In Obama setback, Senate panel rejects health public option

WASHINGTON — In the first significant setback for the centerpiece of President Barack Obama's health care overhaul, the Senate Finance Committee on Tuesday soundly rejected the "public option," or government-run health insurance plan.

Two efforts to adopt a public plan lost, one by 15 to 8, the other by 13 to 10. Three Democrats _Chairman Max Baucus of Montana, Blanche Lincoln of Arkansas and Kent Conrad of North Dakota — voted against both proposals.

Sens. Bill Nelson, D-Fla., and Tom Carper, D-Del., backed a public plan that could negotiate rates with doctors, hospitals and other health providers, while opposing an alternative that would've tied the plan's rates to those paid by Medicare for two years.

Reid Cherlin, a White House spokesman, said that while Obama believes in making a public option available to the uninsured, the president is "open to other constructive ideas of increasing choice and competition."

The votes, however, sent sobering signals to the White House about prospects for any public plan.

Democrats control 60 seats in the 100-member Senate, just enough to overcome procedural hurdles if they all vote together, but Baucus explained that while that margin "would help hold insurance companies' feet to the fire . . . no one shows me how to get to 60 votes with a public option."

Under a rules change effective Oct. 15, Democrats would need only 51 votes to pass health care, but losing up to five Democratic votes in a single committee suggests even that could be difficult.

Still, every committee Democrat suggested that they want some kind of law to change how people obtain health care coverage. They railed against the insurance industry, saying it too often cares more about profits than patients.

Democrats suggested that they'd be open to different ideas, notably the "co-ops," or nonprofit member-run companies that the Finance Committee's draft would allow to be set up, or perhaps a "trigger" that would allow a public option to take effect if private insurers didn't meet certain standards.

"The overwhelming conclusion I reach is whichever option we end up with, we'll be improving the system because we'll be offering more choice," said Sen. Jeff Bingaman, D-N.M.

The Finance Committee is expected to finish drafting its version of the legislation later this week. It then will be merged with a quite different measure, approved in the summer by the Senate Health, Education, Labor and Pensions Committee, that includes a public option. Senate leaders hope to begin full Senate debate in mid-to-late October. If the final bill doesn't include a public option, an amendment seeking to include one is likely to reach a floor vote.

In the House of Representatives, three committees have written bills, and all include a public option. Democratic leaders are trying to combine them into one bill. A House floor debate and vote also is expected next month, and there the public option is likely to pass.

That would set up another test for Obama's plan, as negotiators from the two chambers try to iron out a final compromise.

Tuesday's Finance Committee deliberations gave a preview of the debate likely to dominate the House and Senate floors later this fall.

The five-hour debate was waged on two levels, one between Democrats and Republicans over whether the federal government should play a role in the nation's health insurance system, and the other among Democrats about how extensively the government should be involved.

Sen. Jay Rockefeller, D-W.Va., the public option's chief advocate, said that "our insurance companies have failed to meet their obligations in this whole matter of how do you unroll health care reform. The insurance companies, in my judgment, are determined to protect their profits and put their customers second. It's a harsh statement, but a true statement."

Sen. Charles Grassley, R-Iowa, the committee's top Republican, hammered away at the idea that big government aims to take over health care.

"Over time, the government plan will be the only viable option for most Americans," he said, and that will lead to "rationing or delay of care."

Not so, countered Sen. Bob Menendez, D-N.J. "The public option clearly increases competition. It keeps insurers honest and drives down cost," he said.

The Democrats' disagreement among themselves was gentler. They generally accepted that some kind of public involvement is needed to help people obtain coverage, but they disagreed, sometimes sharply, on what kind.

Senators from rural states were concerned that a public plan that relies on Medicare rates for reimbursing providers would be disastrous. Current Medicare rates in North Dakota, Conrad said, are now well below the actual cost of care.

"I can't possibly support (a provision) that does that," he said. Rockefeller's plan would've kept the Medicare rates in effect for a public plan's first two years, and then have the plan negotiate rates.

Conrad is a leading supporter of co-ops, but there was little vocal support for them — another signal that a battle looms on the Senate floor.

"Co-ops may be a term used in North Dakota and is understood, but is not in other states," said Florida's Nelson.

(Margaret Talev contributed to this article.)


Congressional Budget Office analysis of House bill

CBO preliminary analysis of Baucus bill

Kaiser chart on health insurance costs

Sen. Baucus' opening statement

Sen. Grassley's opening statement

Side by side comparison of health care bills


Panel's head faces 3 Democratic factions on health care

Does lack of GOP support matter for health care revamp?

Baucus unveils health plan, draws fire from all sides

GOP takes aim at Pelosi in bid to block health care reform

For more McClatchy politics coverage visit Planet Washington