New Dem plan for public option: Pass it, but give states an opt-out clause?

I don’t get it. Or rather, I don’t get why any fiscal conservative would go for it.

But instead of starting with no national public option and giving state governments the right to develop their own, the newest compromise approaches the issue from the opposite direction: beginning with a national public option and giving state governments the right not to have one…

For conservative Democrats — especially those from states with major private health insurance industry interests — this concession could be key, allowing them to punt a vote on a public plan to local governments. For progressives, it would not be the hardest pill to swallow.

“It is clearly much better than triggers and [Carper’s] opt-ins,” said Richard Kirsch, executive director of the group Health Care For Americans Now. “A trigger option is a way to kill the public option and these opt ins are not effective because it leaves it up to state legislatures to set it up…”

Another Democrat working on reform legislation added, “If everyone gets a plan, and states have to affirmatively vote, preferably by referendum, to opt out. I really don’t see a lot of states opting out, for one. And, for two, you get your national [public plan] available everywhere. If a few holes start appearing, it’s not nearly as fatal as if you went with the Carper plan, which after a few years might mean 10 or 20 [state-based] public options. If you go the other way, you’ll probably have like 47 states. It’s a big difference.”

When, not if, some sort of federal tax hike is passed to help pay for this boondoggle — maybe it’ll be a VAT, maybe just an increase in the marginal income tax rates — would residents of states without a public option get some sort of deduction or credit? If not, there’s going to be intense pressure on the state legislature to approve a public option if only to ensure that the locals get something for the tax dollars being siphoned from them. Look at what happened when governors like Sanford and Palin flirted with rejecting stimulus money. Eventually they buckled to pressure from the legislature because it was simply too hard to ask people who were being soaked for $787 billion — which is less than the pricetag on the Baucus bill — to accept nothing in return for their money. Combine that with the fact that forcing private insurers to cover preexisting conditions will mean more expensive premiums across the board and you’ll have people in non-public option states either screaming at the legislature to give them “relief” by approving a cheap government plan as an alternative or else voting with their feet — the prospect of which should be enough to get the legislature to act. Unless I’m missing something, an opt-out scheme is basically just a prisoner’s dilemma to get recalcitrant red states to acquiesce in a government plan, which will provide much-needed political cover for Democrats when the red ink starts to flow and the financial reckoning comes. It won’t be Obama’s fault then; it’ll be Obama’s fault and Rick Perry’s fault and Mark Sanford’s fault and every other Republican governor who signed off on “socialism.” So why would any Blue Dog agree to it?

While you ponder, here’s some fun body language from our glorious Democratic leadership yesterday via The Hill. Watch Pelosi when Reid puts a hand on her shoulder and then when Reid says they’ll support The One on Afghanistan no matter what.

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