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Blue Dog Compromise Removes Billions In Savings From Public Plan

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Despite Blue-Dog claims that a compromise they engineered Wednesday would trim $100 billion from the cost of health-care legislation, their weakening of the public option for insurance coverage could end up erasing those savings.

Over the past two weeks, the seven Blue Dog Democrats on the House Energy and Commerce Committee have demanded that legislation crafted by their own party's leaders include more cost controls. On Wednesday, four of those seven ended their opposition after a series of changes -- some cosmetic, others substantive -- were made to the legislation.

They got the headlines they wanted -- "House Democrats Trim $100B From Health Bill," The Washington Post wrote - but sources on Capitol Hill and outside of government say the changes to the public plan could actually increase the cost of the bill anywhere between $60 billion and $100 billion, wiping out all or most of the ostensible savings..

Going into the Energy and Commerce debate, House Democrats had proposed a fairly robust public option that would have structured payments for doctors and health care providers at a rate modified from the one used by Medicare. According to the Congressional Budget Office, such a system would cover around 10 million people and would have an operational cost that was roughly 10 percent lower than that of private health insurance.

On Wednesday, Blue Dog Democrats pared down that outline. The compromise bill would still have a public option. But it would allow doctors and other health care providers to negotiate their payment rates.

The Congressional Budget Office has not yet made an estimate of how cost-effective the revised public option would be. But The Walker Report blog, which has done detailed analysis of all variations of health care legislation, noted that the new public option is similar to that put forward by the Senate Health Education Labor and Pensions (HELP) Committee. The CBO was vague on how much the HELP Committee's public option would cost, but Walker writes that it "would not be noticeably cheaper than private insurance or save the government much money."

Politico, meanwhile, reported on Wednesday night that the savings lost by switching to the Blue Dog public plan would be $60 billion.

On the far end of cost-savings analysis is a June 2009 report issued by the Common Wealth Fund, a private foundation that conducts health care analysis and promotes a better performing health care system. Titled "Fork In The Road," the report concluded that a public option paying providers Medicare rates (which are lower than any proposal put forward to date) would produce savings for the government of roughly $3 trillion. A public plan that provided rates somewhere between Medicare and private plan rates (where the Blue Dog approach would likely be) would yield only $2 trillion in savings.

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