The POLITICO reports that Republicans are turning their backs on Obama’s public health plan proposal:

Sen. Ron Wyden (D-Ore.), who has filed the only health care reform bill with Republican cosponsors, said he spoke with 85 senators as he developed his proposal over the last few years—and found no GOP support for a plan that included a government option. “From a raw political standpoint, having talked to a lot of senators, I wouldn’t have any Republicans on the Healthy Americans Act as cosponsors if we had a public option,” Wyden told POLITICO this week.

Gloomy news, but certainly not a death sentence. Part of the problem is that nobody has spent much time sketching out the details for how to foster fair private/public competition. Republicans have hijacked the concept and confused it with socialist medicine, and progressives are only now starting to push back against their rhetoric.

For instance, the New America Foundation’s Elizabeth Carpenter explained to me that Len Nichol’s recent ‘A Modest Proposal For A Competing Public Health Plan‘ “was really designed to turn the debate from “the public plan is socialism” to a more substantive conversation about how to design the public plan.” Other papers are also in the pipeline. (Next Monday, CAPAF will release a new paper by Peter Harbage titled, Public Plan Choice.)

It’s also worth noting that while Republicans have already slammed the book on the public option, the public supports the idea. A new poll released today by Lake Research found that a whopping 73% of voters “want everyone to have a choice of private health insurance or a public health insurance plan while only 15% want everyone to have private insurance.”

A small group of Democratic lawmakers who agree with the President’s domestic policies, but refuse to finance his budgetary priorities — health care reform, cap and trade, education. Budget Committee heavyweights like Sens. Kent Conrad (D-ND) and Bill Nelson (D-FL), for instance, want to dig the nation out of the economic recession with comprehensive health care reform with old shovels.

Today, when Fox News anchor Bill Hemmer asked Nelson, “what concessions would you push for in that budget proposal,” Nelson pointed to health care:

NELSON: So you have to finagle with the numbers. You want to keep on the three main themes of the president – which is the environment, health, and education – but how we’re going to pull this off, it’s going to take Merlin the Magician. Kent Conrad, our chair of the budget committee, is definitely going to have to be Merlin.

HEMMER: I didn’t hear a firm answer on there. What concessions would you push for in that budget proposal?

NELSON: Well, you’re going to have to redo healthcare so that some of its upfront costs are less, so that you bring down the cost over the 10-year period.

Watch it:

Not quite sure what Nelson is getting at. Invest less in reforming the health care system and you’ll realize greater savings down the road? On the contrary, most experts believe that we’ll have to invest as much as $1.5 trillion to really bend the curve on health care spending and save $3 trillion by 2020.

But what’s most troubling is how quickly one places health care reform on the chopping block. Deficits too high? Cut health care reform! Judd Gregg mouths off about deficits bankrupting the country? Cut health care reform! This answer is completely counter-factual. Perhaps it’s political or the vestige of Bush-era thinking. Either way, Democrats on the Budget Committee shouldn’t rely on “magic” to solve the economic crisis and they shouldn’t have have too much trouble making the case for investing heavily in health care reform to save the economy.

No matter how hard Conrad works his magic, he won’t address the real structural problems so long as Democrats only rhetorically support the initiative. As President Obama recently pointed out, “To those who say we have to choose between health care reform and fiscal discipline, I say that making investments now that will dramatically lower health care costs for everyone won’t add to our budget deficit in the long term; it is one of the best ways to reduce it.”

Transcript: Read more

Len Nichols’ “modest proposal” for a competing public health plan requires the public plan to play by the same rules as private insurers. Operating within a new framework, both plans would offer standard benefit packages, “guaranteed issue, guaranteed renewal, no pre-existing condition exclusions, modified community rating, risk adjustment.”

The public plan would also adhere to the following conditions of fair competition: it would have to be actuarially sound, would not leverage Medicare to force providers to participate or use Medicare payment rates, and would have to adhere to the same rules regarding reserve funds.

Today, during a conference call with reporters, the Heritage Foundation’s Stuart Butler — a vocal critic of the public option — agreed with Nichols’ framework in theory, but argued that government would rig the system in practice:

The design features are correct, this theoretical model of what you would have to do … but what I’m very skeptical if one sees this on a number of states whether one sees the federal government giving up control of public plan or whether they will just feel the impulse to manipulate it. I just can’t imagine [Rep. Pete] Stark and [Rep. Henry] Waxman and others giving up the option of giving up that plan. … I think they will start relaxing requirements on the public plan… maybe you don’t have to finance yourself completely like private plans do.. We’ll just start rewriting the rules there…They will start relaxing them, in the public interest.

“In my view, the right answer is to push or require the private sector on the state level to come up with some arrangement through private plans which is the functional equivalent of the public plan model,” Butler explained on the call.

But Butler’s argument — let the marketplace handle it — kind of misses the point of the public option. The marketplace has contributed to skyrocketing premiums and huge cost-shifts to families through higher deductibles and copayments. It’s what needs reforming. In fact, even if the private market somehow self-designs a framework of regulation, it would likely not lower costs as quickly as public/private completion.

This is because the whole point of allowing a public plan option to compete with private insurers is that if you reform the way Medicare and the public option reimburses for services (move away from fee-for-service and towards bundled payment, primary care, and care coordination) and if those programs become more efficient, the private insurers — who are now competing directly with the new public plan — would also have to adopt more efficient payment practices.

By using the public plan as a vehicle for reforming the private insurance market, you can dramatically lower health care costs. My fear isn’t that the government won’t be able to keep its hands off the public plan; I fear that without a public plan we won’t be able to lower our skyrocketing health care costs and address the economic crisis.