White House health care advisor Nancy DeParle helped clarify the administration's feelings about a public insurance option last week, when she spoke to an audience at the Kaiser Family Foundation. The administration was committed to some sort of public plan, DeParle said, but exactly what kind of public plan was up for discussion.

The plan could operate like Medicare, for example, or it could operate like quasi-public plans for government employees that now exist in many states. And, as you probably know by now, the Medicare-like plan would have a lot more power to push down the price of medical care. That is why many reformers support that option and many key industry groups oppose it.

I reported as much in my item on this news last week. But, to be clear, it's not as if the administration is looking simply at these two, starkly different visions. DeParle actually talked about "a number of options" on the table, as you can see from the transcript here,  Among other things, she noted, the government could run a public plan, in a manner similar to the way it runs Medicare, but without paying the exact same rates that Medicare does.

Uwe ReinhardtAssociation of Health Care Journalists

But in exchange for the higher payments, industry groups--particularly doctors and hospitals--would have to stop resisting changes in the way government pays for medical services. In particular, Medicare (along with the new public plan) would get to bundle payments, make contracts selectively, reward providers who meet quality standards, and tilt reimbursements towards primary care. These shifts have the potential (if done properly) to improve the quality of care while reducing costs in the long run. 

In other words, it's a straight-up trade: Providers would get (relatively) higher payments. The government would get tools for steering money towards more efficient care. 

Curious to hear more about it? Watch today's testimony on health reform before the House Ways and Means Committee. Reinhardt will be testifying.

Note: Jacob Hacker's version of the public plan would include such payment reforms, as well. It remains the plan I prefer, political circumstances permitting. But you can see how the Reinhardt version, or something along those lines, could work as a compromise.

--Jonathan Cohn