Obama demands government-run health option

President Obama came off the sidelines Wednesday and laid out his healthcare reform requirements in a letter to key lawmakers.

He told Democratic Sens. Edward Kennedy (Mass.) and Max BaucusMax BaucusChanging of the guard at DC’s top lobby firm GOP hasn’t reached out to centrist Dem senators Five reasons why Tillerson is likely to get through MORE (Mont.) that their legislation must include a government-run insurance option that would compete against the private sector. He also reaffirmed his support for a Massachusetts-style insurance exchange.

By plunging into the details of the reform rather than cheering from the sidelines, as he has done for months, Obama raises the political stakes for the summer’s big legislative battle, and will hearten liberals who have yearned for his intervention to put a public sector option on the table.

“I strongly believe that Americans should have the choice of a public health insurance option operating alongside private plans,” Obama wrote in the two-page letter.

With the insurance exchange, consumers could choose among health insurance plans, including the public option. Obama also made it plain that low-income people should not have to buy insurance they cannot afford, and that small businesses should be exempt from any mandate that employers offer health benefits or pay a tax to finance government subsidies.

Obama throws a relatively new idea into the mix, as well — imbuing a federal advisory panel with the power to make Medicare pay rate recommendations that Congress must either accept or reject in their entirety. Obama likens this proposal, based on the current Medicare Payment Advisory Committee, to the way military base closure decisions are made.

The Obama administration has steadfastly deferred to lawmakers on the details up until now, a strategy appreciated by the congressional Democrats in the middle of the healthcare reform effort

Lately, however, some lawmakers have been clamoring for the president to get more directly involved and to take firm positions on a handful of contentious issues — especially those dividing Democrats.

Those Democrats appear to have gotten their wish Wednesday. Obama’s letter strongly signals that he and his administration are ready to actively and openly use his clout to shape the healthcare reform legislation.

Most of Obama’s statements in the letter to Kennedy, the Senate Health, Education, Labor and Pensions Committee chairman, and Baucus, the Senate Finance Committee Chairman, reflect his presidential campaign platform.

On a few areas where congressional Democrats appear to be moving in directions contrary to his own campaign positions, Obama attempts a delicate balance between abandoning his previous positions while not ruling out reforms that could end up in the bill.

Foremost among those is the so-called individual mandate, under which all Americans would be legally required to obtain some form of health coverage.

During the presidential campaign, Obama called only for mandating that children are covered and sharply criticized the universal mandate favored by his primary opponent, then-New York Sen. and now-Secretary of State Hillary Rodham Clinton.

“If we do end up with a system where people are responsible for their own insurance, we need to provide a hardship waiver to exempt Americans who cannot afford it,” Obama wrote.

The letter does not mention the possibility that Congress may pass legislation that taxes workers’ health insurance, an issue that could prove a major sticking point among congressional Democrats and between Capitol Hill and the White House.

Obama campaigned hard against taxing health benefits and harshly criticized his rival, Sen. John McCainJohn McCainSunday shows preview: Trump plans next steps Ex-Bush aide Nicolle Wallace to host MSNBC show Meghan McCain: Obama 'a dirty capitalist like the rest of us' MORE (R-Ariz.), for his proposal to do so. Some congressional Democrats, however, see limiting the tax exclusion as a key to lowing healthcare costs — and generating revenue to pay for healthcare reform.

In his letter, Obama reminds the senators that he offered an alternative tax increase worth $336 billion over 10 years to pay for healthcare: limiting itemized deductions for upper-income earners. That proposal landed on Capitol Hill with a dull thud when Obama presented his budget this year.

Obama also reiterates his positions that insurance companies must not be allowed to deny coverage based on pre-existing conditions, must cover preventive services and must offer “protection against catastrophic costs” and must meet a minimum standard “affordable basic benefit package."

Based on his budget, Obama also demands that the bill be budget-neutral and make cuts in Medicare and Medicaid spending by more than $300 billion over 10 years, about half of which would come from reductions in payments to health insurance plans under Medicare Advantage. Obama promises to work with lawmakers to find $200 billion to $300 billion in additional Medicare and Medicaid cuts and to come up with additional tax increases.