WASHINGTON – Inclusion of a government insurance plan in Senate health care legislation is posing problems for moderate senators whose votes are critical to passing the bill. Reverberations could be felt across the Capitol, where House Democratic leaders are finalizing a bill with a government plan.

Connecticut Sen. Joseph Lieberman said yesterday that while he won’t vote to block Majority Leader Harry Reid’s plan from going to the Senate floor for debate, he would ultimately oppose the measure because it includes a public option.

Meanwhile, Maine Republican Susan Collins, who had earlier indicated interest in trying to pass a bipartisan bill this year, issued a statement underscoring her opposition to ‘a taxpayer-subsidized, government-run health insurance company.’

Lieberman said yesterday in a telephone interview with The Associated Press that he’s worried a public option would be costly to taxpayers and drive up insurance premiums. An independent who caucuses with Democrats, Lieberman is among a group of about a dozen moderate senators whose support Reid will need as Senate critical health care votes near.

Lieberman said he’s open to the possibility of supporting a plan set up and run by the states.

It’s not clear that Reid, D-Nev., has the 60 votes needed for the controversial government insurance plan to prevail on the Senate floor. If it fails, that could affect the thinking of House members, particularly moderate Democrats.

‘There are some members of the House, obviously, who are very concerned about what the Senate does … because they want to vote for something that can pass, that can be enacted,’ said House Majority Leader Steny Hoyer, D-Md.

‘On the other hand there are a whole lot of people in the House, the great majority of the Democrats in the House, who want to see a health reform bill pass in the fashion that we believe is justified … and I think an overwhelming majority of Democrats are in favor of the public option,’ Hoyer added.

Lawmakers must meld the House and Senate versions of the health care bills.

House Democratic leaders have been debating the shape the government insurance plan will take in their bill, with Speaker Nancy Pelosi pushing for a strong version that would tie payment rates to providers to rates paid by Medicare – likely resulting in cheaper costs for patients but lower payments to hospitals and doctors, something that troubles moderates.

Pelosi doesn’t appear to have the votes for that plan. Hoyer said that switching the design to allow the Health and Human Services secretary to negotiate payment rates with providers – the approach Reid is taking – gets more support for a public option, which Hoyer said currently commands between 200 and 218 votes. A simple majority in the House is 218.

Reid’s plan would allow individual states to opt out of the public insurance plan. In the wake of his announcement Monday the focus of the health overhaul debate shifted to the handful of moderate senators whose support will be crucial to get him to 60.

Reid’s decision amounted to a victory for liberal lawmakers who have pushed for a public insurance option they contend would create needed competition for private industry and provide affordable choices to consumers.

The reaction from moderate Democrats – they fear a public plan could drive insurers out of business and take over the marketplace – ranged from muted to skeptical. The one Republican who has so far lent her support to Democratic health overhaul proposals, Sen. Olympia Snowe of Maine, said she was ‘deeply disappointed’ by Reid’s decision.

Snowe had supported allowing government insurance in individual states only if the private market wasn’t providing sufficient choice and competition.

Among the moderates whose support is in question are Sens. Ben Nelson of Nebraska, Blanche Lincoln of Arkansas and Mary Landrieu of Louisiana. Landrieu said in a statement that she’s still ‘very skeptical’ about a government plan run from Washington but would keep working with Reid to find a ‘principled compromise.’

Nelson ‘is not committing how we will vote regarding any proposal Sen. Reid is advancing,’ said spokesman Jake Thompson.

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