Perhaps it was the backlash from voting against something 65% of the public supports, but the Senate Finance Committee voted to approve an optional defined-benefit, state-based public option proposed by Sen. Maria Cantwell (D-WA) today. This public option is extraordinarily weak–as one would expect coming from the Finance Committee–and only helps those individuals making less than 200% of the federal poverty limit, or about 20,000 a year, in states that choose to participate.

As it is, this would be another Medicaid. Doctors would be hesitant to take it because individuals with high co-pays and low incomes are unlikely to pay their bills. It might provide marginally better access to health clinics and primary care doctors for the working poor, but it’d do little to help struggling Middle Class families afford health care.

That said, an outline of a compromise which progressives, and perhaps conservative Democrats, could agree to is contained within this amendment. Progressives (rightly) believe that national bargaining power needs to be used to reduce costs, and thereby expand access to health care. Conservatives are wary of expanding the federal bureaucracy through a federally-run plan.

The first change that needs to happen is to expand Cantwell’s public option to include all individuals eligible to purchase insurance on the exchange. This means that the working poor are intermingled with middle class and upper middle class individuals–thereby creating a diverse pool which is attractive to doctors. If this isn’t done, patients would face the same problems they have with Medicaid: an inability to find providers beyond county-run primary care clinics.

The second item which should happen is that the defined benefits should be established by the Secretary of Health and Human Services, not state Governors. I believe it’s important for all health care reform proposals to provide equal benefits regardless of a person’s home state. This will enable patients to move freely about the country, and pursue their dreams.

Making such a defined benefit plan national means having the Secretary of Health and Human Services negotiate on things like drug prices and reimbursement schedules for a broad pool of individuals. As T.R. Reid points out in his book, other industrialized countries health care systems are cheaper because they leverage prices nationally.

The third item which should happen, and this is should appeal to conservatives, is that exactly how to administer the defined benefits should be left up to the states. States should be given grants from the federal government (based a pro-rated formula of how many exchange-eligible citizens they have) to administer the plan. But each state can administer the plan as it sees fit, as long as the premiums and defined benefits meet the standards set by the Health and Human Services Secretary.

Thus, if Alabama wanted to have one privately held, for-profit corporation run its exchange it could administer the plan that way…as long as the defined benefits and premiums were the same or better as the standrds set out by the Secretary of Health and Human Services. If Vermont wanted the state government to be the sole operator of its exchange, it could administer the plan that way…as long as the defined benefits and premiums were the same or better as they standards set out by the Secretary of Health and Human Services.

Such an approach is not a true public option. But it would ensure that there are strict controls on insurance companies. It would prevent premium increases designed to line the pockets and pay for the beach homes of big-shot CEOs. And it wouldn’t foreclose upon the states being laboratories of innovation, which means they could pursue government-run plans at their discretion.

Overall, this could be an acceptable compromise to both sides. However, progressives will not likely back such a compromise unless it applies to everyone on the exchange, and unless the rates are negotiated nationally. Still, after the bitter disappointment of Tuesday, the Finance Committee’s inclusion of this amendment is a positive development.