Senate Finance Committee Rejects Public Option Proposal in Health Care Bill

The Senate Finance Committee voted against proposals that would create a government-run insurance plan in the committee's health care overhaul bill.

Sen. Jay Rockefeller, D-W.Va., proposed a public option plan designed along the lines of Medicare, where the government would decide unilaterally how much to pay doctors and hospitals for people who choose to enroll in the public plan. Sen. Chuck Schumer, D-N.Y. tweaked it by mandating that the government negotiate rates with health care providers, like a private insurer does, instead of simply mandating them. Schumer had touted this as middle ground that responds to market forces.

Video of the Senate Finance Committee debating the public option.Play

But after five hours of debate, both amendments lost. Most Democrats supported Rockefeller's proposal -- with the exception of five -- but the votes were not enough to pass either proposals out of the committee.

Today was the first day the Senate Finance Committee held a debate on the option of a government-run insurance program, which has been a key point of contention. It has pitted liberal Democrats not just against Republicans, but against moderate Democrats as well. When Montana Sen. Max Baucus, chairman of the finance committee, presented his version of a bill two weeks ago to a flat response, he left out the public option to the chagrin of many of his party members. Instead, Baucus proposed the creation of health care co-operatives, which are member-owned, non-profit insurance providers that would compete with private firms.

Video of ad from Americans United for Change calling out Republicans for using health care scare tactics.Play

Rockefeller and Schumer both offered measures as an alternative to Baucus' plan, but neither were expected to pass.

Baucus today said he didn't vote for the Rockefeller amendment because he wants to find a bill that would get all 60 votes on the Senate floor. He made the same argument for not voting for Schumer's amendment.

"My job is to put together a bill that becomes law," Baucus said. "I can count. Nobody has shown me a bill with a public option that gets to 60. So I am constrained to vote against the amendment."

GOP Criticism

Republicans, most of whom vehemently oppose a public option plan, have employed a new line of attack and are saying the Democratic health care bills would result in massive new tax increases.

The Republican National Committee launched a Web video Monday, using the new peg to attack President Barack Obama and the Democratic leadership. RNC Chairman Michael Steele amplified the attack in a news conference today.

"Just a few thoughts I have on this health care train that's moving somewhere, we don't know where, we don't know what's on it, we don't know how much it costs, but we do know that inside of it are a great deal of odorous economic pillories on businesses and families that will not hasten recovery but prolong recession," Steele told reporters.

He charged that the Democrats are shifting the burden to states to pay for health care costs, and said that making health coverage mandatory would make poor Americans suffer from excessive fines.

Medicare Debate

One of the most pointed exchanges of the debate today was whether public option would be like Medicare.

"Placing [health care] in the hands of a Washington, D.C. bureaucracy... I don't know many people in this country that think that is the way to solve the problem," said Utah Republican Sen. Orrin Hatch.

Or, as Sen. Charles Grassley, R-Iowa, put it, "A public insurance plan will ultimately put private insurers out of business."

But Democrats on the committee pointedly noted that the government already runs a big portion of health care in the United States, in the form of Medicare and Medicaid.

"The main knock is that its government run. Medicare is government run and people like it very much," Schumer said, telling Grassley that if he opposes a public option, what he's saying is "we should have no Medicare because it is a government run plan."

Grassley shot back that Medicare is not at issue because it is now part of the "fabric of our society" and he said that despite the existence of private plans that have bundled Medicare benefits for seniors, the private market cannot exist alongside a public option because "the government isn't a fair competitor. It's a predator."

In another part of Washington, filmmaker Michael Moore said that Obama should "hit the reset button" and call for a single-payer, Medicare for all, health-care system.

At a minimum, Moore -- whose new movie, "Capitalism, A Love Story," premiers in Washington tonight -- said Democrats better support the creation of a public health insurance option that is open to all Americans.

Speaking at a news conference, Moore said if Democrats don't back a public health insurance option open to all Americans, liberals will sit on their hands in 2010 and Democrats could lose control of Congress.

House Hurdles on Health Care

Meanwhile, members of the House are also facing their own issues on a health care bill. House Speaker Nancy Pelosi, D-Calif., and the Democratic leadership are struggling to meld their three health care bills in a way that will get the 218 votes they need to pass a bill.

The thorny point for them are the so-called "majority-makers" -- Democrats elected in 2006 and 2008 from districts that voted for George W. Bush in 2004 and/or Sen. John McCain, R-Ariz., in 2008. There are 84 such Democrats and in this political environment, a vote for a health care overhaul bill may be the political kiss of death for many.

For most of these Democrats, the key issue is not the public option, but costs. The House Democrats' bill, as proposed this summer, would cost more than $1 trillion in the next 10 years, according to the nonpartisan Congressional Budget Office.

The other issues House leaders are struggling with are abortion and immigration. Without alienating progressives, they want to keep the promise that no federal money in an overhaul will go to fund abortion or illegal immigrants.

House majority leader Rep. Steny Hoyer, D-Md., was vague today on the timeline for a House bill. Hoyer told reporters that lawmakers still need to work out what's going to be in and out of the bill and how to pay for it.

He said that the bill will emerge during the month of October but he didn't say when lawmakers would vote on it. Hoyer added that there's no deadline to bring legislation to the House floor, and that it will come to the floor when it is ready.

ABC News' Huma Khan, Teddy Davis, Dean Norland and Elizabeth Gorman contributed to this report.