Health debate shifting to public vs. private

Democrats seemed disorganized and shocked as financial analysts slapped surprisingly high price tags on their plans. Republicans jeered when the health committee’s incomplete bill weighed in at $1 trillion - to insure a relatively paltry 16 million people.

Senate Finance Committee chairman Max Baucus, who looked ashen and spent on the day that word circulated that his draft proposal would cost $1.6 trillion, rushed to pare back his bill to make it cheaper. House Democrats unveiled a plan that had no price tag.

A trio of former Senate minority leaders pleaded for a bipartisan compromise, even as Senator Tom Harkin, Democrat of Iowa, mused that too much compromise might leave the country with “even more of a convoluted system than it has now.’’

Senator Chris Dodd, who has taken over for health committee chairman Senator Edward M. Kennedy, who is battling brain cancer, tried to appear resolute Thursday as a marathon series of votes continued. “We’ve made progress,’’ he said, “albeit it’s slow.’’

It seemed clearer than ever last week that the major stumbling block for the weeks ahead will be whether to create a new public insurance option to compete with private insurers.

President Obama campaigned on a promise to make a government healthcare plan available for the uninsured to buy into, and Democrats generally support the idea, on the belief that it would offer lower premiums and force private insurers to do the same.

Republicans generally oppose it, believing that it would cause the private insurance industry to collapse, resulting in a single-payer system with no choices for consumers. Moderate Democrats and a few Republicans might sign on, depending on how the public option is structured.

Underscoring the delicate politics involved, after working for the better part of a year to find a compromise, the Democratic leaders of both Senate committees in charge of healthcare were still scrambling last week to determine whether enough support existed to create a public option.

A government health insurance option, proponents say, would serve three basic purposes. First, it would provide another choice for consumers, especially in areas of the country where there aren’t many insurance options available. It would also exert pressure on private insurers to keep their costs down. Third, proponents say, a public option could offer lower premiums. How much lower depends on how much power Congress is willing to allow it to have - and that is the political hot button.

The strongest kind of a public plan are the versions proposed by Senator Jay Rockefeller, Democrat of West Virginia, and House Democrats, and favored by many liberals. It would create a new national Medicare-style program, competing with private alternatives in a national insurance exchange open to people without workplace coverage. At least initially, a strong public option would set doctor payments at slightly above Medicare rates, but below what most insurance plans pay, which would help keep premiums low.

“If a public plan is designed properly, it will substantially help reduce the amount of money needed to finance reform,’’ said Jacob Hacker, co-director of the Center for Health, Economic and Family Security at the University of California at Berkeley.

But as the American Medical Association made abundantly clear to Obama last week, doctors and hospitals would fight such a plan because they believe they would be underpaid. Insurers argue they could not possibly survive competition with such a powerful competitor, especially since doctors and hospitals would presumably try to compensate by charging private insurers more. (“Cost-shifting,’’ most health policy gurus agree, is already happening - Medicare and Medicaid underpay, so providers overcharge private plans, which drives up their premiums.)

Republicans, and many moderate Democrats, say a strong public option would let the hand of government reach too far into yet another industry. They fear that if the private insurance industry collapses, the country will be left with a single-payer system and consumers would be left without choices.

“A government-run plan would dismantle employer-based coverage, add additional liabilities to the federal budget, and turn back the clock on efforts to improve the quality and safety of patient care,’’ said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the health insurance lobby, in a statement Friday after House Democrats unveiled their plan.

In a struggle to find a compromise, a parade of alternatives is emerging. One is a so-called weak public option. This idea aligns with principles put forth by Senator Charles Schumer, Democrat of New York, in hopes of finding a compromise, though it has not been incorporated into a larger healthcare bill.

Organized at the state level, a weak public option would operate much like self-insured state employee plans: It could still take advantage of its size to negotiate for lower rates, and, unlike most private insurers, it would not have to earn a profit. Another version of a weak public option might mirror the Massachusetts Commonwealth Care program, where a government entity chooses private insurers through a bidding process to offer insurance products for the uninsured to buy through a state or national exchange.

“It’s a credible check’’ on the private insurance industry, said Len Nichols, director of the New American Foundation’s health policy program, who wrote an influential paper proposing this idea as a compromise. “It forces competitive bidding, especially where there’s not much competition now.’’

But moderate Republicans like Senator Charles Grassley the ranking Republican on the Senate Finance Committee who is negotiating with Baucus on a bipartisan bill, does not want the government to be involved at all.

So North Dakota Democrat Kent Conrad has stepped forward with another alternative to a public option. His proposal, which the Senate Finance Committee is on the verge of embracing, would allow for government-chartered but privately run nonprofit insurance cooperatives.

The basic idea would be to have the federal government provide start-up money but then let community governing boards take over, designing insurance products and negotiating with providers. The boards would also assume the risk, like any other insurance company.

“It’s probably not too far removed from Republican philosophy anyway that we ought to have more competition,’’ Grassley told Iowa reporters in a conference call last week. “And if it’s all done entirely within the private sector, you know, it doesn’t seem to me it’s got the faults that you have . . . by having the government institute something.’’

But for liberal Democrats, the co-op idea is surrender. The activist group MoveOn.org has called on its members to contact their senators expressing disapproval, and Service Employees International Union president Andrew Stern, in an interview with The New Republic, dismissed it as a distraction that would fail to offer consumers better alternatives.

“It just seems to me that we’re into distractions now,’’ he said, “and we don’t really want to confront the real question, which is that insurance companies need real competition.’’