Allies Nervous About White House On Health Care

On the day Sen. Max Baucus begins health care hearings, the Washington Post runs what amounts to a shot across the bow from key Democratic client groups: don't punt on a public plan. What's the story behind the story? Read on.

Without dismantling the system, there are two ways to extend health insurance coverage in the near-term. One way is to create a government-sponsored plan that would be able to compete with those offered by private insurers. The government would give the plan away for free to those who can't afford any insurance, and would heavily subsidize it for those who can afford to pay something. Administratively, the government could simply expand and add money to Medicaid. The second way would be to require that insurance companies offer affordable plans and then provide direct subsidies for people to buy the private plans. There'd be a public alternative, but it wouldn't be large enough to set the market price, as it were.  As President Obama regularly emphasized, Congress is likely to keep the employer-based health care system alive for a while, but, if reformers like Jacob Hacker and the Lewin Group have their way, add to it well-funded government components and alternatives that, over time, will drive down costs and provide a source of pressure and competition. A market for insurance policies would be the end-result. (Jonathan Cohn explains the different between a real public plan and a quasi public plan here.) Politically, Obama wants all stakeholders to agree on a solution. So he's been very coy about what he thinks Congress should do first -- the private insurance subsidy part or of the public plan.

Obama's health care allies want the government plan to be debated first; they want it to drive the debate through the entire process. Business and industry worry about competition from government; they'd rather structure the reform from their point of view.

The White House has essentially given Congress three instructions: everyone must have access to health care, it must be affordable, and it must be of a certain quality.  You will see the White House begin to nudge Congress in certain directions; there is a sense among some administration officials that Obama will work to bring the insurance industry aboard first, rather than later. And that's what's getting allies nervous.

The Senate and the House will produce different bills; the House's, written largely by Henry Waxman, will probably be more expensive and more government-centered; the Senate will likely cobble together a version of three bills; the "Wyden-Bennett" legislation, which replaces Medicaid with state subsidies; Max Baucus's bill, which. if it follows his earlier outline, would expand government programs, imposes a coverage mandate and would allow shared purchasing pools to drive down costs and a "pay or play" option for businesses; and Ted Kennedy's legislation, the contours of which aren't known at this point. Democrats say that Sens. Chuck Grassley and Orin Hatch will be the principal negotiators for Republicans. Hatch works with Kennedy and Grassley works with Baucus.