Public Plan Could Derail Obama's Health Care Push

President Barack Obama started his health care push by reaching out to all sides. Now it's stuck in a partisan mess over his idea of a government insurance plan that would compete with private companies.

The idea got little attention when Obama proposed it as a candidate. Now, however, it's jeopardizing his effort to win broad political support for changes that would guarantee coverage for all and try to rein in medical costs.

Supporters of a government plan say it would pressure private insurers to keep premiums reasonable. But experts say Obama may not need a full-blown federal program to achieve that.

For example, nonprofit cooperatives — independent of the government — could be set up to offer affordable coverage.

Or maybe a government plan could be used only as a last resort, entering a state or local market if private insurers fail to keep coverage affordable.

"There are lots of ways to fulfill those functions," said economist Len Nichols of the nonpartisan New America Foundation. Nichols, who directs the foundation's health care program, is working with lawmakers trying to find a compromise on the contentious issue.

"There are ways to finesse this," said Robert Reischauer, president of the Urban Institute public policy center. "One way is to design the authority for a public plan and lock it up in a closet. If the private sector fails to bend the cost curve, then we unlock the closet and let the public plan out."

Such suggestions may be of no avail. The partisan battle lines are hardening.

Republicans, almost unanimously, say a government plan would lead to a Washington takeover of the health care system.

"A public plan is a nonstarter," said Sen. Orrin Hatch, R-Utah. "They are trying several ways to come up with a public plan without calling it that. I just don't see that as working."

Sen. Tom Harkin, D-Iowa, answered "no" when asked if Democrats could live with legislation that guaranteed coverage for all, but did not include a public plan.

"I think that's the essential part of health reform, and that is to have one public plan that is portable. No matter where you live, no matter where you move, you know you can get this plan," Harkin said.

The impasse is rooted in ideological divisions that doomed former President Bill Clinton's health care plan in the 1990s. "The public option discussion is a mirror of the debate we've been having for 60 years about the government's role in health care," said Sen. Ron Wyden, D-Ore.

Part of the problem seems to be that Obama hasn't spelled out what he wants in a public plan, even as he expresses strong support for the idea.

The government already has a public plan for the elderly — Medicare. And there's Medicaid for the poor.

But a government plan for middle-class workers and their families would be new.

Under some scenarios, a government plan could undermine one of Obama's central health care promises: that people can keep the coverage they have if they like it.

A recent analysis by the Lewin Group consulting firm found that if the new government plan was modeled on Medicare and open to all employers and individuals, it would swamp the private insurance industry. Employers and individuals would flock to the public plan because of its lower premiums. Private insurance enrollment would plummet by about two-thirds.

But the analysis also found that a public plan that was only open to individuals and small businesses would have much more limited consequences for private insurers, and could reduce significantly the number of uninsured.

Obama's campaign proposal suggested the latter option, a public plan offered to individuals and small businesses having a hard time finding and keeping insurance. It would be a choice, along with private insurance plans, through a new kind of purchasing pool called an exchange. Studies have found that in most states a single insurer currently dominates the small business market.

As president, Obama hasn't publicly revisited the issue in any detail.

Insurers are determined to avoid any kind of government plan, even as they have pledged to work with Obama to try to lower costs. Employer groups, hospitals and doctors have also expressed concerns. But the public plan is hugely popular with the Democratic activists Obama is counting on for grass-roots support in getting the health care bill through Congress.

The bill expected to emerge in the House this summer probably will have a strong government plan. In the Senate, where a key committee begins work on the legislation this coming week, it's unclear whether a public plan can pass because some moderate Democrats also have concerns. The debate could keep going into the fall.

At a town hall meeting Thursday in Green Bay, Wis., Obama addressed public plan critics.

Speaking of Republican opposition, Obama said: "It's not clear that it's based on any evidence, as much as it is their thinking, their fear, that ... once you have a public plan, that government will take over the entire health care system."