Pelosi backs away from deal with Blue Dogs

Speaker Pelosi is backing away from a deal she cut with centrists to advance health reform, said a source familiar with talks.

Pelosi’s decision to move away from the agreement that was made with a group of Blue Dogs to get the bill out of committee would steer the healthcare legislation back to the left as she prepares for a floor vote.

Pelosi is planning to include a government-run public option in the House version of the healthcare bill. She wants to model it on Medicare, with providers getting reimbursed on a scale pegged to Medicare rates.

"The speaker is full-steam-ahead," said a senior Democratic aide.

But a Pelosi aide said nothing is final, and the proposal to revert to the more left-leaning version of the language would be vetted before the entire Democratic Caucus.

Blue Dog Democrats, many of whom represent rural districts where Medicare reimbursement rates are low, vehemently oppose tying the public option to Medicare.

Rep. Mike Ross (D-Ark.) and a group of fellow Blue Dogs had negotiated a deal with Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) in July that would remove the link to Medicare. Under that plan, officials with the government-run plan would negotiate individually with providers.

That move, which drew howls of protest from liberal members, prevented the bill from getting stuck in committee. But Ross returned from the August break saying he couldn't support a public option under any circumstances, essentially withdrawing his support for the deal.

Pelosi is now effectively withdrawing her support. In leadership meetings last week, she said the public option in the House bill should be linked to Medicare.

Other Blue Dogs involved in the deal have said they realized the public option they negotiated was likely to change before it went to the floor.

Pelosi has also told her fellow leaders she still wants an income surtax on the wealthy, rather than a tax on "Cadillac" health plans, as a means to help pay the $1 trillion cost of the bill. The rest is to be made up with savings in Medicare by eliminating wasteful spending.

That will worry many members who led the charge against the surtax when it was rolled out.

Pelosi wants decisions on the public option and tax this week. She wants to produce a bill that will be a starting point for negotiations among the disparate and, at times, warring factions of the Democratic Caucus.

"The Speaker is committed to having a strong public option in the House bill because it is the best way to promote competition, control cost and keep the insurance companies honest," said Pelosi spokesman Nadeam Elshami. "The caucus continues to meet to discuss the legislation and its provisions."

Democrats are to discuss the public option at a caucus meeting Thursday. That discussion will include replacing the public option with nonprofit "cooperatives" that would compete with private insurers but would not be run by the government. A Senate Finance Committee bill has a similar provision.

The Blue Dogs chose the member who will present the co-op proposal.

Both the public option and cooperatives are intended to compete with private insurers in an attempt to drive down costs. Blue Dogs have also supported making the government-run plan a fallback option if other reforms in the bill don't lower healthcare costs.