As we've reported, a compromise is emerging in the Senate on a public option that give states the opportunity to either opt out of or opt in.  Democratic sources say the former, rather than the later, is preferred by Majority Leader Harry Reid, but some concerns still exists for moderate Dems, like Sens. Ben Nelson, D-NE, and Blanche Lincoln, D-AR, among others.

Regardless, the very idea of creating some sort of government-created insurance plan, that seemed a distant possibility in the Senate until this week, is now gaining steam.

One moderate Democrat, Sen. Mary Landrieu, D-LA, just met privately with Reid and emerged to say, "It really is a possibility," adding, "There is a way to complete this, I believe."

Landrieu has been inside meetings with her fellow moderates for months, bipartisan meetings that have ranged in size from about 5 or 6 to 15 members. "It's everyone from Ben Nelson to Mark Udall," Landrieu said, referring to the Democratic senator from Colorado.

Landrieu described a plan that would be modeled on the health plan for federal government employees, called Federal Employee Health Benefits Plan (FEHBP), that could be started with federal "seed money" and run not by the government, but by a private, independent board (though it is not clear yet who would appoint the board).  The program would be funded by an earnings pool created from premiums.

"It's a private insurance model," Landrieu said, insisting that it neither be government-run, government-backed, nor government paid-for."

Landrieu has some criticism for the more liberal members of her caucus, saying that "this may not meet their requirements" for a "single payer, government-run, government-subsidized" insurance plan, but Landrieu said her group would not accept anything like that, something supporters call a "robust public option."

The senator said her group was trying to combine a proposal that emerged from the Senate Finance Committee, authored by Sen. Kent Conrad, D-ND, that would create a system of nonprofit cooperatives, and merge it with a states-based approach to a national plan authored by Sen. Tom Carper, D-DE.

"It's evolving. At this point...some solid compromise is possible," Landrieu said.

Pointing to about 5 or 6 Senate Republicans that she thought might be gettable, including both Maine moderates - Susan Collins and Olympia Snowe, as well as, George Voinovich of Ohio and Bob Corker of Tennessee.

These are definitely just guesses from Landrieu, it seems, in talking to these senators.  All of them have varying levels of concern about this and many other components of the bills passed by the Senate and now the subject of merger negotiations between Reid and Administration officials.

The issue of whether not states will have to opt in or can choose to opt out of a government-created insurance plan is not something Landrieu wanted to discuss, and this could certainly derail this compromise.  Sens. Nelson and Evan Bayh, D-IN, both former governors, along with Lincoln, have expressed a great deal of concern for the "opt out" option, the one favored by Reid and many other Democrats.  Nelson wants to know, for instance, how difficult it would be for states to opt out, fearing that those who want a more robust public option would virtually lock states into plans from which they could not opt out.

And there is certainly a long way to go before Senate Democrats can get a bill passed.  Leadership aides have told Fox that a bill will likely not be sent to the nonpartisan Congressional Budget Office (CBO) for a final analysis and determination of price tag until Monday or Tuesday of next week.

Moderates want to see more choices and greater affordability for all Americans in the bill that Reid is creating, a sentiment often expressed by more liberal members, as well.  Landrieu, alone, pointed to the variety of choices federal employees have, noting that in New York there are 34 insurance options, alone.

"We are not carrying water for the insurance companies," Landrieu said of herself and her moderate colleagues, but "We want to see more choice and more affordability not just for those who don't have insurance, but for those who can't afford what they have." 

Landrieu said that she and some of her fellow centrists want to see people come off of cash-strapped Medicaid programs and out of insurance plans they cannot afford to buy into a system like the one described, but she said that would not be part of current efforts to find a public option compromise.

"We're not trying to be Republicans...but we do believe in the free market," Landrieu said.