Key Week for Obama Starts on Feisty Note - WSJ.com

By JANET ADAMY, JONATHAN WEISMAN and GREG HITT

CINCINNATI -- President Barack Obama kicked off a crucial week for his top domestic priority by pressing for a new government-run health-insurance program just as key senators moved closer to a bipartisan deal that leaves out the public plan.

Speaking at a boisterous Labor Day rally of AFL-CIO members in Cincinnati, Mr. Obama sought to rally his fractious Democratic base in this swing region of a crucial swing state. Falling back on campaign flourishes he hasn't used since the election drive, he led chants and blasted Republicans for what he said was their lack of a solution for fixing the health system. "I continue to believe that a public option...will help improve quality and bring down costs," he told the crowd to applause.

Sen. Max Baucus, D., Mont., released his health-care proposal that would cost less than $900 billion over 10 years.

But the president faces a more delicate task as Congress returns to Washington Tuesday from a bruising month-long recess that turned into a battle over the president's signature domestic-policy issue. To revive his health agenda, Mr. Obama will address Congress in a special joint session Wednesday where he will more clearly spell out what he can and can't accept in a final health bill, according to White House aides.

Rep. John Boehner, the House Republican leader, said Mr. Obama needs to do more than restate his priorities. "It's time for the president to hit the reset button and work with Republicans for better solutions, before more debt is piled on our children and more American jobs are destroyed," Mr. Boehner, of Ohio, said.

Mr. Obama is expected to reiterate his support for creating the public-health-insurance plan despite pressure from Republicans and some moderate Democrats to back away from the idea. Yet he is likely to leave the door open for a compromise on the issue. Mr. Obama will emphasize what he says the health-care system would look like without change, depicting a scenario of rising costs, more uninsured Americans and more efforts by insurance companies to block those with pre-existing medical conditions from buying insurance, the aides said.

His support for the public plan sets up a split with the Senate Finance Committee, which has been drafting the health bill that has been seen as the only hope of winning bipartisan support for a health overhaul in Congress. Over the weekend, the committee's chairman, Montana Democrat Max Baucus, distributed a draft of his health proposal that leaves out the public plan in order to win support from a small group of Republicans. Mr. Baucus's plan costs less than $900 billion over 10 years and would expand insurance coverage to tens of millions of Americans. (Read the health proposal here.)

In recent days, the White House has signaled it could step in to broker a bipartisan deal on its own, particularly through negotiations with Maine Republican Sen. Olympia Snowe, one of the key Republicans on the Finance Committee. While the White House insists it hasn't decided whether to present formal legislation, it has been drafting legislative language on health proposals since earlier this summer, a White House official said.

Liberal Democrats, especially in the House, are stepping up warnings that they won't vote for a plan without a public option. That suggests conflict in Congress if Mr. Baucus succeeds in pushing his plan through the Senate and the health bills come to a House-Senate conference committee, although that is still several stages away.

Representatives of the six Senate Finance Committee members who are negotiating the plan declined to comment. Mr. Baucus didn't make his proposal public.

White House spokesman Robert Gibbs was noncommittal when asked about Mr. Baucus's plan. "Obviously we'd be pleased if the Finance Committee throughout the course of the next few days came up with a proposal that can get through their committee hopefully with bipartisan support," he said.

Mr. Obama offered clues to his Wednesday address in his remarks before union members Monday. He said he envisions a system where people no longer worry about losing insurance coverage when they change jobs or get sick. He also called for cutting $100 billion in Medicare spending to insurance companies, signaling his support for proposals to cut payments that insurers receive for private insurance plans administered through Medicare.

And the president distilled his call for health-care changes into a few simple phrases, something Democrats have been pleading for. "That's what we're talking about," he told the crowd. "Security and stability for folks who have health insurance, help for those that don't -- the coverage they need at a price they can afford."

"The most important thing that he did here was take this thing head-on," Ohio Democratic Sen. Sherrod Brown said after the speech. "He's beginning to lead."

Mr. Baucus distributed his plan Saturday to the small group of senators who've been negotiating for months to reach an agreement. Instead of having a public plan, it calls for creating a batch of new nonprofit insurance cooperatives aimed at providing competition to private insurers.

The plan requires most Americans to carry health insurance and gives tax credits to low- and middle-income people to help them buy insurance, reaching as high as a family of four that earns about $66,000 a year. For the poorest Americans, it would expand the federal-state Medicaid program to include those earning as much as 133% of the poverty level. The plan sets aside some money to help states pay for the expansion, according to people familiar with the proposal.

Unlike other health proposals in the House and Senate, the plan wouldn't require employers to provide health insurance to workers, a concession aimed at winning support from Republicans. Instead, it would require companies whose workers receive government subsidies for insurance to cover the cost of those tax credits up to a certain level, people familiar with the plan said. That is likely to appease businesses, which have vigorously opposed mandating that employers cover workers.

Mr. Baucus's proposal closely resembles what the committee was seeking before the Senate left Washington for the August recess. The group of six senators plans to meet Tuesday where they could further refine the proposal before it goes to the broader committee for consideration. Besides Mr. Baucus and Ms. Snowe, the six senators are Chuck Grassley (R., Iowa), Jeff Bingaman (D., N.M.), Kent Conrad (D., N.D.) and Mike Enzi (R., Wyo.). The full committee could act as soon as late this week on the plan.

Mr. Baucus's plan is paid for through a series of new revenue increases and spending cuts and is designed to not widen the deficit.

The committee needed to plug a $100 billion shortfall in the plan's budget over a decade, and Mr. Baucus assembled a combination of spending changes and revenue increases to make up for the gap, according to people familiar with the proposal. The main new item is an across-the-board fee placed on insurance companies that is based on their market share and is estimated to raise tens of billions of dollars over the next decade, according to people familiar with the plan. Another plank of the plan would tax insurance companies on particularly generous health-insurance plans.

Committee members had decided against the across-the-board fee earlier in the negotiations, but Mr. Baucus revived it in an effort to keep the new insurance levies from hitting middle-income people, according to people familiar with the plan.

The insurance industry balked at the fee proposal. "New taxes on health-care coverage will only make coverage less affordable for families and small businesses," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the industry's main trade group.

Other sources of funding for the Finance Committee plan include cuts to Medicare, including reductions in the type of private-insurance-plan payments Mr. Obama outlined in his speech. People close to the committee said the cuts wouldn't reduce benefits to senior citizens. The plan also raises money by limiting the tax benefits of so-called flexible-spending accounts that consumers can use to pay for certain medical expenses, and changing the income threshold for itemizing medical deductions.

To make it easier to buy insurance, the plan calls for new health-insurance exchanges that would provide standardized information on insurance plans and pricing.

The proposal prevents insurance companies from denying coverage to people with a pre-existing health condition or dropping their coverage once they become ill. It also calls for caps on consumers' out-of-pocket medical costs.

CORRECTION

Mike Enzi is a Republican senator from Wyoming. An earlier version of this article misidentified him as representing Iowa.

Write to Janet Adamy at janet.adamy@wsj.com, Jonathan Weisman at jonathan.weisman@wsj.com and Greg Hitt at greg.hitt@wsj.com