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Senate panel rejects public insurer option

Action puts focus on co-op proposals

Senators Max Baucus (left) and Charles Grassley. Senators Max Baucus (left) and Charles Grassley. (Win McNamee/ Getty Images)
By Lisa Wangsness
Globe Staff / September 30, 2009

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WASHINGTON - A key Senate committee yesterday turned back attempts to include a public insurance option in its sweeping health care proposal, as a handful of moderate Democrats joined Republicans in arguing that a government plan would represent too much of an intrusion into the private sector.

The votes by the Senate Finance Committee were a setback for advocates of creating a public plan to compete with private insurance companies under the new health care system that President Obama and Democrats have envisioned.

But proponents vowed to continue the fight. Senator Charles Schumer, a Democrat from New York, said the public option was vital to “adding competition to the coagulated, ossified, and fundamentally anticompetitive insurance market.’’

“I do believe with some work and some compromise, we can get the 60 votes on the floor of the Senate, which we don’t have now,’’ Schumer said.

Opponents of the idea, however, were skeptical that liberal Democrats could muster the strength required to overcome moderate Democrats and Republicans who have lined up against it.

“I think it means that the public option, which has been in trouble for some period of time, is at least shelved for the moment,’’ said Senator Ben Nelson, Democrat of Nebraska.

Two amendments to insert the government-run plan into the bill were defeated, 15 to 8 and 13 to 10. The Finance Committee’s rejection of the public option is now expected to put more focus on a proposal by Senator Olympia Snowe, a moderate Republican from Maine who is waiting in the wings with a “trigger’’ amendment that would automatically establish a public option in states where the private market fails to offer affordable coverage.

Her idea would go a step further toward government intervention in the health insurance market than Senate Finance Committee chairman Max Baucus’s proposal, in the draft of the bill he proposed earlier this month, to instead establish new private nonprofit insurance “co-ops’’ in the 50 states. Baucus led moderate, swing Democrats in his committee yesterday in voting against the public insurance option proposals.

“My goal is to get a bill out of this committee that becomes law and that can get 60 votes,’’ he said.

Support for the public option remains vigorous in the House, where three committees passed versions of the bill this summer that included a public option. But in the Senate, where 60 votes are needed to break a filibuster and end debate, a handful of moderate Democrats and most Republicans fear that a government insurer would not pay providers adequately and could drive private insurers out of business.

Senator Kent Conrad, a Democrat from North Dakota, said that hospital administrators in his rural state have warned him that a public plan that paid rates similar to Medicare, which reimburses doctors at below-market rates, would bankrupt them.

He said he prefered the co-op plan, which was originally his suggestion, because it resembled the largely private, nonprofit insurance systems in France, Japan, and Germany, countries that he said spend less money and typically score higher on quality indicators than the United States.

“The question is whether the not-for-profit competition should be run by government or not,’’ he said.

Republicans argued forcefully yesterday that a public option would unfairly undermine competition in the private market, leaving Americans with even less choice than they have today. They said Medicare has proven that the government is worse than the private sector at innovation and cost control.

“Medicare is on the road to fiscal meltdown,’’ said Senator Orrin Hatch, Republican of Utah. “. . . It underpays doctors and hospitals, forcing an increasing number of providers to stop seeing seniors.’’

Yet mounting concerns over the affordability of the bill may be buoying support for the public option, which could theoretically offer lower prices by keeping administrative costs low, not taking a profit, and using its large size to bargain effectively with providers. Jacob Hacker, a political scientist at Yale University who is credited with coming up with the concept of the public option, said offering a last-resort government insurance plan could make the overall health care bill more attractive to those who fear the bill could benefit insurers at the expense of consumers struggling to pay their bills.

“The debate is moving toward this question of what do you have to do to make the individual mandate both politically and morally acceptable,’’ he said. “The public plan is the linchpin for two reasons: one, it provides an alternative to existing private plans, especially the for-profits, and two, it’s a way of providing a low-cost option so it reduces the affordability concerns.’’

Senator Jay Rockefeller, Democrat of West Virginia, who proposed one of the amendments the Finance Committee defeated yesterday, pointed to a recent American Medical Association survey that found 94 percent of major US health insurance markets were dominated by one or two insurers; meanwhile, premiums have doubled in the last decade.

He said that the health care bill, by requiring all Americans to obtain insurance or face a tax penalty, and by setting aside nearly $500 billion in subsidies over 10 years to help low-income people afford to buy that insurance, would be a vast boon for those insurers.

“If we’re not doing this, then what we’re doing is saying, ‘Go ahead, insurance companies, make more profits,’ ’’ he said. “People come second, and profits come first, if we’re against this, in my judgment.’’

Snowe, who said little during yesterday’s debate, has repeatedly cited affordability as her top concern. Snowe’s potential compromise plan would trigger the creation of a government-run plan in any state where at least two different plans, based on premium prices submitted by insurers, failed to meet affordability targets for 95 percent of state residents.

“Affordable’’ would mean that the individual’s share, after employer contributions and any government help, would range from 3 percent to 13 percent of income, depending on income level.