The debate in the Senate Finance Committee on linking Medicare rates to a public insurance option is sure to replay itself during future negotiations between the House and Senate over a final health reform bill.

Two public option amendments - one tied to Medicare rates and one not - were shot down in the Senate Finance Committee at the start of the second week of the committee's markup of the America's Healthy Future Act, that is, the committee's health reform package.

At the Sept. 29 session, Sens. John Rockefeller, D-WV, and Charles Schumer, D-NY, both put forth public option amendments that met with unanimous opposition from committee Republicans and a handful of Democrats, who crossed party lines to reject the amendments.

Democrats Build Momentum In Losing Vote

Democrats employed a clever strategy in the logistics of how the amendments were offered during the markup, to demonstrate building momentum for a controversial provision that appeared to be a nonstarter.

An amendment that is supported by more liberal members of the Finance Committee was offered first, and subsequently followed by a more moderate public plan proposal.

The first amendment, proposed by Rockefeller, was voted down 15-8 by the committee, with five Democrats voting against it: Committee Chairman Max Baucus, Mont., Kent Conrad, N.D., Bill Nelson, Fla., Blanche Lincoln, Ark., and Thomas Carper, Del.

The Rockefeller amendment called for the creation of a Consumer Choice Health Plan to be available for purchase in the national health insurance exchange that would follow the same insurance regulations and offer the same type of plans as private plans operating in the exchange.

Provider payments under the plan would be based on Medicare payment rates for the first two years of the plan's existence, beginning in 2012.

After the first two years, the public option would determine and negotiate competitive provider payment rates based on public and private best practices, integrated models of care delivery, evidence-based practices, quality improvement and the use of health information technology, according to the amendment.

In addition, Rockefeller's amendment would require any health care providers who participate in Medicare to participate also in the public plan.

The House version of the bill, America's Affordable Health Choices Act, also includes a public option plan that would begin operation in 2013, with physicians paid at Medicare plus 5 percent, and other providers at Medicare rates.

As the debate over whether to include a public plan in a final health reform bill proceeds to the Senate-House conference process in order to reconcile differences in legislation from both chambers of Congress, the question over whether to tie the option to Medicare rates will be repeated.

The proposal could take on increased importance if Democrats choose to use the budget reconciliation process to win a simple majority if they are unable to accumulate 60 votes in the Senate.

Nevertheless, Rockefeller's amendment was criticized by Republicans who said that a public option would be a "slow walk" to a single-payer, government-run health system and it would be unwise to base a public option on a bankrupt and under-funded entitlement plan.

"I don't understand why under this amendment we would create another entitlement program when the existing entitlement program [Medicare] threatens to bankrupt our country," quipped Sen. John Cornyn, R-Texas.

But Democrats also took issue with the amendment. Baucus was upfront about the fact that his first responsibility is to get a bill on the floor that will get 60 votes, and putting forth a bill with a public option provision that links itself to Medicare payment rates is unrealistic when put in the context of that goal.

"My job is to put together a bill that will hold water, and in the Senate that means my job is to put together a bill that will get 60 votes," Baucus said. "I am constrained to vote against the public option. I want the strongest bill I can possibly get. There is a lot to like here ... But my first job is to get this bill across the finish line."

Conrad, who voted against the amendment warned that the "devils are in the details." He said he was compelled to vote against Rockefeller's amendment since North Dakota has second lowest level of Medicare reimbursement in the country, and if public options rates are tied to Medicare rates, hospitals in his state would go bankrupt.

"If we are to go in the direction that Rockefeller projects, all of us who represent states where Medicare levels of reimbursement are very low, are going to face extreme hardship," he said.

Schumer Offers A More Moderate Option

Schumer's public option amendment was a more palatable version of the Rockefeller amendment to moderates on the committee because it did not propose to link payment rates to Medicare.

Although the amendment did not pass (10 ayes-13 nays), it did gain the support of two additional democrats - Carper and Nelson - that Rockefeller's did not.

Schumer's public option would also adhere to the same rules other plans in the exchange do, but instead of pegging rates to Medicare, would have to negotiate rates right from its creation.

"Maybe it will be a better negotiator, maybe it will be a worse negotiator, but why not try?" he asked rhetorically.

In an effort to make the amendment more appealing to other members, the amendment had a provision that calls for a one-time infusion of federal dollars for start-up costs, but if the plan fails to support itself subsequently, annual appropriations could not be used to support its ongoing operation.

"I want to say this again because I know there a lot of fear out there about a public option leading to government-run health care: There will not be another infusion of federal dollars into the public options after the first time around."

The two senators held a media teleconference Sept. 24, during which Schumer predicted President Obama will sign a health reform bill with a "good, strong, robust public option" (Also see ""Strong" Public Option Will Be In Final Reform Bill, Sen. Schumer Predicts" - Pink Sheet, 28 September, 2009.). The two predicted that the public plan might be an underdog in the Senate Finance Committee, but that it could hold its own with a majority on the floor.

At a press conference held immediately after the public option amendment votes, Schumer said, "Today is a good day," adding that the amendment process gets easier as the bill moves to the floor and then to conference.

-Lauren Smith (lauren.smith@elsevier.com)

Senate Finance Defeats Public Plan Tied To Medicare Rates; Debate Will Move To House-Senate Conference

More from Archive

More from Pink Sheet