We have spent the better part of this year fighting for health reform that would provide insurance access and continuity to every American in a fiscally responsible manner. We are concerned that – absent a competitive and continuous public insurance option – health reform legislation will not produce nationwide access and ongoing cost containment. For that reason, we are asking for your leadership on ensuring that the merged health reform bill contains a public insurance option.

The letter, spearheaded by Sen. Sherrod Brown (D-Ohio), also drew the support of Democratic Sens. John D. Rockefeller (W.Va.), Russ Feingold (Wis.), Pat Leahy (Vt.), Daniel Akaka (Hawaii), Tom Udall (N.M.), Kristen Gillibrand (N.Y.), Roland Burris (Ill.), Ron Wyden (Ore.), Debbie Stabenow (Mich.), Barbara Boxer (Calif.), Sheldon Whitehouse (R.I.), Michael Bennet (Colo.), Dianne Feinstein (Calif.), Jack Reed (R.I.), Jeff Merkley (Ore.), Frank Lautenberg (N.J.), Ben Cardin (Md.), Al Franken (Minn.), Robert Casey (Pa.), Barbara Mikulski (Md.), Daniel Inouye (Hawaii), Ted Kaufman (Del.), Arlen Specter (Pa.), Maria Cantwell (Wash.), Robert Menendez (N.J.), John Kerry (Mass.), Herb Kohl (Wis.) and Paul Kirk (D-Mass.), as well as Independent Sen. Bernie Sanders (Vt.), who caucuses with the Democrats.

Three thoughts: First, the list of supporters is deceptively thin. Sen. Charles Schumer (D-N.Y.), for example, has been among the most vocal proponents of the public plan, but his name doesn’t appear on the letter.

Second, the Finance Committee included a provision allowing states to create their own public plans to negotiate with providers and compete with private insurers for the sake of bringing costs down for consumers. That’s not the robust national plan many liberals are pushing for, but it is a public plan. The Democrats’ letter is silent on whether the state plan provision would satisfy their demands.

And third, the letter acts as if Reid has the final say on the matter. He doesn’t. Even if the majority leader ignores this entreaty and goes with the Finance Committee’s state-based health co-ops, there will be plenty of time later to amend the bill. After all, this debate is just beginning.

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Finance Chairman Max Baucus (D-Mont.) had delayed the panel’s vote on the sweeping health reform bill until the CBO score was issued. No word yet on when that vote will take place.

**Overall, the bill spends $829 billion over the same span on insurance subsidies and tax credits.

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Baucus did not, however, indicate how long he’d wait after the score arrives before staging that vote.

First, Medicaid pays providers at such low rates (roughly 72 cents for every dollar Medicare pays) that a huge chunk of the nation’s physicians refuse to treat new Medicaid patients outright. The trend begs the question: What good is health coverage if no one accepts it?

And second, as The Washington Post points out today, state budgets are so squeezed already that governors are reluctant to adopt any new financial burdens, even if it means getting health coverage for more residents. (Although Medicare is subsidized exclusively by the federal government, states are on the hook for a percentage of Medicaid costs.) Indeed, many governors oppose the Medicaid expansion in the Finance bill.

“I can’t think of a worse time for this bill to be coming,” said Tennessee Gov. Phil Bredesen (D), a member of the National Governors Association’s health-care task force. “I’d love to see it happen. But nobody’s going to put their state into bankruptcy or their education system in the tank for it.”

Medicaid is difficult to analyze, because the 50 states and the District of Columbia each have different payment structures and eligibility rules. In poor states, for example, the federal government picks up a larger percentage of the tab, relieving the burden on state coffers.

Also, some states have taken it upon themselves to expand Medicaid to cover a larger portion of their low-income population. Maine, for example, covers parents up to 206 percent of the poverty level, while many other states have kept Medicaid largely focused on kids, disabled folks and pregnant woman — the populations they’re required to cover under federal law. Indeed, in 34 states, parental Medicaid eligibility is set below the federal poverty level.

The differences in programs complicate the push for universal uniform. The Finance Committee’s bill would expand eligibility enormously, in effect offering coverage to every American earning less than 133 percent of poverty ($14,404 a year), including childless adults, who are currently prohibited from participating. That provision has been skewered by those states facing the largest enrollment hikes because they don’t already cover many adults.

The Finance bill (as amended) also requires states with expanded coverage to maintain those heightened eligibility levels for pregnant woman and the disabled above 133 of poverty until state insurance exchanges become operational, which is expected to occur at the start of 2013. That maintenance of eligibility requirement has been blasted by the states with the most generous Medicaid programs, which wouldn’t have the option of dropping higher-income adults if the budget situation worsened.

The Finance Committee is expected to approve the larger health reform proposal this week. But you’d be crazy to think that the debate over Medicaid won’t resurface in a big way when the bill moves to the Senate floor.

The latest attempt came late Wednesday from Sen. John Cornyn (R-Texas), who pushed an amendment hinging the Medicaid expansion on efforts to rein in program fraud — a problem highlighted by today’s government report revealing that thousands of people have had their prescriptions filled under Medicaid despite the inconvenient fact that they were dead at the time.

Currently, Medicaid fraud represents 10.5 percent of program spending, Cornyn said, citing figures from the Department of Health and Human Services — a considerable sum considering that Medicaid spending topped $330 billion last year. Under the Cornyn amendment, Medicaid officials would have to pull the fraud figure down to 3.9 percent of program spending before the Democrats’ program expansion would kick in.

Democrats didn’t bite. While a worthy goal, they said, the proposal would punish those in line to become newly eligible for Medicaid coverage under the expansion to 133 percent of poverty.

The Cornyn amendment failed 10 to 13, along strict party lines.

“They are getting ready for a backup,” said one veteran observer of health care debates who was knowledgeable about the effort. “It will be parachuted in if necessary.”

They might not need it. Despite sweeping Republican opposition to the Democrats’ plans, the Senate Finance Committee is carving through the hundreds of amendments to its proposal this month, with hopes that the bill will reach the Senate floor next week. With the arrival of Sen. Paul Kirk Jr. (D-Mass.), the Democrats now have a 60 members in the upper chamber. And without a public plan, the Finance proposal just might attract all of them.

But Baucus wasn’t the only Democrat on the panel to vote against the Democratic proposal. Sens. Robert Menendez (D-N.J.) and Tom Carper (D-Del.) were also vocal opponents of the amendment, and offered “no” votes to back their words.

It’s not tough to surmise the reasons.

New Jersey is one of the nation’s great pharmaceutical hubs, housing such drug giants as Johnson & Johnson, Merck, Wyeth and Schering-Plough. Earlier this year, Bausch and Lomb moved in as well.

As for Carper’s Delaware, it boasts the headquarters of AstraZeneca, a top-10 drug maker with revenues topping $31 billion last year.

And the industry has never been shy about showering local lawmakers with campaign cash. Indeed, Menendez has accepted more than $357,000 from the pharmaceutical industry over his congressional career, according to the Center for Responsive Politics. Carper, for his part, has taken in nearly $208,000 from drug makers, CRS reports.

Sen. Charles Schumer (D-N.Y.) pointed out yesterday that it was perfectly understandable that the drug makers, being publicly traded companies, would fight to preserve their profit margins for the sake of shareholders. But Congress, Schumer added, is bound to different interests. “We don’t represent their stockholders,” he said. “We represent our stockholders — the U.S. taxpayers.”

Someone please inform the Senate Finance Committee.

President Barack Obama promotes health care reform at a town hall meeting in Annandale, Va., on July 1. (Zuma Press)

When Douglas Elmendorf, director of the Congressional Budget Office, told lawmakers last week that the Democrats’ health reform plans wouldn’t control long-term costs, the reverberations were as immediate as they were inevitable.

Republicans blasted the majority’s health strategy as a failed approach that would raise costs on individuals without tackling the broader issue of system sustainability. Reputable news organizations began writing that the Democrats’ health reform agenda is “in trouble” and “endangered.” And public opinion polls indicated waning support for the party’s plans to overhaul the health care system this year.

Illustration by: Matt Mahurin

The combination of factors has played right into the hands of conservatives who’d like nothing better than to see the Democrats’ health plans crash and burn. Yet health care experts across the political spectrum maintain that the recent developments, while likely to stretch the debate further into the year than the Democrats had hoped, hardly close the coffin on their sweeping health reform approach. Rather, observers say, the week’s shifting sentiments are merely a natural part of the legislative process — bumps amplified by the size and scope of the health reform effort. In the context of the larger debate, these experts argue, the events of the last week constitute something like a hiccup, not a mortal wound. The Democrats will probably have to tweak their proposal to cut costs, they say, and they’ll be forced to push the vote to later in the year. But health reform, in some configuration, will become law in 2009.

“Something will pass,” said Julius Hobson, former lobbyist for the American Medical Association and now a senior policy analyst at the Washington law firm Bryan Cave. “It’s not going to be what everybody’s looking at right now, but the president will sign something in December … The drive is there to do something, and they will.”

Jacob Hacker, professor of political science at Yale University, echoed that message, conceding that Washington’s long history of failed health system overhauls makes it tempting to predict that this year will be no different. But with the full weight of the White House, Congress and the health care industry receptive to at least the concept of health reform, success on some level is likely. “The safest prediction is always that things will go down in a flaming ball of defeat,” said Hacker. “But it’s still too early to write this year off … It’s sort of like a roller coaster. Most likely it will go back up again.”

Almost no one disagrees that policymakers must do something to control the nation’s health care costs. Medical spending nationwide is projected this year to hit $2.6 trillion, or 18 percent of the gross domestic product, according to the Congressional Budget Office. Within eight years, that number is projected to jump to 20 percent of GDP. How to rein in those costs, however, is very much in dispute.

Central to the debate thus far has been the inevitable concern over cost. Democrats have already begun work on two separate proposals — one in the House and the other in the Senate — with both designed to cover the more than 45 million Americans who currently lack health insurance. But that strategy doesn’t come cheap. Indeed, the CBO on Friday estimated the cost of the House proposal to top $1 trillion over the next 10 years. The pricetag highlights a pickle facing many voters, who simultaneously say they’d like to cover the uninsured on moral grounds, but don’t want to incur the additional costs that might accompany the expansion.

“Nearly all voters already have health insurance,” Joseph Antos, health-policy analyst at the conservative American Enterprise Institute, said in an email. “They want relief from health costs, and are willing to help others obtain insurance as long as that does not increase their costs materially.”

That dynamic, other observers say, will force the Democrats back to the drawing board in efforts to lower those costs. “Is health reform over? — No,” said Robert Blendon, professor of health policy at Harvard University. “But they [Democrats] are going to have to go more slowly, and they’re going to have to get those costs down … ‘Too expensive’ is the word that’s come around.”

A number of health policy experts pointed to another central dilemma surrounding the health reform debate: The same provisions representing fundamental changes to the health care system — changes almost everyone agrees are necessary — are also untested, leaving the CBO unsure how to score them. Provisions encouraging the use of preventative care, the transition to better health information technology and the creation of medical homes, for example, are all expected to save money. CBO, however, “took a more cautious view,” said Blendon, an expert on the Clinton administration’s failed attempt to pass comprehensive health care reform in 1993.

Republican leaders, already aligned in opposition to both the House and Senate bills, appear unconcerned with such nuances. Senate Minority Leader Mitch McConnell (R-Ky.) said over the weekend that the CBO score is indication enough that the Democrats’ proposals don’t meet the intended goal of reining in costs. Additionally, Republicans are lined up squarely against a Democratic proposal to create a government-backed insurance option to compete with private companies. The bills offered thus far, McConnell said on NBC’s Meet the Press, “shouldn’t pass at any point, either before the August recess or later in the year. What we need to come up with is a truly bipartisan proposal.”

With the public plan a non-starter for the GOP, McConnell’s call for bipartisanship sends a clear message to those across the aisle: Eliminate the public option or kiss your bipartisan bill goodbye.

Not that Democrats haven’t voiced their support for such an approach. Party leaders from President Obama down have said for months that the most lasting health reform bill would be one with bipartisan backing. Yet, as the debate has evolved, and GOP opposition has tightened around things like the public plan, majority leaders seem more and more to be faced with a stark choice: Either accept a bipartisan bill that doesn’t include all of their policy priorities, or fight for their provisional goals at the expense of GOP support.

For some, the choice has already been made. Sen. Christopher Dodd told The New York Times over the weekend that a bipartisan bill would be preferable, “but given the choice between a bipartisan bill that’s weak and doesn’t do much for my people at home, or one that is a partisan bill that actually gets more done,” the Connecticut Democrat said he’d take the latter.

In May, Sen. Charles Grassley (R-Iowa) indicated that Obama was ready to sacrifice some policy goals for a bipartisan bill. “He would like to have a bipartisan compromise even if he doesn’t get all that he wants, as opposed to getting all he wants in a partisan vote,” Grassley told MSNBC after a White House meeting with the president.

More recently, however, Obama seems to have taken the opposite tack. Appearing Monday at Children’s Hospital in Washington, the president indicated that he’s ready to fight for a comprehensive bill designed to get everyone covered. “We’re a country that chooses the harder right over the easier wrong,” he said. “We have to do that once more.”

Such “saber-rattling,” said Antos of AEI, “indicates that a bipartisan agreement is no longer a priority to them [Democratic leaders].” Conservatives are hoping that a third and final health care proposal — still being drafted by leaders of the Senate Finance Committee — will be more moderate than the previous two. Finance Chairman Max Baucus (D-Mont.) has a long history of working with Grassley on legislative compromises. Still, if the Finance proposal strays too far from the Democrats’ goals, some experts warn, then Baucus risks losing support from his own party — a move that could sink the entire enterprise.

“If it comes down to a commitment to bipartisanship above all else, then I fear the whole thing will fall apart,” said Hacker, author of Health at Risk: America’s Ailing Health System — and How to Heal It. Still, he added, Democrats appear to realize that a failure to pass health reform this year would be to miss a historic opportunity — something that’s eluded policymakers for decades.

“The White House,” he said, “recognizes that this is a do or die debate for them.”