Senate to add ‘public option’ to healthcare bill

In a dramatic sign of Democrats’ growing confidence that they have the votes to pass a far-reaching healthcare overhaul, Senate Majority Leader Harry Reid (D-Nev.) said Monday that the bill he intended to send to the Senate floor next month would include a “public option.”

The provision would allow the federal government to create an insurance plan to be offered to Americans who do not get medical coverage through their employers -- with the proviso that states could opt out of the program.

“While the public option is not a silver bullet, I believe it’s an important way to ensure competition and to level the playing field for patients with the insurance industry,” Reid said during a Capitol news conference.

Reid’s announcement reflected a sharp change in the political outlook for one of the most contentious elements in the healthcare debate.

Although passage of a healthcare bill that includes a so-called public option is virtually assured in the House, many Democrats were convinced the Senate would never approve a government-run plan. Instead, the Senate Finance Committee proposed the creation of state-level co-ops to compete with private insurers.

And some senators, most notably Maine Republican Olympia J. Snowe, favored adding a “trigger” to the public option -- letting a government-run plan be offered several years down the road only if private insurers failed to meet cost and coverage targets.

But bolstered by polls showing steady public support for the government option, Senate Democratic head-counters think they are within one or two votes of securing the 60 needed to cut off an expected Republican filibuster. At least 55% of Americans favor a government insurance plan, polls have consistently shown.

The possibility of such a plan getting through the Senate substantially increases the likelihood of final approval by Congress.

The opt-out provision falls short of liberals’ hope for unconditional approval of a public plan, but it comes closer than the co-op or trigger mechanisms. For one thing, it would be national in scope and could be activated immediately. Also, by requiring states to take legislative action to exit the plan, it increases the burden for opponents.

Monday’s announcement was cheered both by conservative Democrats and liberal grass-roots groups such as MoveOn.org’s political action committee. “There’s now real momentum toward meaningful healthcare reform,” said MoveOn’s executive director, Justin Ruben.

Senate Finance Committee Chairman Max Baucus (D-Mont.), a centrist whose healthcare bill did not include a public option, said in a statement that he would support “any provision, including a public option, that will ensure choice and competition and get the 60 votes needed to pass the Senate.”

White House Press Secretary Robert Gibbs said that President Obama -- who has come under fire from some on the left for not pushing hard enough for a government plan -- also applauded Reid’s move.

“As he said to Congress and the nation in September, he supports the public option because it has the potential to play an essential role in holding insurance companies accountable through choice and competition,” Gibbs said.

Reid’s decision also signaled that prospects for any Republican support for a healthcare overhaul were dimming even further.

Snowe, who has been the only Republican lawmaker to back the Democratic healthcare campaign, has been sharply critical of creating a national public option. And she said she was “deeply disappointed” by Reid’s choice.

But the majority leader said he was still interested in working with Snowe and other Republicans. “We looked for Republicans on this,” he said. “It’s just a little hard to find them.”

With a 60-40 voting majority, which includes two independents who caucus with Democrats, Reid has to hold all his members or pick up Republicans to head off a filibuster.

Several GOP lawmakers criticized Reid’s proposal. “The so-called public option is nothing more than a Trojan horse that will ultimately result in government-run healthcare,” said Sen. John Cornyn of Texas.

Republican critics were joined by the insurance industry, which for months has warned that a government competitor that pays providers less could force hospitals and others to charge commercial insurers more.

“A new government-run plan would underpay doctors and hospitals rather than driving real reforms that bring down costs and improve quality,” said Karen Ignagni, president of America’s Health Insurance Plans, the industry’s Washington-based lobbying arm. “The American people want healthcare reform that will reduce costs, and this plan doesn’t do that.”

Under Reid’s proposal, which mirrors a provision written by the Senate health committee, the national coverage program would be offered through a new insurance exchange that probably would be available initially to about 11 million people. Senior Democrats envision that the exchange would be open only to people who do not get coverage through their employers or who work for small companies that elect to enter the exchange.

Private insurers as well as the federal government would offer competing plans in this exchange, so only a fraction of those 11 million customers would choose the public option, according to estimates by the nonpartisan Congressional Budget Office.

To level competition, Reid’s proposal would require the government plan to negotiate payments to providers, rather than rely on Medicare rates, which are typically lower than those used by private insurance companies.

Reid said Monday that states would have to choose to opt out of the public plan by 2014, a year after the government plan would come into being, according to bills pending in the House and Senate. The majority leader did not provide any detail about how states would go about doing that.

Reid and House Speaker Nancy Pelosi (D-San Francisco) are advancing separate healthcare bills, which would have to be reconciled later this year before final legislation could be sent to the White House for Obama’s signature.

For now, House Democrats are poised to pass a bill that would create a nationwide government plan without any option for states not to offer the plan. Pelosi indicated Friday that the opt-out alternative could be included in a reconciled bill.

But House lawmakers still disagree over how much such a plan should pay doctors, hospitals and other medical providers. Liberals, including Pelosi, favor a proposal that would link those payments to the existing Medicare program. Proponents think such an arrangement would save money and help drive down costs.

Many conservative Democrats, particularly from rural areas where Medicare typically pays less, favor an approach like the Senate’s in which the government would negotiate its rates with providers, as commercial insurers do.

Pelosi hopes to settle those differences in time to unveil a bill this week, her office said.

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noam.levey@latimes.com