Senator Jay Rockefeller was excluded from the bipartisan group of Finance Committee members who worked on the bill Chairman Max Baucus unveiled on Wednesday, so he spent part of his summer vacation researching the fake public option favored by some “gang of six” members. He reported on his findings in an open letter to Baucus and ranking member Chuck Grassley. You should click through and read Rockefeller’s whole letter, but here are some excerpts:

“First, there has been no significant research into consumer co-ops as a model for the broad expansion of health insurance. What we do know, however, is that this model was tried in the early part of the 20th century and largely failed. As the USDA states in its response letter, ‘Government support for the cooperative approach to delivering universal health care was reduced during [World War II] and terminated afterward.’ This is a dying business model for health insurance. Moving forward with health insurance cooperatives would expose Americans, who are hoping for a better health care system, to a health care model that has already been tried and largely failed in the vast majority of the country.

“Second, there is a lack of consistent data about the total number of consumer health insurance cooperatives in existence today, and there have been no analyses of the impact of existing health insurance cooperatives on consumers.

“Third, all of the consumer health insurance cooperatives identified by the [U.S. Department of Agriculture] and [National Cooperative Business Association] operate and function just like private health insurance companies. Therefore, it is unclear how expanding consumer health insurance cooperatives would actually achieve greater affordability for consumers or bring about greater competition in the private market…

The Congressional Budget Office doesn’t expect the co-ops to affect the cost of the Baucus bill:

(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.)

The failure of co-ops to provide competition in Iowa bears out the CBO’s expectations:

In the 1990s, Iowa adopted a law to encourage the development of health care co-ops. One was created, and it died within two years. Although the law is still on the books, the state does not have a co-op now, said Susan E. Voss, the Iowa insurance commissioner.

Wellmark Blue Cross and Blue Shield collects about 70 percent of the premiums paid in the private insurance market in Iowa and South Dakota.

It’s past time for President Obama to stop sending out White House staff and cabinet secretaries to signal that Obama might accept cooperatives as an alternative to a public health insurance option.

Here’s hoping that even in the absence of presidential leadership, Rockefeller can get strong amendments attached to the Baucus bill or make sure it never gets out of the Senate Finance Committee.

I wasn’t living in Iowa during the 1990s, so I had never heard about this episode before reading today’s New York Times:

Hopes for co-ops may also be tempered by the experience of Iowa, home to Senator Charles E. Grassley, the senior Republican on the Finance Committee, which is trying to hash out a bipartisan health care proposal.

In the 1990s, Iowa adopted a law to encourage the development of health care co-ops. One was created, and it died within two years. Although the law is still on the books, the state does not have a co-op now, said Susan E. Voss, the Iowa insurance commissioner.

Wellmark Blue Cross and Blue Shield collects about 70 percent of the premiums paid in the private insurance market in Iowa and South Dakota.

To become established, a new market entrant would have to offer lower prices or better services, Ms. Voss said, adding: “Wellmark has a huge advantage. They already have contracts with practically every doctor in the state.”

I am shocked, shocked to learn that senators hauling in huge money from the insurance industry want to scuttle plans for a public health insurance option in favor of cooperatives that would not provide any meaningful competition in the marketplace.

House and Senate Democrats need to stand firm against a fake public option. Contact your members of Congress, Stand With Dr. Dean or sign up with Health Care for America Now to advocate for a real public option.