It’s draining to chase down all the public pronouncements on health care reform and the public option, which usually ends up with something Jane Hamsher has called working the yo-yo. Some Democrat or White House official backs off the public option, says it isn’t the entirety of reform, outrage ensues, and they walk it back. Lather, rinse, repeat.

In comments today on a conference call from Families USA, Senate Finance Committee chair Max Baucus worked the other side of the yo-yo. Baucus, who voted against two public option amendments in committee, told reporters that some version of the policy remains alive in negotiations on a merged bill – but what form that will take is still up in the air.

The goal, Baucus said, was to include something in the bill that keeps premiums down and keeps insurance companies honest. “We just need to find ways to help reach that goal, in addition to the provisions in the bill,” Baucus said.

Baucus cited several permutations of public option proposals under discussion, including what he described as “Medicare light [the robust public option], even playing field [proposed by Sen. Chuck Schumer (D-NY), there’s co-ops–that’s private, not public–there’s opt in, opt out,” Baucus said.

“It’s alive,” Baucus said. “We’re trying to see what makes the most sense.”

Regardless of the effectiveness of the compromises out forth here, this is a change in emphasis – Baucus has spent recent weeks arguing that he has to protect his bill to only those measures which can attract 60 votes. Instead of whether or not a public option will exist in the bill, the new battle is what form it will take. The same dynamic is happening in the House, where Nancy Pelosi is planning to trap fiscally conservative Democrats into living up to their own rhetoric by presenting options on bills that cost less when MORE reform is administered.

Why has this changed? Roger Hickey believes that moderate Democrats are starting to rethink their opposition based on political realities.

Most importantly, Reid and Baucus need to realize that even “moderate” Democrats are rethinking their positions on health reform right now. Concentrating their minds is the realization that they are about to vote to force every American over the age of twenty five to purchase health insurance. Moderate Democrats are the ones most receptive to the demands of the insurance industry, and the price the insurance industry is demanding in exchange for insurance reform (like preventing companies from discriminating against people with pre-existing conditions) is the “individual mandate” – which means voters are forced to buy insurance, whether they can afford it or not.
At this moment, all Democratic politicians, even the most conservative, are realizing that their voters will blame them, not the insurance companies, if the policies the voters are required to buy are so expensive that premiums consume over 20 percent of those voters’ annual incomes. Suddenly, more generous tax subsidies to cover middle-class premiums seem like a good idea. And if the public option can bring down the cost of premiums those subsidies have to pay for, then the overall size of the reform price tag can be kept under control – a long time demand of moderate Democrats.

Digby recalls the disaster over the Medicare Catastrophic Coverage Act back in the late 1980s, when Democrats were forced to repeal a bill that provided catastrophic coverage to Medicare patients because a sliver of affluent seniors didn’t like paying for the reform, and nobody felt the tangible benefits. Under a system of an unaffordable mandate without a public option, that could mirror what we see with this bill. And the way Baucus wants to make coverage more affordable is the worst kind of shell game:

Baucus said that one way to improve affordability would be to reduce the “minimum creditable coverage provision”—basically, what percentage of health care costs that insurance companies would be required to cover. One coverage category (classified as “bronze” under the Baucus bill) was set at 65% in the Senate HELP bill, which Baucus said could be reduced to 60% in conference to match the levels in the Finance Committee. Baucus hadn’t indicated that the Democrats’ conference-committee had come to a final agreement on the issue, but the attention he paid to detailing this option seemed to make his preference clear. While the Finance chairman did note in passing that “higher subsidies” were one way to address the coverage issue, he didn’t bother to elaborate, adding only that “we don’t want to go much over $900 billion over ten years.”

This matches what Olympia Snowe has offered as a way to make health care more “affordable,” but it’s the worst way imaginable: by reducing what that insurance coverage would actually pay for. It won’t be long before people getting subsidies recognize that their coverage is worthless when they have to shell out more and more money for care (I’m not sure out-of-pocket caps would even cover things that aren’t covered in insurance plans to begin with).

This leads us back to the public option. Without this safety valve, both to depress costs and to offer an alternative to those angered by being forced to throwing hundreds of dollars a month at rich insurance execs, public opinion will be likely to take down health care reform, even if it passes. And maybe that’s what Baucus is signaling. Of course, the President could simply refuse to honor deals with industry stakeholders and find enough money to make health care affordable while increasing price competition. After all, this would be the fiscally sound, politically popular and most meritorious (from a policy perspective) thing to do.