Reid Backs Health Public Option With State Opt-Out

Oct. 26 (Bloomberg) -- Senate Democratic Leader Harry ReidHarry Reid said he will ask the U.S. Senate to vote for a government-run health-insurance program that would allow states to opt out.

Reid said the so-called public option with the opt-out provision is the “fairest way to goâ€

The government-run plan, which would compete with private insurers, is among the most divisive issues in the health legislation, which is designed to cover millions of the uninsured and curb rising medical costs. The option has drawn opposition from every Senate Republican and some Democrats, many of whom say it will undermine the private market.

“We clearly will have the support of my caucus to move to this bill and start legislating,” Reid, a Nevada Democrat, said at a Washington press conference today.

Insurers’ stocks fell 2.5 percent for the day, as measured by the Standard & Poor’s 500 Managed Health Care Index of six companies. Humana Inc. of Louisville, Kentucky, and Cigna Corp. of Philadelphia led the declines with 3.5 percent drops.

A public insurance program “would underpay doctors and hospitals rather than driving real reforms,” according to a statement released by the America’s Health Insurance Plans trade group. “It’s time we focus instead on broad-based reforms.”

Losing Snowe?

Congress is considering the biggest changes to the U.S. medical system since it created Medicare, the health program for the elderly, in 1965. Reid is trying to keep all 60 votes controlled by Senate Democrats in line as he combines health legislation passed by two Senate committees. The bill will also include nonprofit health-care cooperatives, he said.

Reid’s decision on the public option risks the loss of Republican support that President Barack ObamaBarack Obama and Democrats such as Finance Committee Chairman Max BaucusMax Baucus have sought for months. The only Republican who has voted for a health-care bill, Maine Senator Olympia SnoweOlympia Snowe, opposes the public option.

Snowe said last week she would vote against allowing Democrats to bring a bill with a public option to the floor. She favors triggering the plan only if the private insurance market fails to lower premiums after a certain period of time.

Snowe ‘Deeply Disappointed’

“I am deeply disappointed,” Snowe said in a statement released by her office right after Reid’s press conference. A trigger “could have been the road toward achieving a broader bipartisan consensus in the Senate,” she said.

Senator Richard DurbinRichard Durbin of Illinois, the Senate’s No. 2 Democrat, said Reid had considered Snowe’s trigger proposal on the assumption he might get all 60 Democrats and the Maine Republican to support it.

“Unfortunately it’s a zero-sum situation,” Durbin said. “There were some who felt that it just didn’t go far enough.”

Reid said he’s hopeful Snowe will “come back” to where Democrats stand on the public option during the floor debate.

The head of the nation’s largest union organization declined to support the Reid plan for the public option.

Reid’s measure is “a step in the right direction,” said Richard Trumka, president of the AFL-CIO. “But we really do support a robust public option.”

Still, Reid’s decision may clear the way for more cooperation between the Senate and the House, which is also considering health legislation. House Speaker Nancy PelosiNancy Pelosi, who has championed the public option in her chamber, told reporters on Oct. 23 that she “didn’t think there’s much problem” with allowing states to opt out of the government insurance plan.

Obama Pleased

Obama is pleased that Reid decided to include a public option, White House Press Secretary Robert Gibbs said.

“We’re much closer than we’ve ever been to solving this decades-old problem,” according to Gibbs’s statement.

Louisiana Democrat Mary LandrieuMary Landrieu, an opponent of the public option, signaled in a statement after meeting with Reid on Oct. 13 that she was open to a compromise. Reid needs 60 votes to prevent Republicans from blocking consideration of legislation.

Landrieu said in a statement that she was “encouraged that the conversations” among “senators who back different versions of a public option could potentially lead to a compromise.”

Nebraska Democrat Ben NelsonBen Nelson was noncommittal when asked about the proposal yesterday on CNN’S “State of the Union.”

“I certainly am not excited about a public option where states would opt out,” Nelson said, saying he prefers a plan “where states can opt in if they make the decision themselves.”

Needs Specifics

Nelson said he would decide whether to vote to let the legislation be considered once he has seen a specific proposal.

New York Democrat Charles SchumerCharles Schumer, a member of Reid’s leadership team who supports government-run insurance, said on NBC’s “Meet the Press” yesterday that “liberals” in the Democratic caucus would “like it stronger, but they are willing to live with” the opt-out. Among moderate Senate Democrats “there are some who actually like it,” said Schumer, who added that Reid was close to 60 votes needed to ensure passage.

In a floor speech, Texas Senator John CornynJohn Cornyn, a Republican, questioned whether states allowed to opt out of the public insurance plan would be exempt from higher taxes that he argued would result from the legislation. He called Reid’s proposal “a transparently false choice, another gimmick to get votes” for the legislation.

In the House, the question has been how to structure the public option, not whether to include one. Pelosi has pushed for what she calls the most “robust” version, a plan that would peg its provider reimbursements to 5 percent above the rates paid by Medicare, the government program for the elderly.

That’s a nonstarter with Senate Democrats including North Dakota’s Kent ConradKent Conrad, who says those rates are too low and would bankrupt hospitals in his state.