Speaker Pelosi offers stronger public option than Sen. Reid's 'flex-pub'

The bill's government run insurance program, also called the public option, eliminates cost controls that had been a key support point for liberals, The Los Angeles Times reported Thursday. Moderates, who won that important concession, had feared cost controls would hurt local hospitals: the bill now calls for rates to be negotiated between the government and hospitals.

Fiscal Analysis: Speaker Pelosi's bill comes a few days after U.S. Senate Majority Leader Harry Reid's, D-Nevada, reform bill that will include a flexible public option -- one where states can opt-out of the federal insurance plan. As of now, it looks like Reid's 'flex-pub' will prevail in the House/Senate conference committee, but it remains an open question concerning whether a state will face penalties if it doesn't participate in the federal public option, then subsequently doesn't implement their own state-level plan to achieve 100% insurance by a given year. That's a major issue, and look for moderate and liberal Congressional Democrats to go to the mat on it to defend their positions.

The likely outcome for that plank? If federalism is any guide, look for very low penalties for states who opt-out, then don't insure. In other words, after the bill is passed, liberal states like New York, California, Massachusetts, Oregon etc. are likely to be states where one can obtain health insurance at a moderate price; conservative states like Texas, Louisiana, and Mississippi are likely to offer the fewest options for moderate-income residents, and consequently are likely to have the lowest percentage of citizens with health insurance.

Concerning the income tax increase on high-income Americans, that most likely will not be included in the conference committee bill. Most Senate Democrats oppose it. There is the possibility of a small income tax increase/surcharge for health care, but it will pass only if it applies to middle-income Americans as well as upper-income citizens.

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Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.