Moments ago, Democratic Senators told reporters that the caucus yielded to Sen. Joe Lieberman’s (I-CT) demands and dropped the Medicare buy-in provision from the Senate health care bill, leaving only a network of nonprofits to stand in for the public health insurance option. While Senators stressed that a final decision would be made tomorrow, after the Democratic caucus meets with President Obama, most agreed that the fate of the Medicare buy-in was all but certain.

“The general consensus was that we shouldn’t make the perfect the enemy of the good and if we’re going to get all the insurance reforms accomplished and a number of other things [and] dropping the Medicare expansion was necessary, well then that’s what should be done and it appeared that would be necessary to get the 60 votes,” Sen. Evan Bayh (D-IN) told the Hill. “At some point you have to switch from the sentiment, the emotion of the words, to the facts,” said Sen. Jay Rockefeller (D-WV). “And then you’ve got to decide if I didn’t get what I want, in the form that I wanted it, am I willing to cashier 31 million Americans? I want a bill.”

CNN confirmed these reports:

When Democratic leaders initially announced the compromise last week, progressives claimed that the Office of Personnel Management’s (OPM) network of nonprofits would do little to increase competition or lower health care costs. Public option ‘godfather’ Jacob Hacker argued that “because Blue Cross and Blue Shield (BCBS) is the most likely national non-profit to take advantage of this new opening, and because the Blues dominate most states, the plan perversely amounts to trying to increase competition and choice by encouraging Blue Cross and Blue Shield to compete against, you guessed it, Blue Cross and Blue Shield,” Hacker wrote, asking “That’s competition?”

Now, with the public option dead (and the OPM proposal ineffective), Democrats should demand a list of policies in its stead. These proposals should seek to accomplish the goals of a public plan (competition, cost savings, transparency and accountability) through regulatory means and ensure that health reform does not reward private insurers with millions of new customers.

Among the options are proposals to strengthen the Medicare Commission (now known as IMAC) to focus on a more systematic approach and target more providers, allow all state-based exchanges to act as prudent purchasers and select only the most efficient insurers, work to strengthen the consumer protections in the bill or bolster the mechanisms that oversee insurer compliance with the new regulations. Lawmakers should also consider including more dynamic regulatory authority that would allow the Secretary of Health and Human Services to prevent insurers from designing new ways of excluding sicker beneficiaries and give the agency the authority new insurer abuses.

This afternoon, Sen. Al Franken (D-MN) openly challenged Sen. John Thune (R-SD)’s claim that the Senate health care bill does not offer benefits until 2014. “We are entitled to our own opinions; we are not entitled to our own facts,” Franken declared. “I stand here day after day after day and hear my colleagues, my good friends from the other side, say things that are not based on fact.”

The Senate health care bill spends $10 billion between 2011 and 2014 on interim benefits. Franken explained that the bill offers immediate insurance reforms for Americans purchasing coverage in the individual market and closes the donut hole in Medicare Part D.

“Senator Thune did say that none of the benefits started next year, but he just, I guess, hasn’t read the bill,” Farnken said. “I do find that many of my colleagues who I’m very friendly with, haven’t read the bill and are not very familiar with it.”

Watch a compilation:

The exchanges don’t open open until 2014, but the Senate health bill immediately prohibits insurers from rescinding coverage or imposing life-time or annual limits. Americans who are denied coverage because of a pre-existing condition could participate in a national high-risk pool program and young Americans can stay on their parents’ policies until they turn 26. Under the Medicare buy-in compromise, Americans between 55 and 64 would also be able to enroll in the Medicare program on day one.

Franken may have overstated his case, however. While the bill offers some substantial immediate benefits, the bulk of reform does not kick in until 2014, once the exchanges are established.

This morning, Ezra Klein pointed out that Sen. Joe Lieberman’s (I-CT) opposition to health care reform will kill the bill and the thousands of Americans who will go uninsured because of it. Klein’s post may have been simply “pointing out that Lieberman’s actions have consequences,” but it elicited a sharp response from Washington Post editor Charles Lane. “Klein essentially accuses Lieberman of mass murder because he disagrees with him on a policy issue about which there is considerable debate among people of good will across the political spectrum,” Lane wrote:

This is disgusting, and pretty illogical, too. Klein brandishes a study by the Urban Institute showing that the lack of health insurance contributed to the deaths of 137,000 people between 2000 and 2006. But last time I checked, Joe Lieberman does not oppose insuring everyone. Indeed, he is on record favoring “legislation that expands access to the millions who do not have coverage, improves quality and lowers costs while not impeding our economic recovery or increasing the debt.” He simply opposes the public option, as well as Harry Reid’s last-minute improvisation on Medicare. Klein’s outburst only makes sense if you assume that there is one conceivable way to expand health insurance coverage, and that Harry Reid has discovered it.

Matt Yglesias points out that “stark moralistic language….makes people very uncomfortable. Lieberman’s people are squirming at the accusation that he bought his Medicare concessions by threatening to kill people. Lame Washington Post editors are squealing.” True, but I would argue that Americans are far less comfortable with arguing that the status quo and insurance market deregulation kills people and far more comfortable believing the government death panels will euthanize grandma.

Compare, for instance, reactions to Sen. Chuck Grassley’s (R-IA) ‘pull the plug’ remarks with the fire storm that brewed over Rep. Alan Grayson’s (D-FL) argument that Republican health care reforms would result in more deaths. Grayson was asked to bow at the alter of Rep. John Beohner (R-OH) while pundits tried to ‘debate’ the merits of end-of-life counseling provisions. Why are Grassley’s claims given more credibility than Grayson’s indictment of the status quo and GOP insurer-friendly health care proposals?

One argument fits a neat and familiar narrative that goes back to the days of Medicare. The other suggests that some combination of government inaction and corporate malfeasance are at least partly responsible for a great number of needless American deaths. Only the latter argument has the benefit of being true, but it’s also the one that’s venomously smeared.

A compromise provision in the Senate health care bill that requires insurers to rebate beneficiaries if they fail to spend 90% of premium dollars on medical care could add new costs to the federal government, limiting health reform’s deficit reductions. Sen. Jay Rockefeller (D-WV) inserted the new medical loss ration (MLR) requirement (for insurers participating in the small or individual group markets) during the Gang of 10 public option negotiations, but a new directive from the Congressional Budget Office (CBO) may force Majority Leader Harry Reid (D-NV) to abandon the provision and could further undermine the now defunct compromise.

The CBO’s “harsh assessment” concluded that the 90% MLR requirement — which insurers would only have to maintain until 2014 — “would devastate the industry“:

A proposal to require health insurers to provide rebates to their enrollees to the extent that their medical loss ratios are less than 90 percent would effectively force insurers to achieve a high medical loss ratio. Combining this requirement with the other provisions of the PPACA would greatly restrict flexibility related to the sale and purchase of health insurance. In CBO’s view, this further expansion of the federal government’s role in the health insurance market would make such insurance an essentially governmental program, so that all payments related to health insurance policies should be recorded as cash flows in the federal budget.

The question of whether certain purchases of private health insurance “should be treated as part of the federal budget” is not insignificant. During President Clinton’s push to pass comprehensive health care reform, the CBO decided that “payments to and from the ‘health alliances’ should be included in the accounts of the federal government.” The decision artificially increased the bill’s score, dooming its chances in Congress.

Rockefeller argues that insurers that receive government subsidies should be required to spend those dollars on health care, not administrative overhead or profit. The 90% ratio replaced an existing provision that required insurers to maintain a medical loss ratio of 85%.

In an effort to quantify savings that the Congressional Budget Office and the Office of the Actuary at the Center for Medicare and Medicaid Services (CMS) refuse to score, the administration’s Council of Economic Advisers released a new report today which finds that the health care legislation moving through Congress would reduce health care spending by 1 “percentage point over an extended horizon.” “This increase in the growth rate of GDP resulting from slowing the growth rate of health care costs translates into substantial increases in the median family income,” the report concludes.

“There is a lot of uncertainty,” Christina Romer, chairwoman of the Council of Economic Advisers, admitted on a conference call with reporters. But “the CBO scores for various things, especially for delivery reforms, turn out to be low compared to what actually happened.” “When you do these reforms in a unified comprehensive way…putting them all together you can actually have important synergies.” “Just based on the CBO scores, on the analysis that is out there, we feel comfortable saying that it will slow growth by 1 percentage point.” Romer also pushed back against conservative critics who cited the recent CMS report to argue that national health spending would increase under reform:

[There is a]difference between level effect and growth rate effect…expanding coverage to 30 million, will up the level of health care spending initially. You can’t increase coverage and pay less…I do think we need to acknowledge that the level spending rises initially…But we are talking about what happens over the longer haul… so the important thing is that we think it will slow the growth rate of cost by 1 percentage point per year and that’s based a lot on the CBO score…what happens at the end of the budget window and then what they’re projecting going out further…”

“Yes, in the short run you do spend more to insure a larger number of people,” Romer reiterated. But “the more fundamental issue is about the trajectory we are on. The people on the house floor who say that the status quo is better or can even be sustainable, have not looked at the numbers.” Currently, the United States spends 18% of its Gross Domestic Product (GDP) on health care, and is expected to spend nearly 34 percent of GDP on health care by 2040.

“What sounds like a small number is enormous when you look over time the effects that that has. So even though we will up the level of spending in the short run,” the 1 percentage reduction in growth after 5 or 10 years, “has a dramatic impact on where we are relative to otherwise we would have been.”

Romer also echoed yesterday’s floor speech by Sen. Sheldon Whitehouse (D-RI) who argued that policy makers will have to implement a range of policies to reduce growth. That’s the “importance of the Medicare advisory board,” Romer said. It’s “an institutional structure that keeps those ideas coming. We know this will be an evolving process…some will be dramatically good, others won’t work as well.” Romer also credited the 40% excise tax on high-cost plans and delivery reforms like bundling and Accountable Care Organizations for slowing the rate of growth.

Just days after signaling that he would not oppose a Medicare buy-in, Sen. Joe Lieberman (I-CT) announced yesterday that he would vote against the health care bill if it included the measure. Appearing on Face the Nation, Lieberman told host Bob Schieffer that he did not know “exactly what’s in it” but pledged to oppose the Medicare buy in “because it has some of the same infirmities that the public option did”:

LIEBERMAN: But I will tell you that on one part of it the so-called Medicare buy-in, the opposition to it has been growing as the week has gone on. And– and though I don’t know exactly what’s in it, from what I hear I certainly would have a hard time voting for it because it has some of the same infirmities that the public option did. It– it will add taxpayer cost. It will add to the deficit. It’s unnecessary. [...]

SCHIEFFER: So you can’t vote for the bill right–

LIEBERMAN: Yeah– [...]

LIEBERMAN: You got to take out the Medicare buy-in. You got to forget about the public option. You probably have to take out the CLASS Act, which was a whole new entitlement program that will in– in future years put us further into deficit. And you got to adopt some of the cost containment provisions that will strengthen cost containment that all of us favor….So it’s time to get reasonable.

Watch it:

Lieberman’s opposition leaves Senate Majority Leader Harry Reid (D-NV) with a set of difficult, if not unfortunate choices, that could very well doom any hopes of passing the Senate health care bill before Christmas. Insiders suggest that if Reid does not file all three cloture votes — one on the manager’s amendment, one on the bill substitute, and one on the final bill — by Thursday, he will not have enough time to pass the bill before or on December 23 or 24th.

Reid’s best hope is for a positive CBO score that would win over Sen. Olympia Snowe (R-ME) or bring Lieberman back to the negotiating table. Reid could try to pass the health care bill through reconciliation (which he has taken off the table), broker another compromise that satisfies Lieberman’s concerns or abandon the public option and the CLASS Act altogether. Ditching the long-term care insurance provision could prove difficult however, since the program’s revenues account for more than half of the Senate bills’ deficit reduction in the first 10 years.

Alternatively, Reid could ditch Lieberman and offer a triggered public option that could win the support of Snowe. But that would only further delay the process. “It isn’t enough to say let’s get it done and not worry about the specifics that are in the legislation,” Snowe has said. “The more they try to, you know, sort of drive this process in an unrealistic time frame, you know, the more reluctant I become. … I don’t think we should be concerned by this artificial timetable. There’s always January.”

Of course, if Lieberman was truly interested in voting for health care reform he would offer substitute policies that could achieve the goals of the public option — increased competition, lower costs, and care quality. Lieberman could offer to strengthen the Medicare Commission (now known as IMAC), allow all state-based exchanges to act as prudent purchasers and select only the most efficient insurers, work to strengthen the consumer protections in the bill or bolster the mechanisms that oversee insurer compliance with the new regulations.

But it’s unlikely that Lieberman will offer Democrats a real compromise. He has no real plan. In fact, his initial uncertainty about the Medicare buy-in may be the result of his absence from the original negotiations (Sen. Tom Carper (D-DE) sat in for Lieberman during those talks). He is not very interested in health care reform, but at least he’s with us on the war.