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Obama may drop public insurer option

Appears open to nonprofit cooperative

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By Sheryl Gay Stolberg
New York Times / August 17, 2009

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PHOENIX - The White House, facing increasing skepticism over President Obama’s call for a public insurance plan to compete with the private sector, signaled yesterday that it was willing to compromise and would consider a proposal for a nonprofit health cooperative being developed in the Senate.

The “public option,’’ a new government insurance program akin to Medicare, has been a central component of Obama’s agenda for overhauling the health care system, but it has also emerged as a flashpoint for anger and opposition. Health and Human Services Secretary Kathleen Sebelius said the public option was “not the essential element’’ of the overhaul, and raised the idea of the co-op during an interview on CNN.

And Obama himself sought to play down the significance of the public option at a town-hall-style meeting Saturday in Grand Junction, Colo., when a university student challenged him on how private insurers could compete with the government. After strongly defending the public plan, Obama suggested that he, too, viewed it as only a small piece of a broader initiative aimed at controlling costs, expanding coverage, protecting consumers, and making the delivery of health care more efficient.

“The public option, whether we have it or we don’t have it, is not the entirety of health care reform,’’ the president said. “This is just one sliver of it, one aspect of it.’’

For Obama, giving up on the public plan would have both risks and rewards. The reward is that he could punch a hole in Republican arguments that he wants a “government takeover’’ of health care, and possibly win some Republican votes. The risk is that he could alienate liberal Democrats, whose support he will also need to pass a bill.

Yesterday, Senator Jay Rockefeller, Democrat of West Virginia, reiterated his support for the public option.

“I believe the inclusion of a strong public plan option in health reform legislation is a must,’’ he said in a statement. “It is the only proven way to guarantee that all consumers have affordable, meaningful, and accountable options available in the health insurance marketplace.’’

White House officials say the president has not abandoned the idea of a pure government plan, a central feature of the legislation moving through the House. But Sebelius’s comments did seem to open the door, and at least one Democrat close to the White House said the administration was well aware that, with moderate Senate Democrats opposed to the idea of a public plan, Obama might have to give up on the notion to get a bill through.

“The president is going to continue to try to persuade everyone of the great value of having a true public plan,’’ said this Democrat, who spoke on the condition of anonymity to avoid discussing strategy publicly.

“But at the end of the day, I believe he recognizes that there are other, arguably less effective, ways to achieve greater coverage, more choice, better quality, and lower cost in our system.’’

In an interview yesterday, David Axelrod, Obama’s senior adviser, said the president remained convinced that a public plan was “the best way to go.’’ But Axelrod said the nuances of how to develop a nonprofit competitor to private industry have never been “carved in stone.’’

On Capitol Hill, the Senate Finance Committee is expected to produce a bill that features a nonprofit co-op. The author of the idea, Senator Kent Conrad, Democrat of North Dakota, the chairman of the Senate Budget Committee, predicted yesterday that Obama would have no choice but to drop the public option.

“The fact of the matter is, there are not the votes in the United States Senate for the public option,’’ Conrad said, speaking on “Fox News Sunday.’’ “There never have been. So to continue to chase that rabbit, I think, is just a wasted effort.’’

The co-op, modeled after rural electric and agricultural cooperatives in Conrad’s home state, would offer insurance through a nonprofit, nongovernmental consumer entity run by its members. Axelrod said one downside of a co-op, from Obama’s point of view, is that it might be unable to “scale up in such a way that would create a robust’’ competitor to private insurers.

And whether a cooperative would actually bring Republicans on board with Obama is unclear. Senator Richard C. Shelby, Republican of Alabama, who appeared alongside Conrad on “Fox News Sunday,’’ called the co-op idea “a step in the right direction.’’

“I don’t know if it will do everything people want, but we ought to look at it,’’ Shelby said. “I think it’s a far cry from the original proposals.’’

The public option, as Obama envisions it, would be a government-backed plan available to consumers through a health exchange where people could buy insurance, public or private, that best fits their needs. While a public plan might require some government financing to start up, the idea is for it to be financially self-sustaining and require no subsidies, Axelrod said.

Republicans argue that a public plan would invariably put private insurers out of business and prompt employers to drop private coverage, pushing people who are already insured onto a plan run by the government. Obama counters that a public option would keep insurers “honest’’ by forcing them to compete in the marketplace, although he has said all along that he would be open to other ideas.

Here in Phoenix, where Obama is to address the Veterans of Foreign Wars today, conservative groups including Americans for Prosperity are planning to protest the health plan. The same groups have turned up around the country at congressional town hall meetings, which have sometimes turned into shouting matches as opponents denounce Obama for promoting “socialized medicine.’’

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