Correction to This Article
The original photo caption and article said the bill was reduced from a $1.6 billion pricetag to $1.2 billion. The correct amount is a reduction from $1.6 trillion to $1.2 trillion.
The Debate

'Public Option' May Be Health-Care Bill's Highest Hurdle in Senate

The Senate Budget Committee chairman, Sen. Kent Conrad (D-N.D.), said that the price tag on the bill is now closer to $1.2 trillion than $1.6 trillion.
The Senate Budget Committee chairman, Sen. Kent Conrad (D-N.D.), said that the price tag on the bill is now closer to $1.2 trillion than $1.6 trillion. (By Melina Mara -- The Washington Post)
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By Shailagh Murray
Washington Post Staff Writer
Wednesday, June 24, 2009

The "public option" has emerged as the crux of the unfolding debate over health-care reform on Capitol Hill, an ideological flash point that has become perhaps the greatest challenge for the Senate negotiators attempting to reach a compromise that could actually become law.

Even as senators make strides in reducing the emerging legislation's overall cost, the notion of disrupting the private insurance market by injecting federal competition has stoked passions on both sides and created the kind of wedge that President Obama and Democratic leaders had sought to avoid in the debate.

On the left, the group is running ads criticizing Sen. Mary Landrieu (La.), a moderate Democrat, for voicing objections to a government-sponsored plan. Former Democratic National Committee chairman Howard Dean will lead a coalition of advocacy groups to Capitol Hill on Thursday to rally for the cause. On the right, Senate Minority Leader Mitch McConnell (R-Ky.) has delivered at least 10 speeches in recent weeks blasting the idea, and has pledged unified Republican opposition if Democrats proceed. That could spell stalemate for the health-care bill in the Senate, where the minority has numerous options for obstructing bills.

Private insurers warned in a letter last week to Senate Health Chairman Edward M. Kennedy (D-Mass.) that expanding the government's role in health care would lead to "devastating consequences," including steep reductions in employer-sponsored health coverage. But in a news conference yesterday, Obama countered that a federal presence in the marketplace is the only way to ensure that all Americans will have access to affordable coverage and that spiraling health-care costs will be contained.

"Just conceptually, the notion that all these insurance companies who say they're giving consumers the best possible deal, if they can't compete against a public plan as one option, with consumers making the decision what's the best deal, that defies logic," Obama said.

A bipartisan group of senators is working on one possible alternative, a national network of member-run cooperatives. One possible model would create a national structure with state affiliates, funded with at least $3 billion in federal start-up money. The cooperatives also would have the authority to pool their purchasing power. Senate Budget Committee Chairman Kent Conrad (D-N.D.), a co-op advocate, said the goal was to make the entities "strong, significant competitors to private insurance."

There appears to be little room for compromise. The more bargaining power and other advantages that co-ops are granted, the less appealing they become to Republicans, many of whom had welcomed the concept of a co-op as promising. And the more the co-ops' authority is diluted, the more Democrats are likely to protest.

"I'm losing confidence that Senate Republicans will ever agree with the types of changes to a co-op that would make it a viable substitute," said Sen. Charles E. Schumer (D-N.Y.). "We can only bend so much to win over opponents of health reform. We cannot say we're putting something else out there and not have it do the job."

Obama would not rule out supporting an alternative approach. "We are still early in this process," he said yesterday. "We have not drawn lines in the sand, other than that reform has to control costs and that it has to provide relief to people who don't have health insurance or are underinsured."

On other provisions, Senate negotiators appeared to be moving forward. Members of the Finance Committee said they had drastically reduced an initial $1.6 trillion price tag for the 10-year bill that the panel will debate in July. Conrad said the cost is now "in the range" of $1.2 trillion, closer to the $1 trillion target set by Finance Committee Chairman Max Baucus (D-Mont.).

The leaner legislation is not likely to broaden its appeal. Conrad said much of the savings in the finance bill had come from altering subsidy levels for individuals who do not have health insurance, but that the legislation would still require people to purchase coverage. He said the committee is deliberating four approaches to "pay or play" language that would require employers to offer coverage or subsidize costs of a plan purchased on the open market, through a new health-care "exchange."

Included as part of the exchange's menu of coverage options would be the public plan, whether co-op-run or administered directly by the federal government. In addition to its role as a fallback to private insurance, the plan would possess negotiating authority that would effectively force a radical overhauling of the health-care provider system, to lower costs, improve quality, and better target major diseases.

The finance bill also would raise about $300 billion by taxing a portion of the value of health benefits that millions of Americans receive through their employers. That proposal is drawing increasingly loud opposition, including among Democrats, who fear a potential political backlash.

Over the past week, Sen. Ron Wyden (D-Ore.) has lobbied for a different approach that would generate a little more revenue, according to the nonpartisan Joint Committee on Taxation. Instead of taxing employer benefits above $17,000, as Baucus has proposed, Wyden wants to convert the current tax-free treatment of employer-sponsored benefits into a generous tax credit so workers can shop for their own insurance plan.

Baucus said he is optimistic about the pace and direction of negotiations, but Democratic leaders said they are scaling back expectations for reaching the bipartisan deal that many lawmakers, along with Obama, had set out to reach.

"We want to do a bipartisan bill," said Senate Majority Leader Harry M. Reid (Nev.). "That's not saying we need half the caucus to come with us. We need about three or four Republican senators to join with us to have a bipartisan bill."

Staff writers Lori Montgomery and Perry Bacon Jr. contributed to this report.

© 2009 The Washington Post Company