Reporters who attended an hour-long breakfast (or watched a webcast) with Sen. Charles Grassley, the ranking Republican on the Senate Finance Committee who is working on bipartisan approaches to health reform, came away with vastly different impressions. Some dwelt on his prediction of how extremely tough it would be to find a compromise on the public plan option, which both sides see as as potential dealbreaker. Others saw him as keeping doors open -- he said repeatedly that he's found compromises on other tough issues, that the only one that has eluded compromise for years was abortion. I was in the latter camp. I covered the Hill for more than a decade and watched Grassley up close and wouldn't expect him to start difficult negotiations by coming out in public and telling a roomful of reporters "OK, I'll cave." Maybe if I was in the room (rather than watching the webcast) I would have had a different impression through body language or inflection, but I thought he was pretty clear about putting everything on the table. That leaves the question: what exactly might be on the table?

New America Health Policy Program director, Len Nichols, recently co-authored a paper on how to create a compromise public plan that could provide that public option preferred by many reformers yet co-exist on a level playing field with private insurance. As "proof of concept" Len urged people to think about how health plans for state employees function.

Over at the Wonkroom, Igor Volsky asks, "What Kind of Public Option Compromise Would Grassley Support?

So how would this competition actually work? Well, rather than allowing the new public plan to pay Medicare rates or use Medicare's clout to bargain for lower costs, a politically viable proposal to promote competition between private health plans and a public health insurance option, will probably look something like what the New America Foundation has proposed.

As Elizabeth Carpenter explained it to me, "what makes the public plan ‘public' in Len and John's paper is that it would be operated by politically appointed managers and owned by the government who would also bear the insurance risk, not the private sector. The managers would be evaluated by patient satisfaction, not profits, and the people running the plan would have no incentive to stint on patient care in favor of the bottom line."

In other words, public and private payers compete on a completely level playing field and follow all of the rules of the marketplace.The public plan would be actuarially sound, would not leverage Medicare to force providers to participate or use Medicare payment rates, and would have to adhere to the same rules regarding reserve funds. Patients who are weary of private providers would likely enroll in the public option.

Costs would be lowered through competition and system-wide reform. "The framework utilizes Medicare as a catalyst to inject value into our health system, but the overall approach to controlling costs is systematic and does not leverage Medicare's buying power," Carpenter writes.

The idea is this: if you reform the way Medicare and the public option reimburses for services (move away from fee-for-service and towards bundled payment, primary care, and care coordination) and if those programs become more efficient, the private insurers — who are now competing directly with the new public plan — would also have to adopt more efficient payment practices.

We are very glad to see that people are open to talking about, thinking about, and visualizing compromise. We're going to need a lot of it.