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Reid says health-insurance bill will include opt-out public option

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"It is . . . difficult to quantify precisely how these steps will work together to promote quality and reduce cost growth," he noted Monday on the OMB blog. But he defended the proposals as "what independent analysts and bipartisan groups such as the Engelberg Center at the Brookings Institution all say hold the most promise."

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Moderate Democrats in both the House and Senate are leery of a public insurance plan, calling it an overly aggressive expansion of government that could eventually place new pressures on the federal budget. But Romer cast it as important part of legislation that the White House viewed as critical to reducing not only costs, but also record the budget deficits that are forecast to rise dramatically if federal health-care spending is not brought under control.

In a speech at the liberal Center for American Progress, Romer said a public option would serve as "a potentially important source of cost containment" by offering consumers "a competitive, alternative choice, constraining the ability of insurers to raise premiums, and thus containing the growth rate of costs."

Liberal senators who had threatened to vote against a bill with no public option said they are pleased with Reid's compromise. "An opt-out clause would protect the public option, and would help secure the necessary votes to pass health-care reform, without compromising on the type of coverage or level of affordability," said Sen. John D. Rockefeller IV (D-W.Va.).

Karen Ignagni, president of America's Health Insurance Plans, called the public-option debate "a roadblock to reform" and warned that it would reduce payments to "doctors and hospitals rather than driving real reforms that bring down costs and improve quality."

While Democrats praised its ability to control costs, the opt-out public plan represents a much less dramatic approach to federal coverage intervention than liberal advocates had sought -- or insurance companies had feared. Health-care policy experts said the emerging legislation contains few provisions that would clearly drive down costs.

Even in its current form, health economists said the Cadillac tax is probably the most powerful tool in the bills to reduce costs. The Senate Finance Committee's bill would impose a steep levy, probably about 40 percent, on the most expensive policies, a move that would encourage insurers to stop selling them, employers to stop offering them and workers to stop choosing them.

The result, economists say, would be to shift worker compensation into wages rather than expensive insurance packages and force people to think more critically about the money they spend on doctors and other medical services.

"There's still hope that meaningful reforms can be included, but there's a long way to go," said Mark McClellan, a George W. Bush administration health official who is now at the Brookings Institution, which recently released a compendium of ideas for "bending the cost curve." "Concerns about the cost savings proposals being watered down are very real."


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