WASHINGTON - President Barack Obama addressed the elephant in the room -- a government-run health insurance option -- by playing down its importance in a big speech to Congress on Wednesday, but not everyone was buying it.

The so-called public option is at the heart of the debate on Capitol Hill.

Republicans and some moderate Democrats say they cannot vote for legislation that includes it for fear it will lead to a government takeover of healthcare, while liberal Democrats say they cannot envision a healthcare overhaul without it in order to compete with private insurers.

Supporters view the public option as a cheaper alternative to private insurance companies which they accuse of piling up profits while short-changing patients. Critics see the potential in the public option for government bureaucrats to ration healthcare for Americans.

So what's a president to do?

He sought to minimize its importance, saying it would only apply to a small percentage of Americans -- 5 percent -- who are unemployed or in small businesses.

It is only one part of my plan, and should not be used as a handy excuse for the usual Washington ideological battles, he said in a speech to a joint session of Congress.

He may not have changed any hearts and minds.

The fact is, all Senate Republicans as well as some Democrats do not support the public option, which has also been generating concern across the country about a government takeover of healthcare, said Maine Republican Senator Olympia Snowe, a moderate who has been involved in negotiations with the White House.

CENTRIST PORTRAYAL

In his highly anticipated address, Obama cast himself as a centrist in the raging healthcare battle, saying he was drawing the best ideas from his fellow Democrats and opposition Republicans, even adopting one proposal from his opponent in last year's campaign, Senator John McCain.

And while he tried to instill a spirit of unity by invoking the memory of the late Democratic Senator Edward Kennedy, there was no immediate evidence that his speech was a game-changer on Capitol Hill as the healthcare debate enters a fateful period.

Fellow Democrats cheered him on and Republicans applauded politely but were otherwise notably unhappy, with one shouting, You lie, when Obama said Democratic healthcare plans would not assist illegal immigrants.

But while a stalemate in attitudes might have persisted on Capitol Hill, lawmakers were pushing ahead with negotiations and most predicted an agreement of some sort in the weeks ahead, although perhaps scaled down from what Obama wants.

Obama's main audience was tens of millions of Americans watching on television and his objective was to stem a slide in public support for his handling of healthcare.

Taking a populist approach, Obama tried to reassure them by saying most of them would see no change in their health insurance, that most of the 10-year, $900 billion cost could be paid for through savings in the current system.
He tried to create a sense of crisis among those who remained unconvinced of the need for change by insisting that lives were hanging in the balance.

Everyone in this room knows what will happen if we do nothing. Our deficit will grow. More families will go bankrupt. More businesses will close. More Americans will lose their coverage when they are sick and need it most. And more will die as a result, Obama said.

MODERATES UNMOVED

Moderate lawmakers were unmoved in their concerns about how to pay for the overhaul that many believe will simply add to deficit spending.

McCain, who just completed a sweep of several states hearing voters' thoughts on healthcare, told Reuters that public opinion has clearly swung on the side of opposition to the overall plan in general but the public option in particular.

If I were doing it, I would be doing what he's doing -- trying to convince the American people that the reforms are valid and do-able and would not pile up a huge debt. I think that's going to be hard to do, he said.

Senior White House officials said that by adopting some Republican ideas such as a modest initiative on addressing medical malpractice lawsuits, they were making the effort bipartisan even if few, if any, Republicans voted for the healthcare overhaul.

The possibility remained that Democrats would try to patch up their internal divisions to the point that they could push a bill through Congress without Republican support.

I will not waste time with those who have made the calculation that it's better politics to kill this plan than improve it, Obama said.

(Editing by Howard Goller)

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