"Mongoose Tenacity" on the Senate Finance Committee

The Senate Finance Committee's rejection of two public option amendments has set off a flurry of other proposals that could upend the reformed health care system imagined in the Chairman Max Baucus's original bill. Earlier today, Democratic Senator Maria Cantwell introduced an amendment that would empower states to set up their own insurance pools of low-income residents, negotiate with insurers on their behalf and purchase coverage outside the exchanges, which are marketplaces for private insurance. Cantwell's amendment passed 12 to 11 with Democrat Blanche Lincoln voting with the committee's Republicans against it. The amendment, modeled after a system already operating in Cantwell's home state of Washington, is a fairly radical proposal and has already sparked a fierce reaction from Republicans.

The proposal would allow states the option of pooling together residents who earn 133 to 200 % of the federal poverty level. (Earners below that level would qualify for Medicaid under the Baucus bill; 200 % of poverty is about $44,000 for a family of four.) The states would be able to take whatever federal subsidies these residents would have gotten to shop in the exchanges and use that money instead to negotiate with private health insurers and get coverage for the pool. Cantwell's amendment states that these residents must be allowed to choose from at least two different plans, but would prohibit these residents from being able to take their subsidies and shop in the exchanges instead. (They could, in theory, still shop in the exchanges, just without subsidies.) Since Cantwell says about 75% of the uninsured fall at or below the 200% poverty line, states that chose to activate this system would have much smaller exchanges.

In explaining her amendment, Cantwell said it "hits the sweet" spot in that it's a public program that would encourage private sector competition and would still utilize the private health insurance industry. (Senator Jay Rockefeller, who introduced a strong public option amendment on Tuesday that was voted down, signed on a co-sponsor.) Cantwell also said the system would encourage states to steer low-income residents into cost efficient managed care programs.

Republicans on the committee, including Jon Kyl and John Cornyn, argued that by separating these low-income residents, Cantwell's proposal could actually increase premiums for consumers left in state exchanges. But as a Finance Committee staff member pointed out, low-income Americans tend to be less healthy than those earning more, so removing these people from the exchanges would in reality reduce the risk of the pool that remains. Baucus endorsed the amendment and said Cantwell has exhibited "mongoose tenacity" in trying to find ways to lower costs for consumers - Cantwell says her program could cut premiums for these low-income Americans by 35%.

But despite Baucus's accolades, Republicans are already pointing to Washington state's system as an example of why Cantwell's amendment is bad policy. From Politico:

Shortly after the Finance Committee passed a quasi, state-based public option sponsored by Sen. Maria Cantwell, Senate Republicans were circulating a memo highlighting all the problems with the plan in Cantwell's home state of Washington.

The memo linked to a New York Times story that reported Washington's basic insurance plan, which Cantwell's amendment uses as a model, has seen insurers drop out, premiums increase and enrollment drop. The program has a waiting list of 30,000 even as the state has moved to push 40,000 people off the plan because of budget problems.

Democratic Senator Thomas Carper, who voted against public option amendments from Rockefeller and Senator Charles Schumer, has also floated ideas in the past two days for how states could lower insurance costs for residents, including opening state employee benefits plans to the public or creating in-state public options. In an interview with the Washington Post's Ezra Klein, Carper explained why he voted against a national public option but still thinks state-based programs like it could work.