The latest idea bears little resemblance to the original vision outlined by liberals, and embraced by Obama, during the 2008 presidential campaign. That called for the government to sell insurance to workers and their families in competition with industry giants like UnitedHealthcare.
But instead of Medicare-for-the-masses, it would be Blue Cross Blue Shield or Kaiser Permanente, albeit with a government seal of approval from the department that handles the health plan for federal employees, including members of Congress. The Office of Personnel Management OPM would become an instantly recognizable federal acronym, like FDA and CDC.
"I think it's the right way to go because it's simple and the public can grasp it," Sen. Mark Begich, D-Alaska, said Monday, reflecting a general hope that a deal is close.
Lawmakers will be able to tell their constituents "you're going to get exactly what we have, and that every federal employee has, you can buy into it,'' Begich added.
Five moderates and five liberals tapped by Majority Leader Harry Reid, D-Nev., planned to work on the compromise Tuesday as the Senate debated the 10-year, nearly $1 trillion bill. A vote on an amendment to tightly restrict abortion coverage by health plans receiving federal subsidies could also happen Tuesday.
Reid imposed a Tuesday deadline to complete negotiations on the government-run option, according to Sen. Tom Harkin, D-Iowa, a participant in the talks.
"It's one of those kind of things in the middle that doesn't make everybody very happy but that's our compromise," Harkin said. "It's something I'm going to probably have to live with."
Said Senate Finance Committee Chairman Max Baucus, D-Mont.: "It's probably the closest proposal thus far that could get the support of 60 senators. It's got legs."
Word of a possible compromise on the public plan drew a wary reaction from liberals, who support a Medicare-like approach.
"We need a public option that is a government entity, or established by government," said Richard Kirsch of Health Care for America Now.
Insurance industry groups had little to say publicly, but privately some officials said the shift away from a government-run plan sounds promising. There was plenty of skepticism.
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"This is a long, long way from the original public plan that was going to require providers to accept Medicare reimbursement at 20 percent less than the commercial market," said Robert Laszewski, a health care industry consultant. "What the heck the advantage is, I don't see."
Liberals are trying to extract a price for any compromise. Sen. Jay Rockefeller, D-W.Va., has proposed allowing people 55 and over to buy into Medicare. Others would further expand the Medicaid health program for low-income people. Finally, if private insurers don't step up to submit bids to OPM, some liberals want to authorize the federal agency itself to set up a plan.
The Senate bill now calls for a government-run plan, with states allowed to opt out. The House bill includes a government plan available in all states. Ongoing talks among Senate Democrats are nowhere near a conclusion; nonetheless, senators and aides outlined a framework that could lead to compromise.
The idea is for the government to lend its seal of approval to private plans that would be offered across the nation. The plans would be available through new state insurance markets, called exchanges. New markets would create big purchasing pools for those who now have trouble finding and keeping affordable coverage people buying their own insurance and small businesses. Most of the 30 million consumers in the exchanges would have government subsidies to help pay premiums.
Under the compromise, any insurer could approach the federal personnel office to offer a plan in the exchanges, but the plan itself would have to be nonprofit. Most Blue Cross plans are still nonprofit, as is Kaiser, the giant health maintenance organization.
Offered alongside other private insurance in the exchanges, the OPM-approved plans would carry a special designation certifying that they meet standards comparable to those in the federal employee plan.
Supporters of the idea say it would promote competition by creating new national plans that could immediately go into states in which one or two big insurers now control the market.
Skeptics say the OPM-approved plans would be pretty much the same as other private plans offered in the new markets. They run the risk of attracting sicker patients who might think the government's seal means less chance of insurance hassles. That would mean higher premiums for those who sign up.
Solving the impasse over a government plan would move Reid closer to the 60-vote majority he needs to push a final bill through the Senate. On Monday, one moderate whose vote Reid would like to have expressed satisfaction.
"I think the discussions are going in the right direction ... away from a government-run plan," said Sen. Ben Nelson, D-Neb.