Senate panel rejects public option for healthcare reform

WASHINGTON —  Underscoring the divisions within their party, Democrats on the Senate Finance Committee on Tuesday split over a key issue in the healthcare debate as centrists teamed with Republicans to reject creation of a “public option” for medical insurance.

The committee voted 15 to 8 against establishing a public program, after a sometimes emotional debate that stretched over half a day, revealed tensions between liberal and conservative Democrats and laid bare the chasm between the political parties over how to repair the nation’s troubled healthcare system.

It was the biggest setback to date for liberal Democrats, but did not kill the possibility of a public option being included in final legislation. Liberals argue that such a plan is needed to increase competition among insurance companies, rein in costs and guarantee affordable coverage for all Americans.

Backing an amendment by Sen. John D. Rockefeller IV (D-W.Va.), liberal lawmakers were rebuffed by five centrist Democrats, some of whom argued that such a plan would bankrupt hospitals in rural areas, while others expressed concern that it would hurt the private insurance industry that is important to their communities -- an industry that also contributes to their campaign treasuries.

All 10 of the panel’s Republicans voted no.

The committee also rejected, 13 to 10, a revised public plan amendment by Sen. Charles E. Schumer (D-N.Y.) that was designed to address concerns that a government-run program would have an unfair competitive advantage over private companies. That narrower margin indicated there was room within the Democratic Party to seek compromise on the issue.

“This vote will be a good test so the American people know there is significant support in this committee,” Schumer said. “This is not the first word on the public insurance option, and it won’t be the last.”

The issue surely will be revisited when the bill goes to the Senate floor and to a conference committee with the House, where support for a public option is very strong.

For now, Senate Finance Committee Chairman Max Baucus (D-Mont.) said that a bill with the public option would not win the 60 votes needed to cut off a potential filibuster.

“My job is to put together a bill that will become law,” said Baucus, who wrote the bill before the committee and voted against the public option. “I can count, and no one shows me how to get to 60 votes with a public option.”

Also opposing the Rockefeller amendment was Sen. Kent Conrad (D-N.D.), chairman of the budget committee. He said he was worried that the plan would devastate his state because its reimbursements would be based, at least at first, on Medicare rates that he said were unrealistically low for rural hospitals.

Conrad supports an alternative to the public option that is included in the Baucus bill: funding to establish nonprofit, state-level cooperatives in which consumers could band together to buy insurance.

Other Democrats who voted against the public option were Sen. Blanche Lincoln of Arkansas, who may face a tough reelection fight in 2010 in a conservative state; Sen. Bill Nelson of Florida, a former state insurance commissioner worried about its effect on private insurance companies; and Sen. Thomas R. Carper of Delaware, who shared those concerns.

Nelson and Carper were the two who switched sides and voted for the Schumer amendment.

GOP opponents included Sen. Olympia J. Snowe of Maine, the only Republican who is even considering supporting the bill. She did not speak during Tuesday’s debate, in which one Republican after another denounced the idea as the equivalent of a government takeover of health insurance.

“It is a slow walk toward government control,” said Sen. Charles E. Grassley (R-Iowa).

Tuesday’s debate was a rhetorical and political high point in the healthcare overhaul effort, but it focused on only a small part of the sweeping legislation by Baucus that would, among other things, require almost all Americans to have insurance, provide government subsidies to help needy families pay premiums, and make it harder for companies to deny coverage or cut off benefits.

It also would establish a new marketplace, or exchange, that would allow individuals and small businesses without insurance to compare and choose among competing policies that met certain minimal government standards.

That would help address a bipartisan concern that there is not enough competition in the insurance market. A study by the American Medical Assn. found that in 10 states in 2006, more than 80% of the market was cornered by just two health insurance plans.

Proponents of the government program want consumers to have access to one option that is not profit-driven and thus can charge less. Without that, they argue, there will be no pressure on private companies to hold down premiums.

“It would simply guarantee there is at least one health insurance plan in the exchange . . . that ordinary Americans can afford and count on,” Rockefeller said. “It acts as a counterweight to the way I would characterize health insurance companies -- I love to use the word ‘rapacious.’ ”

Republicans, however, argue that the government program soon would turn from an option into a dominant force. As Grassley put it, “The government is not a competitor. It is a predator.”

At a time when congressional debates tend to focus on fringe issues and personal attacks, committee members noted that the exchange Tuesday was unusually sober.

“We have differences, and they are honest and heartfelt differences,” Schumer told committee Republicans. “You have a little more faith in the private sector, and we have a little more faith in getting the government involved.”

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janet.hook@latimes.com