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Obama squares off with insurance lobby
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WASHINGTON (AP) — President Barack Obama on Tuesday squared off with the insurance lobby over industry charges that a government health plan he backs would dismantle the employer coverage Americans have relied on for a half-century and overtake the system.

The harsh exchange came after months of polite White House photo-ops at which the administration and insurers emphasized their search for common ground. It happened just when Congress seems to be floundering in its attempt to move sweeping legislation embodying Obama's top domestic priority, although leading lawmakers say they remain confident.

"If private insurers say that the marketplace provides the best quality health care ... then why is it that the government, which they say can't run anything, suddenly is going to drive them out of business?" Obama said in response to a question at a White House news conference.

"That's not logical," he scoffed, responding to an industry warning that government competition would destabilize the employer system that now covers more than 160 million people.

Obama made his comments as officials disclosed that key Senate Democrats had whittled more than $400 billion off the cost of a health care plan that carried a $1.6 trillion price tag last week. The new cost is below $1.2 trillion, but still above the informal target lawmakers have set. The officials spoke on condition of anonymity, saying they were not authorized to disclose details of the closed-door talks.

Sen. Kent Conrad, D-N.D., told reporters the reductions were achieved by lowering subsidies designed to make insurance affordable for those who lack it, as well as other changes.

Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, told reporters he was very close to his $1 trillion target, and predicted, "we'll make it." Baucus has been struggling to engineer a bipartisan compromise on Obama's health care priorities.

Late Tuesday, Baucus emerged from a meeting with White House Chief of Staff Rahm Emanuel and said the administration still wanted a deal that could get Republican support. Emanuel met in the Capitol with Senate Majority Leader Harry Reid, D-Nev., and other senators working on health care amid talk that Democrats may be getting ready to go it alone on health care.

"Rahm said he still wants a bipartisan plan," Baucus told reporters after the meeting.

Obama's comments earlier in the day went to the heart of one of the most controversial issues in health care, the demand by many Democrats for a government-sponsored health insurance that could compete with private plans.

Individuals and small businesses would get to pick either the public plan or a private one through a new kind of insurance purchasing pool called an exchange. Eventually, the exchanges could be opened to large companies as well.

"The public plan, I think, is an important tool to discipline insurance companies," Obama said.

That's not what the industry thinks.

In a letter to senators released Tuesday, the two largest industry groups warned in stark terms that a government plan would take over the system.

America's Health Insurance Plans and the Blue Cross Blue Shield Association also said they don't believe it's possible to design a government plan that can compete fairly with private companies in a revamped health care market. That particular statement seemed to be aimed at lawmakers of both parties who continue to seek a compromise on the contentious issue.

"We do not believe that it is possible to create a government plan that could operate on a level playing field," said the insurers' letter, signed by AHIP head Karen Ignagni and Scott Serota, the Blue Cross CEO. " Regardless of how it is initially structured, a government plan would use its built-in advantages to take over the health insurance market."

The industry suggested a government plan would run counter to Obama's promise that Americans can keep the coverage they have.

"A government-run plan no matter how it is initially structured would dismantle employer-based coverage, significantly increase costs for those who remain in private coverage, and add additional liabilities to the federal budget," said the letter.

Nonetheless, recent media polls have found strong public support for the idea. That has emboldened liberals, who are arguing that Democrats shouldn't compromise on a government plan. But moderate Democrats in the Senate are trying to get Republican support for nonprofit co-ops as an alternative.

Without a compromise, there's probably no chance of significant Republican backing for Obama's plan to slow increases in health care costs and expand coverage to the nearly 50 million uninsured.

Conrad is the principal advocate for a suggested compromise, creation of nonprofit cooperatives to sell insurance in competition with private industry. He told reporters the latest discussions envision $3 billion to $4 billion in seed money from the government to get the co-ops into operation, and include a "national structure with state affiliates" that would be able to work across state lines.

The co-op proposal is weaker than the government option that Obama and many Democrats favor, but Conrad said the lineup in the Senate makes the president's preference unlikely to pass as part of a bipartisan bill.

"Every single Republican except one is opposed to a public option and she is opposed unless it involves a trigger," meaning it is held in reserve for situations in which a private competition doesn't materialize. He referred to Sen. Olympia Snowe of Maine.

At the White House, Obama said he understood the legitimate concerns of insurers that private plans wouldn't be able to compete with "the government just printing money." The proposals lawmakers are debating would provide government money for startup costs, but then require the government plan to be financed through premiums.

Insurers say the government can protect consumers through stiffer regulation.

"If we have comprehensive reform of market rules, then it would not be necessary to have any form of public plan, including co-ops," said Robert Zirkelbach, a spokesman for the industry.

Separately, the Republican National Committee released the text of a cable television ad criticizing ABC News over a program on Obama's health care plan that is scheduled to air Wednesday night. The party had been pressing ABC to give prominent billing to the views of leading Republicans as well.


AP Special Correspondent David Espo contributed to this report.

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