Public plan pitched as alternative

Insurers and employers, however, are leery about competing with a subsidized public program. They fear that healthy consumers eventually would opt for the less-expensive public plan and further the shift to a government-run healthcare system.

PROVIDING CHOICE

Rep. Pete Stark (D-Calif.), chairman of the House Ways & Means Health subcommittee, is a lead proponent of the public plan option, maintaining that it would help trim spending on healthcare and make coverage more affordable.

Congressional Democrats also want to establish a government-run Medicare drug plan that would compete with private plans offering Part D pharmaceutical benefits. Senate Majority Whip Richard Durbin (D-Ill.) has joined with House leaders in sponsoring legislation that permits Medicare to operate a low-cost plan that would benefit from government negotiated drug prices. The stated aim of consumer advocates is to force out private plans and end the competitive approach to providing the Medicare drug benefit.

Insurers, hospitals and payers fear that a government-sponsored plan would have authority to set negotiated prices for providers and thus could reduce its costs much more than private plans. Similar to the Medicare program, the public plan also might not have to account for administrative costs or maintain reserves, giving it important advantages over private insurers.

One way to level the playing field is to offer the public plan through an administered market system. The federal government or national board would set parameters for benefits and premiums, and insurers would bid on the product. That approach, similar to the federal health insurance program for government employees, would be very different from the government-run plan envisioned by most Democrats.

There is agreement that any public plan option should be linked to an individual mandate on coverage. Stark said at a December briefing that to have a reasonably priced plan, "everyone has to be in the pool and pay." Insurers similarly acknowledge that universal coverage is necessary to eliminate exclusions for pre-existing conditions.

Congressional Republicans say they will fight any proposal that puts everyone in a Medicare-type program, which would evolve into a "super-HMO" able to dictate care.

Democrats maintain that the public option is critical to any agreement on health reform. Rep. Henry Waxman (D-Calif.), chairman of the House Energy & Commerce Committee, described the public plan as an alternative to a single-payer system, and that increased "creative tension" between public and private plans can be beneficial. But, he noted, financing and coverage are critical.

Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.