S.D. Governor On Health Care Opt-Out Provision Senate Majority Leader Harry Reid included a public option in the Senate's version of a health care bill. But because of opposition from Senate Republicans and conservative Democrats he said states would be free to opt out. South Dakota's Republican Gov. Mike Rounds discusses the opt-out provision.

S.D. Governor On Health Care Opt-Out Provision

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The fortunes of the so-called public option, a government-run health insurance plan, now hinge on the attractiveness of an opt-out. Senate Majority Leader Harry Reid included a public option in the Senate's version of the health care bill. But in view of intense opposition from Senate Republicans and from some of the more conservative Democrats to that provision, he added a sweetener: States would be free to opt out.

Senator HARRY REID (Democrat, Nevada; Majority Leader): I think it's the fairest way to go. I think at this stage in the proceedings, a public option which has received so much attention and a public option with an opt-out is one that's fair and gives states - in fact, if they don't want to be part of public option - option to get out.

SIEGEL: Well, how sweet does Senator Reid's sweetener make the public option to state capitals? And joining us to answer that question from Pierce, South Dakota, is Governor Mike Rounds. He's a second term Republican and chairman of the National Governors Association Committee on Health Care, very active in their taskforce on health care.

And Governor Rounds, do I understand also that when your business is not in a trust because you're the governor, it's a real estate and insurance brokerage?

Governor MIKE ROUNDS (Republican, South Dakota): That's correct, sir.

SIEGEL: So this is your business?

Gov. ROUNDS: That's right. That's my background.

SIEGEL: Well, first, are you opposed to a federal public option? And if one were passed, would you then propose that South Dakota opt out of it?

Gov. ROUNDS: The devil will be in the details. We haven't seen a copy of the bill yet. But as we understand it, all of the states, even if they were to opt out, would still be subject to all of the taxes that it's going to take to put together the public plan. In addition to that, we would still be subject to the additional increased cost that would be cost shifted from the public plan to all of the private plans.

SIEGEL: I'd like you to explain what you just said.

Gov. ROUNDS: Sure.

SIEGEL: You're saying that if for example, that the bill were to mandate that South Dakota raise the income level for Medicaid eligibility, let's say, and you to had to cover more people in the state on Medicaid, you say that would result in the higher premiums for people who now have private insurance plans.

Gov. ROUNDS: That is correct. If you base the public plan on any kind of a Medicaid rate, it means that other people that would not be a part of a public plan would have a higher insurance premium to pay to pick up the added cost that the insurance companies would be billed by doctors and hospitals.

SIEGEL: But why wouldn't the state insurance regulator in South Dakota say, no, you can't increase rates and put some pressure on the doctors, hospitals, pharmaceutical companies, other providers, to get their prices down?

Gov. ROUNDS: Well, remember that divisions of insurance don't regulate the cost that doctors and hospitals charge. They can regulate premiums. The unfortunate thing is that if you regulate premiums and simply say you can't raise your rates, an insurance company isn't going to continue to run business in a state in which it's going to cost them more for the cost of paying for the expenses than what they can bring in premiums.

SIEGEL: What about your colleagues on the Governors Task Force on this? Do they face - do they have similar situations?

Gov. ROUNDS: It depends upon the state. Some of the other states - and I'll go even more, I wouldn't limit it just to the people that are on the task force. I will tell you that in some of the states right now, they have real challenges and that they haven't done the reforms that the National Association of Insurance Commissioners have recommended in the past. The challenge comes in is that every single state has some specific areas in which they can do a better job than having a federal bureaucrat make the decision for everybody.

SIEGEL: Well, here's a challenge to our idea of federalism. You say things are run better at the state level, where the people who are dealing with these things are closer to people, but you also say that there are states that haven't come through with the reforms that are recommended by the insurance regulators. One seems to be an argument for local control of serving providing. The other one seems to be an argument for federal laws that mandate standards that everybody has to live by.

Gov. ROUNDS: We've suggested that there are some good reform activities that could go nationally, and I think a number of the states simply, they're concerned about a federal regulator stepping in and telling us how it's going to be done but at the same time taking away our ability to take care of individuals who do have concerns.

SIEGEL: Governor Rounds, thank you very much for talking with us.

Gov. ROUNDS: Thank you very much for the opportunity.

SIEGEL: That's Governor Mike Rounds, Republican of South Dakota, who is very much involved in the National Governors Association's task force on health care.

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