This is a rush transcript from "On the Record," October 23, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: An optional public option? Now, there are reports that the Senate is still considering a public option, but one in which individual states can opt in or out. Now, why would a state opt in or opt out, and how does it affect you?

Adriel Bettelheim of CQPolitics joins us. Adriel, what's this opt in, opt out public option they're talking about in the Senate?

ADRIEL BETTELHEIM, CQPOLITICS.COM: Well, this is one of those unique Washington phenomena, where the longer you talk about something, the more alternatives you have. And what they've come up now is instead of having a government-run public option, some of the centrists in the Senate, whose votes are critical to any final agreement, have come up with a plan that they're broaching where they say, Give the states the option to set up a state-run public plan or not, or give the states an opportunity to collaborate and set a regional plan, but no federal plan.

And this is starting to get some traction with key people like Olympia Snowe, the Republican of Maine, and Ben Nelson, Democrat of Nebraska.

VAN SUSTEREN: Well, who's going to pay for it, the state or the federal?

BETTELHEIM: Well, this is a big question. I mean, you know...

VAN SUSTEREN: (INAUDIBLE) a huge question! I mean, that's -- I mean, of course, the feds are willing to pass it off to the states if the states, you know, pick up the freight!

BETTELHEIM: And of course, what's important here in the scoring of any final bill is how much the federal taxpayers get. So if they can offload things by expanding Medicaid and adding some, you know, costs onto states, that might be appealing in getting a final agreement. But a lot of that still remains to be hashed out.

VAN SUSTEREN: Is this sort of a legitimate good (INAUDIBLE) possible option? I mean, you may not agree with it, but I mean, at least it's viable, or is this just Congress playing around with the numbers and the games?

BETTELHEIM: Well, I think what they're trying to do -- at least the moderates seem to be trying to get out of this idea of a uniform federal- run insurance plan. And they're trying to do anything to stop that. You saw earlier there was a proposal to set up coops. Now they're trying to give states the option to set them up or not. And what they're trying to do is pivot the debate off from the liberal pole that sort of is where the starting point is.

And what's really important here to remember is that the first draft of the bill that eventually hits the House, or Senate floor in this case, is so important because the language that's in there has to be pulled out. So that's why you have these different groups trying so hard.

VAN SUSTEREN: If -- if you're -- let's say you're in a state. Let's say you're in my home state of Wisconsin, and your state opts out. And so -- and so you don't have insurance. So do you get that penalty?

BETTELHEIM: You're not necessarily penalized in a dollar sense, but there are some rural areas in Wisconsin and other parts of the country where there may only be one or two private insurers. And the people who want a public option, whether federally-run or state-run, say that sometimes you need an alternative just to inject some competition into what's otherwise a monopolistic market. So you know, that has some appeal to rural state lawmakers.

VAN SUSTEREN: All right, in terms of counting heads and numbers, is this a likely possibility and is this what the Senate bill is going to ultimately be?

BETTELHEIM: Well, it's a little early to tell, but you have some key moderates, like Susan Collins and Olympia Snowe, the Republicans from Maine, Landrieu from Louisiana, Ben Nelson from Nebraska, Joe Lieberman from Connecticut, who are sort of -- seem to be coalescing around this and they're trying to fight back another public option that would set up a federal plan and give states the chance to opt out. This one is called opt-in. It gets very confusing, but what they're trying to do, basically, is beat back a uniform federal plan in some way, shape or form.

VAN SUSTEREN: All right, the Senate tends to be rather civilized. I mean, people may not agree with their arguments, but -- is there any blood on the floor in this one? I mean, are people fighting hard and heavy at this point?

BETTELHEIM: I think they're throwing out ideas and they keep repeating places where they disagree. And it's sort of how you do things in long-scale negotiations. You're kind of trying to identify areas that need to be hashed out. Harry Reid, the majority leader, went to the White House on Thursday and sort of talked about these different options, and President Obama sat there, and you know, frankly, rather wisely, just sat there, we're told, and didn't endorse one plan or another. He knows there's a lot of acts that need to be still played out in this play.

VAN SUSTEREN: So who's winning? Who's losing and who's winning at this point?

BETTELHEIM: You know, I think the insurance industry is still losing a little bit. They came out with this report saying premiums would go up under the centrist Senate Finance plan, and since then, has given energy to advocates of some type of public option. So now it's looking more likely that a public option will be in a Senate bill than it did even two, three weeks ago.

VAN SUSTEREN: Is Majority Leader Reid's sort of head on the plate on this one back home?

BETTELHEIM: Is his...

VAN SUSTEREN: Yes, I mean, it's, like, I mean, he's got political problems back home. Is this -- is his head on the plate, so to speak?

BETTELHEIM: Well, if it is, I'm not sure it's specifically related to the health debate. That, if I understand right, is more a question of him forgetting about Nevada and dealing with national business, and that's a problem that, you know, plagues any national party leader. It was the same thing with Bill Frist. It was the same thing with Tom Daschle in South Dakota.

VAN SUSTEREN: And look what happened to Tom Daschle.

BETTELHEIM: Yes.

VAN SUSTEREN: (INAUDIBLE) he learned the hard way. Adriel, thank you.

BETTELHEIM: Good to be with you.

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