It took a few months, but tensions between the Obama administration and private health insurers seem to be coming to a head.

In a White House press conference Tuesday, President Barack Obama described a government-run health care option as "an important tool to discipline insurance companies" and brushed aside criticism that such a plan would ruin the industry.

"If private insurers say that the marketplace provides the best-quality health care," pondered the president, "then why is it that the government--which they say can't run anything--suddenly is going to drive them out of business? That's not logical."

In a letter last week to leaders of the Senate Health, Education, Labor and Pensions Committee, insurance giant Blue Cross Blue Shield and industry group America's Health Insurance Plans urged him not to include a so-called public option in health care legislation.

Just last month, the president, insurers and other key stakeholders were patting each other on the back at the White House for committing to $2 trillion in health care savings during the next decade. Jeff Smokler, a Blue Cross spokesman, says the company is committed to expanding health care to everyone. However, the company and AHIP argue, a government-run option inherently tilts the playing field in favor of the government.

Obama hasn't formally committed to a public option, though he says that it "makes sense." But he acknowledged Tuesday that there's a "legitimate concern" about the public plan crowding out private insurers if it's simply "eating off the taxpayer trough." The obvious question, of course, is how to keep such largesse in check. As members of Congress consider several bills to overhaul health care, that solution hasn't been found.

Obama is at a crucial point in his first year in office. Some of the biggest planks of his agenda--health care reform, climate-change legislation and an overhaul of financial regulation--are now squarely in the hands of Congress, which will spend months deliberating these items.

It's not clear how much more the White House can do by itself to respond to the economic crisis and to push big-agenda items, though it's safe to bet that the administration will continue to do whatever it takes. Unemployment is at 9.4% and counting, and concern about the administration's plans is creeping upward across various polls.


As the administration looks for ways to pay for health care reform, one target is Medicare Advantage, which allows Medicare recipients to receive government health insurance through private insurers. According to the president, the program is a $177 billion subsidy (again, over 10 years) to the insurance industry, and recipients aren't any better off health-wise than if they'd just received standard Medicare coverage.

"We're going to take that money, and we're going to use it to provide better care at a cheaper cost to the American people," Obama said Tuesday. He added that all health insurers will be subject to different rules if Congress creates an insurance clearinghouse from which people can choose their plans. In particular, the president said, insurers won't be able to "cherry-pick" the healthiest and most well-heeled customers.

"Too often insurance companies have been spending more time thinking about how to take premiums and then avoid providing people coverage" than thinking about providing insurance when families need it, the president said.

Obama spent much of the remainder of Tuesday's news conference defending his hands-off approach in responding to the popular uprising in Iran and his handling of the economic crisis. But he also acknowledged some setbacks. In particular, only $49 billion of a $787 billion stimulus package has gone out the door, and foreclosures--321,480 in May, according to RealtyTrac--far outweigh the 200,000 mortgages that have been modified under the administration's plan.

"I don't feel satisfied with the progress that we've made," said Obama.

Translation: Even while Congress wrestles with the big items, look for more White House activism.