Obama renews support for U.S. public insurance plan

President Barack Obama attends a meeting with the Parallel Civil Society in Moscow, July 7, 2009.

WASHINGTON (Reuters) - U.S. President Barack Obama renewed his support for a government-run health insurance plan on Tuesday after a top aide indicated the White House might be willing to back a healthcare overhaul that did not include the option.

In a statement released while traveling in Russia, Obama strongly endorsed the idea of a public plan and said it was one of the best ways to bring down costs and "force the insurance companies to compete and keep them honest."

The option, supported by many Democrats, has drawn sharp opposition from Republicans in Congress, who say it could hurt insurance companies and displace the traditional employer-based insurance model.

White House Chief of Staff Rahm Emanuel was quoted in the Wall Street Journal on Tuesday as saying the administration wanted to create competition for insurers, but the mechanism was negotiable.

Emanuel said another option would be to use the public plan only if the marketplace failed to provide enough competition, similar to a "trigger mechanism" included by congressional Republicans in the prescription-drug benefit plan for Medicare in 2003 but never used.

That sparked concern among healthcare reform advocates and many Democrats who strongly support the public option and wanted it included in a mammoth overhaul of the U.S. healthcare system being hammered out in Congress.

Obama's top legislative priority has made unsteady progress in Congress as lawmakers struggle to meld five separate bills into versions that can pass the Senate and House of Representatives by the August 8 start of a monthlong recess.

"I am pleased by the progress we're making on healthcare reform," Obama said, "and still believe, as I've said before, that one of the best ways to bring down costs, provide more choices, and assure quality is a public option that will force the insurance companies to compete and keep them honest."

SHARES UP

Shares of health insurers were up as much as 8 percent at midday on the possible shift in the administration's stance on a public plan, then they gave up some of their gains.

Shares of Aetna Inc and UnitedHealth Group Inc closed 6.3 percent and 4.5 percent higher respectively, while shares of Humana Inc closed more than 3.3 percent higher and WellPoint Inc 2.4 percent.

With a price tag estimated at $1 trillion or more, Democratic lawmakers are trying to trim costs and broaden the plan's appeal to make it more palatable and potentially win bipartisan support.

Senator Kent Conrad, a Democratic member of the Senate Finance Committee, said negotiators had been looking at taxing some employer provided benefits to help finance the overhaul. Currently that benefit is tax-free, and panel members were considering capping that tax exclusion.

But Conrad said new polling data shows that taxing health benefits is unpopular, with about 70 percent of people opposed to the idea. "The exclusion issue is especially difficult. If you go to the public and ask them what they think, they don't like it," Conrad said.

Three major hospital associations have offered to contribute about $155 billion over 10 years to help pay for the healthcare overhaul, The Washington Post reported, citing industry sources.

Two hospital sources told the newspaper about $100 billion would be saved through lower-than-expected Medicare and Medicaid payments to hospitals. About $40 billion would be saved by slowly reducing the subsidies paid to hospitals to care for the uninsured.

Two weeks ago, the pharmaceutical industry offered some $80 billion in prescription discounts over the next decade to help defray the cost of healthcare reform proposals.

House Majority Leader Steny Hoyer said healthcare reform must be paid for without adding to the U.S. deficit, and "all options ought to be on the table" including tax increases.

The tax-writing House Ways and Means Committee was in a day-long meeting to discuss how to pay for any reform.

Among the options being considered is a surtax on individuals making above $250,000 a year, according to people close to the talks.

(Additional reporting by Kim Dixon, Susan Heavey and Susan Cornwall; editing by Mohammad Zargham)