Senate Democrats have not given up on passing health care reform through normal procedures requiring at least 60 votes to overcome a Republican filibuster. The problem is, several conservative Senate Democrats are on record opposing a public health insurance option. Meanwhile, a bill with no public option will have trouble passing the House of Representatives, where the overwhelming majority of the Democratic caucus supports a robust public option tied to Medicare rates.

The obvious political solution is to include some watered-down public option in the bill, giving cover to Progressive Democrats who insist on a public option while placating House Blue Dogs and Senate conservatives who want to protect private insurers’ market share.

The “triggered” public option favored by many industry allies didn’t fly, because most Democrats understand that the trigger would never be pulled. This past week, a new possible compromise emerged:

It was pulled out of an alternative idea, put forth by Sen. Tom Carper (D-Del.) and, prior to him, former Senate Majority Leader Tom Daschle, to give states the power to determine whether they want to implement a public insurance option.

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.

I consider this idea’s pros and cons after the jump.  

Chuck Schumer of New York confirmed that Senate Democrats are giving serious consideration to the opt-out idea. Senate HELP Committee Chairman Tom Harkin sounds open to the compromise. Former Governor Howard Dean, who has been railing against “fake” public options all year, told the Huffington Post he might support this compromise.

“If I were a member of the U.S Senate I wouldn’t vote for the [Senate Finance Committee] bill but I would vote for this [opt-out plan],” Dean said, “not because it is necessarily the right thing to do but because it gets us to a better conversation about what we need to do. […] if this passes I won’t say it is not reform because it is reform. If this is what it takes to get 60 votes I say go for it.”

Supporters of this compromise assume that very few states would opt out, because the public health insurance option is so popular. Alternatively, some people argue that even if a lot of red states opt out, blue states will reap economic benefits, while Republican politicians at the state and federal level are put in an awkward position.

There’s no question that enacting some kind of nationwide public health insurance plan with an “opt-out” would give far more Americans access to the plan than Carper’s “opt-in” proposal.

However, my concern is that quite a lot of states might ditch the public health insurance plan. Corporate interests have at least as much influence over state legislatures as they do over Congress–perhaps more. The public option would particularly benefit residents of states with little to no competition in the private health insurance market. But Representative Bruce Braley (IA-01) seems on target in warning that states with “strong political influence from one or two major health insurance companies” would be most likely to opt out, leaving “consumers in those states without a meaningful choice.”

Daily Kos user eugene argues here, “Not only is this a bad idea because of the policy and political costs of throwing ‘red states’ overboard, it dramatically understates the very real risks that even so-called ‘blue states’ would choose the opt-out.” Click through to read his case.

This Huffington Post piece points out another reason to be wary:

“One problem with the opt-out idea is that Republicans may seize on it in the future and turn it into a general opt-out for states to exempt themselves from the whole bill,” said Paul Starr, health care expert at Princeton University. “Remember there will be four years and two elections before the reforms go into effect. This would be the easiest step for Republicans take during that period to ensure that the whole thing would unravel. And it would unravel because states that adopted the reform would become magnets for migration by the sick from states that opted out.”

Punting the public option choice to the states might squeeze a few extra votes out of the Senate, but at what cost? Passing a more comprehensive bill with just 51 votes in the Senate, using the budget reconciliation process, seems more promising than obtaining 60 votes for an opt-out.

In related news, Senator Chris Dodd promised yesterday to “fight for a strong public option” when he works with Majority Leader Harry Reid and Senate Finance Committee Chairman Max Baucus to merge the bills passed by the HELP and Finance committees. Senator Sherrod Brown of Ohio and 29 other Senate Democrats sent Reid a letter this week supporting a public option “available continuously in all parts of the country.”