Discord grows over public health care plan ("There's a lot of us that feel that the government is an unfair competitor," ) By Richard Wolf, USA TODAY

WASHINGTON — The mood was upbeat in early March when scores of powerful lawmakers and lobbyists joined President Obama in the East Room of the White House to talk about fixing the nation's health care system. Still, Sen. Chuck Grassley, R-Iowa, rose to tell Obama that many Republicans had a problem with his plan to let the government compete with private insurers.

"There's a lot of us that feel that the government is an unfair competitor," Grassley said. "We have to keep what we have now strong, and make it stronger."

Three months later, disagreement has turned to discord over a key element of Obama's health care prescription: his insistence on a "public plan" to compete with private insurers. America's Health Insurance Plans, an industry trade group, is joined by the American Medical Association, U.S. Chamber of Commerce and others that have expressed misgivings about greater government involvement.

"We're not sure that the government is very good at running a health plan," said Nancy Nielsen, president of the AMA, which heard Obama defend his plan Monday.

That has led to a number of compromise proposals, designed to inject choice and competition into the market without letting the government set prices or shift costs to the private sector.

"What I am trying to do — and what a public option will help do — is put affordable health care within reach for millions of Americans," Obama told the American Medical Association.

The first Senate and House bills to emerge this month would offer a public plan, but a third bill, in the Senate, to be unveiled soon might not include it. Ten of 11 Republicans on the Senate Finance Committee wrote Obama this month in opposition.

An analysis by the Lewin Group, a health care consulting firm, found that a public plan such as Medicare would draw 119 million people away from private insurers. That's because a plan patterned after Medicare could pay doctors and hospitals 20% to 30% less than its private competitors. Limiting who can join and regulating what the plan must pay providers would reduce the upheaval, the analysis said.

Obama has not insisted on a plan like Medicare. Among ideas lawmakers are considering:

• A public plan could be required to compete on a "level playing field" with private insurers, while still adding a choice for people in parts of the country with limited private options.

"It could operate by the same rules that all the other plans do," Nancy-Ann DeParle, director of the White House Office of Health Reform, said recently. "You don't have to use Medicare prices. You can use something else."

• Instead of a national plan, states could be required to offer their own versions, according to a Senate Finance Committee list of options. More than 30 states now offer such plans to their employees. Sen. Kent Conrad, D-N.D., has said the plans could be run by member-owned cooperatives.

• Participation could be limited to individuals, the self-employed and small businesses — those who now have the most trouble getting affordable insurance. That's what Obama called for during the presidential campaign. The Lewin analysis said that would attract 43 million people, including 32 million who switch from private plans.

• A public plan could be created as a fallback if changes in the private insurance market don't reduce costs and increase coverage — something Sen. Olympia Snowe, R-Maine, has suggested. The Medicare prescription-drug law of 2003 included such a provision, but it has not been used.

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