(Updated 8:32 p.m.) Gov. Dannel P. Malloy said Monday the compromise struck with the legislature’s Democratic majority over SustiNet was a recognition that resources are tough to come by at the moment.

SustiNet, which was supposed to be Connecticut’s best shot at a public option because such as option was not included in the federal reform legislation, now won’t be open to the public or small businesses under the budget deal Democrats struck with Malloy last week. It will pool together state employees, state retirees, and municipalities. It will also look to add nonprofit providers in the future, but it will no longer seek to cover the uninsured.

Shortly after taking office Malloy surprised proponents of the SustiNet concept and began to distance himself from the proposal pushed mainly by the Universal Health Care Foundation.

“If you’re asking do I think this year we could move into a Massachusetts model, the answer is no,” Malloy said Monday at a press conference. “I pointed out my differences, but my differences don’t lessen my desire to cut the costs in an effective way…there are more than one way to do it and in some senses we don’t close any door, but we do take definitive steps, I believe, in the pooling arena.” 

Malloy also said it was important that under the new structure agreed to by the legislature’s Democratic majority all the power over the health plans is maintained by the governor’s office, instead of the quasi-public agency set up under the initial proposal.

Malloy made the comments at a press conference following his meeting with U.S. Rep. John Larson and Donald Berwick, administrator of the Centers for Medicare and Medicaid Services.

The new agreed upon SustiNet proposal will cost the state about $600,000 a year, or $1.2 million over the next two years. Jeanette DeJesus, Malloy’s special advisor on health care reform and Deputy Public Health Commissioner, said most of the cost is for seven additional employees to be split between the comptrollers office and the Office of Health Care Reform and Innovation.

As far as a public option in the future is concerned, DeJesus said Malloy realizes it’s proper to look first at the feasibility of a public option. She said it’s not accurate to say he’s just giving up on a public option, but he recognizes it’s impossible in this economic environment.

Under the federal exchanges every state will have to open a marketplace for individuals and small businesses to purchase insurance through by 2014. Malloy has embraced the exchanges even though he seems to remain skeptical of the initial SustiNet proposal.

“Given the difficulties this year having this kind of item in the budget is a huge victory,” Juan Figueroa, president of the Universal Health Care Foundation said last week. “Nonetheless, it falls short of achieving the goals of SustiNet, designed not only to improve health care delivery in our state, but also save money and provide an affordable nonprofit option for small businesses and individuals left behind by the current health care system.”

Paul Wessel, executive director of CT Parent Power, who took Malloy to task over his lack of support for SustiNet at a town hall meeting in Middletown said the compromise may not be perfect, but it’s a step forward.

Wessel said what Malloy kept saying at the town hall meetings was “no, no, no,” but what the new proposal does is give credence to the power of the people in a state dominated by the insurance industry.

Eric George, associate counsel for the Connecticut Business and Industry Association, said last week that he’s happy the public option was removed from the legislation, but reserves final judgment on the measure. He said it’s not nearly as problematic without the public option, but there’s still risk for taxpayers depending on how the state self-insures the pool and sets the benefit levels.

Rep. Besty Ritter, co-chairwoman of the Public Health Committee, said Monday that she will continue to push for a public option to be included as part of the legislation.

Berwick, a controversial recess appointment, said he doesn’t believe health care systems improve from cutting.

“I’m not for cutting. I don’t think that’s the way to get there,“ Berwick, administrator said. “I think a modern, mature, confident, optimistic nation can find its way toward what we do in every other area of products and services to better designs.”

He said those better designs are all over the country and now it’s time to normalize them into the system. Following a meeting with the Connecticut Hospital Association, Berwick said he was impressed with their ability to beat the national average on bloodstream infections.

Here in Connecticut there seems to be a very firm commitment toward implementing the Patient Protection and Affordable Care Act and it could be a prototype for the rest of the country, Berwick said. “The way we can get to the kind of healthcare America wants and needs, same for Connecticut, is not by us doing things to each other, but with each other.”