[IBD Editorials] President Obama is staking the success of his health care plan on his personal popularity with a prime time address to the nation on Wednesday. House Democrats will be cheering him on and encouraging him to double-down in his support for a public plan option.  For Obama, this is the wrong message and a big gamble. He won the election by promising to govern from the center but has let Congress tack hard left on key issues from the stimulus to global warming.

The backlash at town hall meetings and tea parties this summer is evidence that the president needs to reach out to moderates and conservatives and scale back his health care ambitions. This may not be Obama’s Waterloo — the Democrats have the votes to ram legislation through Congress — but it might turn out to be a Pyrrhic victory.

Playing the blame game has been the administration’s favorite tactic of late, but the administration’s wounds are self-inflicted. The president’s initial approach — letting Congress draft bills based on White House “principles” — has backfired badly.

This became glaringly apparent on July 16, when CBO chief Doug Elmendorf testified before the Senate that none of the bills drafted in the House or Senate “proposed the sort of fundamental changes” critical to controlling government spending. For a president who argued for months that health care reform will save money and reign in the deficit, it was a devastating blow.

Switching tactics, the administration now prefers to talk about health insurance reform and bash the insurance industries’ “windfall profits.”

Working from the same playbook, Health Care for America Now, an umbrella organization of left-leaning groups like MoveOn.org and ACORN, issued a report claiming “profits at 10 of the country’s largest publicly traded health insurance companies in 2007 rose 428% from 2000 to 2007, from $2.4 billion to $12.9 billion.”

Attacking insurers is a losing ploy for several reasons. First, the insurance industry has already signed on to support health care reform in return for requiring all Americans to buy health insurance.

Second, large insurers’ profits ($12.9 billion) represent about half a percent of the U.S.’s annual $2 trillion health care costs. To put that in perspective, Medicare is estimated to lose $60 billion annually to fraud — a sum nearly five times larger.

Finally, Americans are happy with the quality of their health care and insurance. A Gallup poll released on Sept. 1 showed that 87% of people with private insurance rate the quality of their health care as excellent or good, with 75% of those with private plans rating them as excellent or good.

What choices are left for the president?

Damn the torpedoes and full speed ahead: Democrats could push for a majority rules option where they would try and pass controversial legislation through “reconciliation” in the Senate, a procedural option that would allow them to pass bills with just 51 votes instead of 60, dodging a potential Republican filibuster.

There are several drawbacks to this approach — not the least of which is that they may not have the votes, with moderate Democratic senators balking at the idea. In the House, Blue Dogs might also defect over the price tag of the legislation.

Obama would also risk massive amounts of political capital on this go-it-alone approach just before mid-term elections.

Here’s a better approach: Play small ball.

First, take the public option off the table. This is the main irritant for moderates and conservatives, and insurance market reforms don’t depend on the government creating a massive new public entitlement that won’t add any real competition or choice.

Covering Americans with pre-existing conditions — one of Obama’s top talking points — can be better accomplished by increasing federal funding for high risk pools that offer affordable coverage, or a risk-adjustment mechanism that reimburses insurers who cover more high-cost patients.

Either approach would encourage insurers to offer coverage to this population, rather than avoid them.

Next, reform Medicare and Medicaid. Medicare has a $38 trillion unfunded liability and Medicaid’s costs are expected to rise by just under 8% for the next 10 years. Bipartisan support exists for reining in waste, fraud and abuse in both programs.

At the same time, we should experiment with new payment systems that encourage more cost-effective, high quality care.

Finally, embracing tort reform would restore the president’s reputation as a centrist, reduce crippling medical malpractice premiums, and reduce defensive medicine that drives up health care costs.

The president and Congress pushed too far too fast on health care reform and are paying the price for it. By focusing on incremental solutions to specific problems, the president can rally support and hit the “reset” button on his presidency — while there’s still time to do it.

By PAUL HOWARD | Posted Friday, September 04, 2009 4:20 PM PT Howard is the director and a senior fellow at the Manhattan Institute.