By Laura Litvan and Nicole Gaouette
(Bloomberg) — Senate Democrats tentatively agreed to abandon plans to set up a full government-run insurance program in a bid to remove one of the biggest obstacles to health legislation, a person familiar with negotiations said.
The lawmakers instead backed a proposal to establish a program modeled on the U.S. government employee-insurance system that would have private companies provide coverage under federal oversight to millions of uninsured Americans, the person said. They also want to expand eligibility for the federal Medicare program for the elderly.
The deal was negotiated by 10 Senate Democrats seeking an alternative to the government-run program. While most Democrats support the so-called public option, the idea has drawn fire from party members in the Senate and all Republicans. It needs backing by 60 senators to get into the final bill.
Senate Majority Leader Harry Reid said Democrats reached "a broad agreement" on the issue, yet offered no details.
"We have confronted many hurdles, and tonight I believe we have overcome yet another one," Reid, a Nevada Democrat, said in a statement last night.
Reid is pushing the Senate to pass health-care legislation before the end of the month, paving the way for a House-Senate compromise early next year. The 10-year, $848 billion Senate bill, designed to cover 31 million uninsured Americans and curb medical expenses, would make the biggest changes to the nation's health-care system in four decades.
The dispute over the government-run insurance plan threatened to derail any agreement, with Republicans and centrist Democrats saying it would provide unfair competition to insurers such as Hartford, Connecticut-based Aetna (AET) and Indianapolis-based WellPoint (WLP).
Reid, seeking to break an impasse on the bill, encouraged the group of Senate Democrats to meet behind closed doors and come up with an alternative to his original plan to set up a government program that would allow states to opt out.
While he said last night the "consensus" is for a public option, Jim Manley, his spokesman, said the proposal by the senators to allow the federal Office of Personnel Management to administer insurance plans could be construed as a public option.
Reid sent several alternative proposals to the Congressional Budget Office, which must offer a cost estimate for the legislation, Manley said.
One was the senators' plan to allow the federal agency to oversee the insurers, he said. Another calls for the public option to be started up only if private insurers failed to keep costs down. That idea is being pushed by Maine Senator Olympia Snowe, one of the few Republicans being courted by Democrats to support the legislation.
The White House applauded what it called "great progress" by the senators. "We're pleased that they're working together to find common ground toward options that increase choice and competition," Communications Director Dan Pfeiffer said in a statement.
The plan agreed to last night would let private companies sell insurance to businesses throughout the U.S. It would lower the eligibility age for the Medicare plan to 55 from 65.
Long Way to Go
Lawmakers have cautioned that there is a long way to go even if an accord holds.
For one thing, the analysis by the nonpartisan budget office may set back Reid's timetable. For another, Senator Joe Lieberman, a Connecticut independent who caucuses with the Democrats, has said he is skeptical about creating an alternative to the public option based on coverage offered to federal employees.
"There's a danger that people will try to add more to the bill than it can reasonably carry," Lieberman said, citing the costs involved.
And the steering committee for the Health Care for America Now coalition, which includes the NAACP, United Auto Workers and the AFL-CIO, among other groups, yesterday said a public option has to be part of the insurance exchanges the health legislation would create.
"Using nonprofits to replace a public option won't work," the steering committee said. "In fact, with half of people in private insurance currently enrolled in nonprofit plans, they are part of the problem."
Like the $1 trillion measure passed by the House on Nov. 7, the Senate's health-care legislation would require Americans to get health coverage or pay a penalty. It would expand Medicaid, set up new online purchasing exchanges to get insurance and provide subsidies for those who need help buying policies.
The agreement follows a vote earlier last night in which the Senate refused to add stricter limits on abortion funding to health-care legislation.
The lawmakers voted 54-45 to reject an amendment by Nebraska Democrat Ben Nelson, jeopardizing his support for the overall legislation. Nelson said his proposal would preserve the ban on federal funding of abortion; opponents argued it would discourage insurance companies from covering the procedure.
The loss means Reid may have to find a compromise to gain Nelson's backing for the broader measure.
"This is not the right place for this debate," Reid said before lawmakers voted to take the amendment from consideration on the Senate floor. "We have to get on with the larger issue at hand," the health-care plan, he said.
To contact the reporters on this story: Laura Litvan in Washington at firstname.lastname@example.org; Nicole Gaouette in Washington at email@example.com