Senate Democrats have reached a "broad agreement" on a health reform bill, Majority Leader Harry Reid said Tuesday night — a plan that would replace the public option in the current Senate bill with a new national insurance plan offered by private insurers, and a chance for older Americans to “buy in” to Medicare.
Democrats on Tuesday night took a major step forward on a plan by agreeing to ask congressional scorekeepers to give them cost estimates on a possible compromise that would break the impasse over health reform in the Senate.
In doing so, Senate negotiators moved decisively away from including a government-run health insurance plan that would start on Day One in any final compromise, a major disappointment for the Democratic base but one that is likely to prove necessary to win over fiscally moderate senators.
Instead, Democrats are considering including a “trigger” that would allow a public plan to kick in – but only in the event that private insurers didn’t step up and offer policies for the new national health insurance plan, which seemed unlikely.
To win over liberals disappointed at losing the public option, Democrats would allow older Americans starting at age 55 to buy into Medicare, the popular program for the aged. The Medicare expansion would be a significant victory for Democrats, who spent years pushing for it. The proposal would in effect create a public health insurance option for older Americans, since Medicare is government-funded and government-run.
If the Senate reaches a compromise based on these principles, it would set up a major clash with the House, which included a pure public option in a bill passed last month. Some House progressives, like Rep. Raul Grijalva (D-Ariz.), have been critical of the Senate’s national plan idea, calling it “a "whitewash" and "not even reminiscent" of the public option.
The broad outlines of the Senate deal had been discussed for days, but Democrats emerged from a closed-door session about 8 p.m. with news of the breakthrough. Some were reluctant to call it a deal until hearing back from the Congressional Budget Office about how much the proposed new provisions would cost.
“This is a consensus that will help insure that the American people win in a couple different ways. One, insurance companies will certainly have more competition. And two, the American people will certainly have more choices," Reid told reporters in the Capitol, but refused to divulge details of the agreement.
“Not everyone will agree to every piece we sent over there,” Reid said. “But believe me that we've got something that's good...it moves this bill way down the road."
Reid also disputed that the public insurance option would be eliminated under the proposed agreement, but he did not elaborate.
The state “opt-out” public option in the current Senate bill is no longer in play. But the group sent a proposal to the Congressional Budget Office for the public option “trigger,” according to people familiar with the talks.
The group also reached a consensus to expand access to Medicare, allowing people 55 to 64 to purchase coverage in the program. Details of who would be eligible within that age group were unclear Tuesday. 
The “buy-in” period could kick in as early as 2011 – three years ahead of when the larger set of reforms would begin – although the coverage for the interim period would not be subsidized.
The national insurance plan would be administered by the same federal agency that oversees the respected Federal Employees Health Benefits Program. But the insurance options within that plan would be offered by private, nonprofit entities.
There was movement towards placing tighter regulations on the insurance industry. At the top of the list was a proposal from Sen. Jay Rockefeller (D-W.V.) requiring insurers to spend at least 90 percent of premium money on medical care, rather than on administrative costs or profits.
The agreement also includes a proposal from Rockefeller to reauthorize the Children’s Health Insurance Program, which was set to expire in Oct. 1, 2013.
Sen. Russ Feingold (D-Wisc.) was described by sources as one of the last holdouts within the room on the public option. He released a statement Tuesday indicating that he has not signed onto the proposal.
“While I appreciate the willingness of all parties to engage in good-faith discussions, I do not support proposals that would replace the public option in the bill with a purely private approach,” he said. “We need to have some competition for the insurance industry to keep rates down and save taxpayer dollars. I will base my vote on the bill on the entirety of what is in the bill, and whether I think the bill is good for Wisconsin.”

Other key progressives did not respond as critically.

Sen. Tom Harkin (D-Iowa), who supports the need for a public option, said: “Do I like it? No, but I'm going to support it to the hilt.”

On MSNBC’s “Countdown with Keith Olbermann” Tuesday night, Sen. Bernie Sanders (I-Vt.), perhaps the most ardent public option booster, said the proposal was a “tradeoff.”

Howard Dean, former chairman of the Democratic National Committee, had repeatedly called for the bill’s defeat without a pure public option. But on “Countdown,” he said the Medicare expansion was a “big deal.”

The Senate breakthrough came as the clock was already winding down on Reid’s hopes of getting a bill done by Christmas. He had told negotiators – five liberal and five moderates – that he needed a deal by Tuesday or Wednesday at the latest.

Reid credited Sen. Chuck Schumer (D-N.Y.) and Sen. Mark Pryor (D-Ark.) with helping the group of 10 complete what the majority leader called an "impossible job."

With a deadline imminent, Democratic senators had scrambled Tuesday to break a months-long impasse over the public option, but stubborn political obstacles emerged as details of the possible compromise took shape.

As quickly as the outline of an agreement seemed to emerge Monday, parts of it had fallen away by Tuesday afternoon — the casualty of opposition raised by moderates. At the same time, progressive senators were still resisting pressure to give up entirely on the public option, while some moderates were balking at the trigger, according to an official briefed on the meetings. 

There was also pressure not to further expand a proposal from Sen. Maria Cantwell (D-Wash.) that would allow states to negotiate with private industry to provide group coverage for low-income people. The bill limits states to negotiating for people who earn up to twice the federal poverty line.

By Tuesday evening, the group was no longer considering opening Medicaid to people with incomes 150 percent above the poverty line, according to senators involved in the talks. It faded as a realistic option amid concerns among moderates and many governors that it would put too much of a burden on state governments, which pick up a portion of the coverage costs.

Sen. Olympia Snowe (R-Maine), who is still being wooed by Democrats, expressed strong skepticism toward another key element, the expansion of Medicare to people between 55 and 64. She said she was concerned the bill would rely too much on government to fill gaps in insurance coverage that the private sector should handle.

Reid said he had not spoken to Snowe since the Democratic group concluded its talks.

An added difficulty was the Senate’s rejection Tuesday of an amendment by Sen. Ben Nelson (D-Neb.) to strengthen restrictions on federal funding for abortion coverage. He has said he would filibuster the bill if it didn’t provide adequate restrictions but Tuesday would only say that the defeat of his amendment “makes it harder to be supportive.”

“I had no Plan B, and I’m not looking for a Plan B,” Nelson said.

Nelson said he would look at any compromises on the abortion language that were presented to him but does not plan to work on one himself. Nelson continued to participate in the public option talks, but it was unclear Tuesday night if he had signed onto the “broad agreement.”

Earlier in the day, Snowe was highly skeptical of a proposal to expand Medicare and Medicaid — signaling that her support for an emerging public option compromise will be difficult to secure.

Democrats have been hopeful they could attract Snowe’s vote for a final health reform deal and gain a little breathing room in trying to reach 60 votes. But Snowe said the latest proposals on the table would take the legislation in the wrong direction, adding more government involvement at a time when voters want less.

“My deep concern is about the breadth and scale of this legislation, taking it in a more expansionistic approach for government’s role rather than the reverse,” Snowe told reporters. “You can design incentives in this legislation to maximize the power of the marketplace in making sure the industry performs.”

Sen. Joe Lieberman (I-Conn.), another undecided moderate who opposes any version of the public plan, hasn’t been participating in the meetings. But his staff is present, and he speaks with Schumer every day, Lieberman told reporters Tuesday.

He said he is encouraged by a proposal to remove the public option and replace it with a national nonprofit insurance program administered by a federal agency. Regarding Medicare and Medicaid, Lieberman said he needed to examine the additional costs.

Both the American Hospital Association and the Federation of American Hospitals sent alerts to its members Tuesday urging them to call senators in opposition to the proposals.

“Remember that we worked hard to successfully and significantly change the House bill so its public option was not entirely based on Medicare rates, but largely negotiated rates, and in the Senate we worked to ensure that the Finance Committee bill has a nonprofit, nongovernmental public option based on negotiated rates and not tied to Medicare or Medicaid,” read the alert from the American Hospital Association.

“Adding millions of people to these programs at a time when they already severely underfund hospitals is unwise and should be opposed.”

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