As support for a government-run insurance plan reaches an all time high, Sen. Joe Lieberman (I-CT) today moved closer to stripping the public plan from the merged Senate legislation.

Citing concerns that the public option would create “trouble for the taxpayers, for the premium payers and for the national debt,” Lieberman said that he was “inclined” to vote to allow health care reform legislation to be debated on the Senate floor, but would “vote against cloture” if “the bill stays as it is now.” TPMDC has Lieberman’s comments:

“I told Senator Reid that I’m strongly inclined — I haven’t totally decided, but I’m strongly inclined — to vote to proceed to the health care debate, even though I don’t support the bill that he’s bringing together because it’s important that we start the debate on health care reform because I want to vote for health care reform this year. But I also told him that if the bill remains what it is now, I will not be able to support a cloture motion before final passage. Therefore I will try to stop the passage of the bill.“

Contrary to Lieberman’s claims, the public option envisioned by Reid would be required to compete on a level playing field with private insurers and charge premiums “in an amount sufficient to cover expected costs.” Instead of increasing the national debt, the Congressional Budget Office concluded that the self-sustaining public option (similar to the one envisioned by Reid) could actually save the government money and slightly lower premiums.

But Lieberman isn’t interested in the policy details. Earlier this month, the senator registered his opposition to the Baucus bill, which did not contain a public option. During today’s conference call, Lieberman opened the door to supporting a plan “set up and run by the states,” giving Reid breathing room to introduce an amendment that would fund state-based public plans.

In fact, given the public’s strong support for the option and Reid’s decision to include the plan in the bill, the final Senate legislation will likely include some kind of public option provision. That proposal could mirror The New America Foundations’ proposal to establish a series of independent public options based on already existing state-employer health plans (currently offered in 30 states). The federal government would offer states start-up funds to establish a program that would compete on a level playing field.The public plan would have to be actuarially sound, would not leverage Medicare to force providers to participate or use Medicare payment rates, and would likely adhere to the same rules regarding reserve funds. Patients who are weary of private providers would likely enroll in the public plan.

Responding to Lieberman’s statement during his weekly press conference, Reid said, “Joe Lieberman is the least of Harry Reid’s Problem.”

Lieberman’s opposition may also influence negotiations in the House, where moderate to conservative House Democrats may now abandon their wavering support for a (robust) national public plan (after all, if it won’t be law, why vote for it?).

The opt-out public option that Majority Leader Harry Reid (D-NV) sent to the Congressional Budget Office (CBO) would establish “a national insurance plan with government seed money and be run by a private, not-for-profit board,” Fox News reports. The plan would negotiate its own reimbursement rates with providers and allow state legislatures to opt out of the option by 2014 if they can provide comparable coverage in order to exit out of the federal plan.” States may also choose to establish a consumer-driven cooperative, although “states that opt out of the public plan could not offer co-ops.”

The comprise was developed by Sen. Chuck Schumer (D-NY), who converted Sen. Tom Carper’s (D-DE) original state-based opt-in proposal into a national opt-out option, and is far more conservative than the robust public option being considered in the House.

If the option is modeled on the provision in the HELP Committee’s bill, the plan would only save about $25 billion over 10 years, without significantly lowering health insurance premiums. It would likely lack Medicare’s market clout or leverage to significantly lower health care costs, but would still represent a not-for-profit alternative that can begin spearheading critical delivery system reforms.

Since both Senate bills establish state and regional based exchanges in lieu of a single national structure, it’s likely that the compromise in the merged Senate bill will establish 50 different options, all controlled by the Secretary of Health and Human Services. The public plan would have to attract a network of providers, charge premiums “in an amount sufficient to cover expected costs,” and meet all solvency and reserve fund requirements.

If Reid follows HELP’s template, then within each state or region the Secretary would negotiate reimbursement rates on behalf of the pubic option that would likely mirror the rates used by private insurers (the legislative language states that rates “shall not be higher, in aggregate, than the average reimbursement rates paid by health insurance issuers offering qualified health plans through the Gateway”). The HELP language also allows the public option to “develop or encourage the use of innovative payment policies that promote quality, efficiency and savings to consumers,” a critical provision that would allow the public option to invest in payment and delivery system reforms.

Reid aides stressed that the legislative language for the opt-out provision was a “work in progress” that has yet to be scrutinized by the Congressional Budget Office. The aide said “Reid delivered a menu of proposals to the CBO for review and will make a final decision about what the Senate measure will include once he receives cost estimates for the various policies, which could come within a week.”

The merged Senate public plan would still have to be reconciled with the House, where liberals “are keeping up their pressure on key Democrats — including President Barack Obama — and urging them to embrace a robust public insurance option” that reimburses providers at five percent above Medicare rates. (The Congressional Budget Office has concluded that the option could save approximately $85 billion more than a level-playing field proposal.)

Rep. Raúl Grijalva (D-AZ) — co-chairman of the Congressional Progressive Caucus — explained that there is “a big difference” between the Senate’s proposal and the Progressive Caucus’ demand. “‘My state would opt out immediately,’ [out of the Senate's public plan] he said, predicting that Texas and other conservative states would as well, despite having some of the highest rates of uninsured people in the country. “Without protections for those people who would be left behind, I would have a hard time,” Grijalva said. “Without the robust plan, based on Medicare plus 5 [percent], there is no competition, there is no mechanism to drive down costs for insurance companies and you hurt coverage,” Grijalva said.