percent of the co-op's members even bother to vote for the board of trustees, the governing body.

In many ways, Mercer said, Group Health has become indistinguishable from any successful corporation, from its sleek new headquarters on South Lake Union to [Group Health CEO] Armstrong's $1.1 million annual pay package.

Creating health co-ops, after all, could involve building or assembling new organizations from scratch, including management, medical staff, clinics and customers.

And that "just doesn't happen overnight...  Group Health has had 60 years" to gain 600,000 members.

If co-ops are so great, "why aren't there more?" asked Mercer, who believes that a government-run plan would do more to help the millions who have no insurance or are struggling to afford coverage.

He believes only a public plan would be powerful enough to limit health-care costs without the overhead of multiple co-ops.

Cody, the lawmaker and Group Health nurse, also does not believe co-ops are the best blueprint for revamping health care.

"I just can't see it being a national answer," she said.

On the other hand, there is something in the Co-op HMO model that really truly is better than just more access to public fee-for service insurance:

Armstrong, for his part, thinks a public plan would offer nothing beyond the ability to negotiate lower payments to doctors and hospitals. He says it wouldn't address a fundamental problem: a fee-for-service culture that rewards providers for doing more and more procedures, an approach rejected by Group Health at its founding.

The co-op option, Armstrong said, is "the best idea I've heard so far."

Of course, controlling fee-for-service, shifting incentives to evidenced based medicine, use of clinical practice guidelines, limiting formularies and procedures to things proven to work and be safe, use of global budgets and planning, etc... all of that is a small part of the Obama-Democratic proposal... and a much larger and stronger part the single payer proposal. And all are opposed by the same right wing and corporate interests that threw out the disingenuous.

So are co-ops a model to emulate? Yes, indeed, in place of our entire current system. But not as a pre-crippled tiny appendage.

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As a "closed-shop" staff-model HMO, Group Health provided great preventive care, affordably. That is, if you were OK with choosing one of their primary-care docs as your PCP. If you already have a doc, one who wasn't on the GHC staff, you weren't able to join the cooperative.
In trying to add patients without relying in debt consolidation, GHC expanded to encompass other models of HMOs, with the usual "in-network/out-of-network" levels of reimbursement and coverage. The staff-model core remains, but it's beginning to look more and more like a garden-variety managed-care plan.
The co-op model would work if every provider in the country was on the staff of the co-op. Otherwise, I'm not sure.