Public Insurance Concept May Prove Sticking Point in Health Care Reform

The insurance industry and some Republicans -- such as Sen. Charles Grassley of Iowa -- have already suggested that a public insurance option could be a "deal-breaker." But one of President Barack Obama's top health care advisers told reporters Wednesday she believes it's still viable and said the president wants it to be a part of any health care deal in an effort to keep the private sector "honest."

"I'm actually very hopeful we'll be able to reach an agreement on that," Nancy-Ann DeParle, the head of the White House Office of Health Reform, said at a briefing at the Kaiser Family Foundation in Washington. "It is part of the president's plan ... and the reason it's included is he wanted a mechanism to lower costs and to keep the private sector honest by having a competitive public plan in there."

There are no specific details on how a public insurance model would be crafted to help cover some of the nation's estimated 46 million uninsured people. But a number of health care experts have previously suggested it could bear at least some resemblance to Medicare by allowing the government to negotiate lower prices from doctors, hospitals and providers and thereby lower the cost of premiums to consumers.

That has alarmed private insurers who say they simply could not compete on a level playing field and would lose too many customers to the government.

DeParle and Kathleen Sebelius, who's been nominated to head the Department of Health and Human Services, are among the officials charged with leading the Obama administration's efforts to pass a broad new health care reform package. On Wednesday, DeParle was careful to avoid drawing hard lines in the sand over the public insurance option.

Instead, she suggested the contours of a possible compromise that could keep the concept in the mix.

She said a government plan "could operate by some payment rules that are similar to Medicare."

But she also said it also could borrow elements from state employee plans. In that model, the government could sponsor a public option that is operated by private insurers and has the government paying rates comparable to the private market. But the government would still save money through lower administrative costs.

"So there are different breeds of public plans that could be part of this," DeParle said. The goal is, "how do we make sure ... that people who are shopping for a health insurance plan and are looking at things that are low-cost and that are competitive and have some choices. That I think is what we're looking for."

The president of the insurance industry's trade group said she was encouraged by DeParle's remarks.

"I do think Nancy-Ann's comments this morning were very thoughtful in reflecting some growing understanding that a (public insurance) plan using Medicare rates could be harmful," Karen Ignani, the CEO of America's Health Insurance Plans, told the NewsHour. "It's a recognition that there's a lot of thinking going on around this."

Ignani also maintained that a plan that too closely matched Medicare's payment rates would hurt too many private insurers.

"Right now, there is subsidization going in the private sector for underpayment on the Medicare side," Ignani said. "If government uses Medicare rates, a (recent Commonwealth Fund) study found that 120 million people will leave the private system and go to the public sector in less than three years."

For her part, DeParle, who meets regularly with members of Congress on Capitol Hill, suggested some Republicans may not be as opposed to a public insurance option as has been advertised. While some are clearly opposed on philosophical grounds, DeParle said others are more concerned about the mechanics of how it would work.

"It's been interesting to talk to people who say 'Oh, I don't like a public plan.' When you actually start talking to them about what it might look like, you realize you're talking about two different things."

DeParle also acknowledged that the White House and Congress are just beginning to negotiate how to pay for a health reform measure that could cost more than $1 trillion over 10 years. But she said tax revenues weren't the only way to fill the hole.

"There are plenty of scoreable savings in the budget and in providing smarter care," she said, adding that the administration is looking for "the right mix of savings and revenue."

DeParle, who has worked at the state and federal level and served as a board member of numerous private companies, also told reporters she believed the pace of work on health care reform is far better than it was 15 years ago.

"By the late summer or early fall of `93, there were probably a dozen or more bills in the Congress," said DeParle, who served in the Clinton administration. "But there wasn't really the kind of engagement that we see this year on the part of committee chairs or staff working on a bill. You may think this is a congressional recess. We're meeting with them virtually every day ... This is very active work that's going on."