Reid says bill will include a public option
Approach lets states opt out Moderates wary of government involvement

By Shailagh Murray and Lori Montgomery
Washington Post Staff Writer
Tuesday, October 27, 2009

Senate Majority Leader Harry M. Reid announced Monday that he will include a government-backed insurance plan in the chamber's health-care reform legislation, a key concession to liberals who have threatened to oppose a bill without such a public option.

Reid's decision was a reversal from two weeks ago, when the Nevada Democrat appeared inclined to set aside the idea -- among the most divisive in the reform debate -- in an attempt to avoid alienating party moderates. Doubts remain about whether he has the votes to guarantee passage, but he said he concluded that in the interest of bringing the strongest possible bill to the Senate floor next month, adding a public option was a risk worth taking.

"We've spent countless hours over the last few days in consultation with senators who've shown a genuine desire to reform the health-care system," Reid said. "And I believe there's a strong consensus to move forward in this direction."

The Senate provision would give states the right to opt out of a government plan, though Reid spokesman Jim Manley was unable to provide further details, describing the legislative language as a work in progress that has yet to be scrutinized by the Congressional Budget Office. Manley said Reid delivered a menu of proposals to the CBO for review and will make a final decision about what the Senate measure will include once he receives cost estimates for the various policies, which could come within a week.

"When we have a final bill, everyone will have an opportunity to see and read what's in it," Manley said.

Engineered by Sen. Charles E. Schumer (D-N.Y.) as a compromise between moderates who want a smaller government role and liberals who prefer a single-payer system, the opt-out proposal is so new to the reform debate that it was never put to a vote during weeks of deliberations by two Senate committees.

Its inclusion in the legislation will cost the support of Sen. Olympia J. Snowe (Maine), the only Republican to endorse President Obama's reform efforts to date. As a result, the opt-out approach will need the backing of all 60 Senate Democrats to protect it from a Republican filibuster. Snowe said Monday that she is "deeply disappointed" by Reid's move.

The risk of losing Snowe made Obama reluctant to support Reid's gambit, but White House spokesman Robert Gibbs told reporters Monday that the president is "pleased that the Senate has decided to include a public option for health coverage," while noting the measure's potential to hold "insurance companies accountable through choice and competition."

Despite the uncertainty, Reid said that omitting a public option would leave too few guarantees that the health coverage Congress would require Americans to buy would be affordable. Democrats have already significantly weakened major cost-containment provisions in the House and Senate bills. A proposal to end the tax-free treatment of employer-provided health benefits -- the most expensive loophole in the tax code -- has been scaled back in the Senate to become a tax only on the most expensive policies. And neither chamber has fully embraced an independent commission conceived to dilute Congress's powers to determine Medicare spending.

In a speech Monday, Christina Romer, chairman of the president's Council of Economic Advisers, listed a public plan among a series of provisions under consideration on Capitol Hill that the White House considers likely to reduce the long-term costs of health care.

Romer also said that taxing high-cost, or "Cadillac," insurance policies -- an idea many labor unions adamantly oppose -- is "probably the number one item" likely to stem rising costs, because it would encourage employers and their workers to choose cheaper policies. An independent Medicare commission also would help to drive long-term costs, Romer said.

Peter Orszag, director of the Office of Management and Budget, also argued that the excise tax and Medicare panel would help in cost containment.

"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."

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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