Menus Subscribe Search

History and Health Cooperatives

• February 12, 2010 • 5:00 AM

Depression-era health solution may find new favor in the modern American struggle for health care change.

When the U.S. Senate Finance Committee was wrangling to draft a health reform bill last summer, Sen. Kent Conrad (D-N.D.) suggested pushing aside the controversial public option in lieu of a system of health cooperatives. Many heads were raised: What was a health cooperative and could it address the myriad problems and complexities of patient care in the 21st century?

Despite a bevy of criticism and doubt from many Democrats leaning more to the left than most members of the Finance Committee, health cooperatives were included in the committee draft and survived the final cut of the Senate bill.

While the health care bill was all but confirmed dead after the election of Republican Scott Brown to fill a traditionally Democratic Senate seat from Massachusetts, recent stirrings of the near-cold cadaver have some health reform supporters hoping for one more chance. Speaker of the House Nancy Pelosi has suggested she might have the votes to use a budget reconciliation process to blend the House and Senate bills and pass comprehensive reform. It’s likely that cooperatives would survive such a process, but to most people, they remain a vague but faintly hopeful concept, even as the director of research for the poster child of modern co-ops suggests that expecting co-ops to solve nationwide problems of access is “a tall order.”

Although little known, they are not new on the American landscape. Several are operating today and health cooperatives provided care before health insurance became common; during the Great Depression 39 cooperatives served about 650,000 people.

A paper by a physician who has studied health care during that time offers both perspective and a bit of country wisdom.

“There’s something about the transition in economic status that worsens people’s health,” said Michael Grey, chief of medicine at the Hospital of Central Connecticut and author of “Health Insurance Cooperatives: Lessons from the Great Depression,” which appeared last month in the Journal of the American Medical Association.

He could have been talking about today — a Harvard University study found that in 2007 health costs were behind 62 percent of American bankruptcies — but Grey was referring to the health of rural Americans in the 1930s.

When the New Deal’s Farm Service Administration found that half of all loan defaults by rural farmers were due to ill health, it came up with a solution: Bundle health care costs into farm loans and create health care cooperatives. At that time, the insurance concept was new to medicine, but the idea took hold.

Physicians participating in the program provided basic outpatient care and billed the cooperative for their services. Often a local judge was chosen as a trustee, and that person oversaw administration of the fund.

The participating doctors received about 65 percent of submitted bills, which at that time was much more than they would have received otherwise, Grey told Miller-McCune, and about what doctors receive today when billing Medicare for services.

In part due to the success of the cooperatives, 90 percent of all FSA loans were paid in full, Grey said.

The cooperatives waned in the late 1940s when leaders in the field thought the best medical care would come from supporting a national health insurance model. They pinned their hopes on President Harry Truman’s health care proposal crafted in 1945.

The first president to propose a national approach to health care, Truman’s plan tried to address a lack of doctors in rural areas and access to doctors and hospitals for lower-income communities.

The more controversial aspect of the bill was a proposed national health insurance plan run by the federal government that would be open to all Americans, but would remain optional. The proposal reached Congress in the form a of a Social Security expansion bill and was quickly attacked by the American Medical Association, which characterized the approach as “socialized medicine.”

The bill went down in flames in 1947.

Flash forward six decades. Health cooperatives emerge in the summer of 2009 as an alternative to a nationally administered public health option. This time both the AMA and the American College of Physicians favor passage (although the AMA amended its position recently, saying it would withdraw support if Congress doesn’t address Medicare rates paid to physicians).

The question is, can health cooperatives work?

Currently there are a handful of consumer health cooperatives in the country — in Washington state, Oregon, Wisconsin and Minnesota — serving an estimated 2 million members. Today’s cooperatives act as the insurer, negotiating with providers to get the best services and rates for their members; many own their own hospitals and care centers.

Most have been in operation for decades, and all have been growing in recent years.

Grey believes they could work again on a national basis but only if allowed to operate like other consumer co-ops, such as credit unions, and if they achieve a large scale “so they can leverage cost savings and also have enough clout to push for best practices.”

Currently, most co-ops are administrated through state law, and many states do not confer nonprofit, tax-exempt status on them. Such a designation allows the cooperative to plow profits back into capital improvements, lower premiums or expanded benefits, Grey said.

Size and the time needed for large entities to emerge are the other big issues. “It would take some time — and an effort on the part of Congress to level the playing field,” Grey said, adding that national legislation should also allow cooperatives to extend across state borders.

The bill passed by the Senate Finance Committee allocates $6 billion for grants and loans to cover start-up costs and specifies that multiple awards not be made to states until all 50 states and the District of Columbia have had a chance to apply. However, it leaves it to the states to determine nonprofit status.

One cooperative that has been championed by those backing the cooperative model is Seattle’s Group Health. Serving about 600,000 members in Washington state and northern Idaho, the cooperative dates to 1947; today its network of services includes 26 primary care centers, six specialty care units and one hospital.

In a paper Eric Larson, executive director of Group Health Research Institute, recently published in The New England Journal of Medicine, he describes innovations in patient care, success in conversion to electronic medical records and salaried doctors using a team approach to healing. But in that same paper “cost” reared its ugly head: In recent years Group Health’s premiums have risen at nearly the same rate as for-profit insurers.

Larson said Group Health “aligns its price structure with those of competitors, because in the absence of insurance-market reform, not doing so would put it in an unsustainable, disadvantaged position of attracting sicker, higher-risk patients.”

Grey acknowledged that large health cooperatives “have come to look more like the Aetnas” but said the only way to address the cost problem is for government to subsidize co-op members on a graduated scale.

A more fundamental problem, he said, is that to reduce costs and keep health care from reaching 20 percent of gross domestic product, “the only real solution is that we spend less for health care. You either provide less or pay less for what you’re providing. Either way someone is getting less.” (In the U.S. today, about 17 percent of GDP goes toward health care; for countries with universal coverage, 10 percent is the norm.)

Grey said expectations and Americans’ penchant to always “want more” are at the root of some of the problems today. In the 1930s, “patients had more modest expectations of what they would get from their doctors.

“They wanted to go and they wanted to feel better, but there wasn’t a presumption that they could be cured, or that there was a pill to take that would make it go away, or that there was a surgery or an imaging study. So the expectations for everybody now are so much higher than 70 years ago, and I think a lot of that is driven by real changes — advances in medicine — that are positive change. But that’s come at a price literally and figuratively.”

Grey said some sort of rationing of care will likely have to be accomplished in order to lower costs. “Isn’t there some point where you have to balance the benefits for the few versus the cost for the many?” he asked.

“The real question is whether America is ready for that kind of conversation. It happens in all the other Western countries in the world. But in the United States we have such a difficult time tackling that in an honest way.”

Sign up for our free e-newsletter.

Are you on Facebook? Become our fan.

Follow us on Twitter.

Add our news to your site.

Joan Melcher
Joan Melcher is a freelance writer and editor living in Missoula, Montana. Her work ranges from travel magazine articles to stories on breaking research.

More From Joan Melcher

A weekly roundup of the best of Pacific Standard and PSmag.com, delivered straight to your inbox.

Recent Posts

August 1 • 4:00 PM

The Gaps in Federal Law That Are Making It Easy for Lenders to Sue Soldiers

Courts are required to appoint attorneys for service members if they are sued and can’t appear. But the law says little about what those lawyers must do. Some companies have taken advantage.


August 1 • 2:22 PM

Warmer Parenting Makes Antisocial Toddlers More Empathetic

Loving care may be the best antidote to callous behavior in young children.


August 1 • 2:00 PM

The Federal Health Insurance Exchange Remains Surprisingly Active

New federal data, obtained by ProPublica under the Freedom of Information Act, shows nearly one million insurance transactions since mid-April.



August 1 • 6:00 AM

The Idea of Racial Hierarchy Remains Entrenched in Americans’ Psyches

New research finds white faces are most closely associated with positive thoughts and feelings.


August 1 • 4:00 AM

How and Why Does the Social Become Biological?

To get closer to an answer, it’s helpful to look at two things we’ve taught ourselves over time: reading and math.



July 31 • 4:00 PM

Thank You for Your Service: How One Company Sues Soldiers Worldwide

With stores near military bases across the country, the retailer USA Discounters offers easy credit to service members. But when those loans go bad, the company uses the local courts near its Virginia headquarters to file suits by the thousands.


July 31 • 2:00 PM

A New York State of Fracking

Court cases. A governor’s moratorium. Pending health study. A quick guide to the state of fracking in New York.


July 31 • 11:17 AM

How California Could Power Itself Using Nothing but Renewables

We don’t need fossil fuels.


July 31 • 8:00 AM

Should Athletes Train Their Memories?

Sure, but it probably won’t help.


July 31 • 6:00 AM

Universal Basic Income: Something We Can All Agree on?

According to Almaz Zelleke, it’s not a crazy thought.


July 31 • 4:00 AM

Medical Dramas Produce Misinformed, Fatalistic Viewers

New research suggests TV doctor dramas leave viewers with skewed impressions of important health-related topics.


July 30 • 4:00 PM

Still the World’s Top Military Spender

Although declining in real terms, the United States’ military budget remains substantial and a huge drain on our public resources.



July 30 • 2:04 PM

The Rise of the Nuisance Flood

Minor floods are afflicting parts of Maryland nearly 10 times more often than was the case in the 1960s.


July 30 • 2:00 PM

The (Mostly Awful) Things You Learn After Investigating Unpaid Internships for a Year

Though the intern economy remains opaque, dialogue about the role of interns in the labor force—and protections they deserve—is beginning to take shape.


July 30 • 12:00 PM

Why Coffee Shortages Won’t Change the Price of Your Frappuccino

You’re so loyal to Starbucks—and the company knows it—that your daily serving of caffeine is already marked up beyond the reach of any fluctuations in supply.



July 30 • 10:00 AM

Having Difficult Conversations With Your Children

Why it’s necessary, and how to do it.


July 30 • 8:00 AM

How to Make a Convincing Sci-Fi Movie on a Tight Budget

Coherence is a good movie, and its initial shoot cost about the same amount of money as a used Prius.


July 30 • 6:00 AM

Are You Really as Happy as You Say You Are?

Researchers find a universal positivity bias in the way we talk, tweet, and write.


July 30 • 4:00 AM

The Declining Wage Gap for Gay Men

New research finds gay men in America are rapidly catching up with straight married men in terms of wages.


July 30 • 2:00 AM

LeBron James Migration: Big Chef Seeking Small Pond

The King’s return to Cleveland is a symbol for the dramatic shift in domestic as well as international migration.


July 29 • 4:00 PM

Are Children Seeking Refuge Turning More Americans Against Undocumented Immigrants?

A look at Pew Research Center survey data collected in February and July of this year.


Follow us


Subscribe Now

Warmer Parenting Makes Antisocial Toddlers More Empathetic

Loving care may be the best antidote to callous behavior in young children.

The Rise of the Nuisance Flood

Minor floods are afflicting parts of Maryland nearly 10 times more often than was the case in the 1960s.

America’s Streams Are Awash With Pesticides Banned in Europe

You may have never heard of clothianidin, but it's probably in your local river.

How Textbooks Have Changed the Face of War

War is more personal, less glorious, and more hellish in modern textbooks than in the past. But there’s still room for improvement.

The Big One

One in two full-time American fast-food workers' families are enrolled in public assistance programs, at a cost of $7 billion per year. July/August 2014

Copyright © 2014 by Pacific Standard and The Miller-McCune Center for Research, Media, and Public Policy. All Rights Reserved.