WASHINGTON — In an effort to defuse the most explosive issue in the debate over comprehensive health care legislation, a top Senate Democrat has proposed that any new government-run insurance program comply with all the rules and standards that apply to private insurance.
The proposal was made Monday by Senator Charles E. Schumer of New York, the third-ranking member of the Senate Democratic leadership, in a bid to address fears that a public program would drive private insurers from the market.
Calls for a new public plan have provoked more political passion than any other issue in discussions of how to revamp the nation’s $2.5 trillion health care system. The Senate Finance Committee begins to wrestle with the idea at a meeting on Tuesday, where it will examine ways to expand coverage.
President Obama campaigned on a promise to create a public plan, in an effort to compete with private insurers and keep them honest. But insurance companies and Republican lawmakers say a government-run plan could drive private insurers out of business and eventually lead to a single-payer system run by the government.
Scorched by Republican opposition to the idea of a new public program like Medicare, Senate Democrats are looking for a middle ground that would address the concerns of political moderates. One way they propose to do that is by requiring the public plan to resemble private insurance as much as possible.
“The public plan,” Mr. Schumer said Monday, “must be subject to the same regulations and requirements as all other plans” in the insurance market.
Democrats in Congress hope to shift the debate from the question of whether to create a public health insurance plan to the question of how it would work.
In so doing, they look for the support of influential moderates. But in the last few days, three moderate senators — Ben Nelson, Democrat of Nebraska; Olympia J. Snowe, Republican of Maine; and Arlen Specter of Pennsylvania, who switched parties to become a Democrat — have expressed reservations about a public plan.
Insurers also remain skeptical. Karen M. Ignagni, president of America’s Health Insurance Plans, a trade group, said, “We are very, very grateful that members of Congress have been thoughtfully looking at our concerns.” But she said she still saw no need for a public plan “if you have much more aggressive regulation of insurance,” which the industry has agreed to support.
Linda Douglass, a White House spokeswoman, said that Mr. Obama was for a public plan but that he realized it could be defined in different ways.
Mr. Schumer said his goal was “a level playing field for competition” between public and private insurers. But Ms. Ignagni said, “It’s almost impossible to accomplish that objective.”
The chairman of the Senate Finance Committee, Max Baucus, Democrat of Montana, asked Mr. Schumer to seek a solution. In his response, Mr. Schumer set forth these principles:
¶The public plan must be self-sustaining. It should pay claims with money raised from premiums and co-payments. It should not receive tax revenue or appropriations from the government.
¶The public plan should pay doctors and hospitals more than what Medicare pays. Medicare rates, set by law and regulation, are often lower than what private insurers pay.
¶The government should not compel doctors and hospitals to participate in a public plan just because they participate in Medicare.
¶To prevent the government from serving as both “player and umpire,” the officials who manage a public plan should be different from those who regulate the insurance market.
In addition, Mr. Schumer said, the public plan should be required to establish a reserve fund, just as private insurers must maintain reserves for the payment of anticipated claims. And he said the public plan should be required to provide the same minimum benefits as private insurers.
But some thorny questions remain. Could states tax the premiums of a public plan, as they tax private insurance premiums? Would the public plan have to comply with state laws, as private insurers do? Would the government ever allow the public plan to become insolvent?
In the pursuit of universal coverage, liberal Democrats say, it would be a mistake to rely entirely on the same insurance companies that have profited by selecting healthier customers, avoiding sick people and refusing to pay many legitimate claims.
“Private insurance plans are often just one step ahead of the sheriff,” said Senator Sherrod Brown, Democrat of Ohio.
On Monday, some insurers and Republican lawmakers circulated a video clip of a recent speech by Representative Jan Schakowsky, Democrat of Illinois, in which she said insurers were right to fear that a public plan option could “put the private insurance industry out of business.” Ms. Schakowsky said that might happen because of “the superiority of the public health care option.”