Senate Finance Committee Chairman Baucus, center, is trying to forge a Democratic coalition with Sens. Bingaman, top left, and Conrad, center left. Sens. Rockefeller, bottom left, and Stabenow, top right, are trying to change it, Sens. Wyden and Nelson, center and bottom right, haven’t signaled if they will support it.

UPDATED, 5:03 p.m.聽– The Finance Committee today thwarted efforts by liberal Democrats to include a government-run health insurance option in major health care legislation, as the Senate appears to be dividing into three important camps: those who are solidly behind Chairman Max Baucus, those reluctantly leaning in his direction and a handful of wild cards who will wield great influence.

After a lengthy morning debate over what is emerging as one of the most contentious issues in the health care debate, the committee voted to reject two separate proposals, by Sens. John D. (Jay) Rockefeller IV, D-W.Va., and Charles Schumer, D-N.Y., to add a public option to the legislation.

On the first roll call vote, Baucus and four other Democrats 聳 Thomas Carper of Delaware, Kent Conrad of North Dakota, Blanche Lincoln of Arkansas and Bill Nelson of Florida 聳 sided with 10 Republicans to kill the Rockefeller measure. Schumer’s proposal later went down by a 13 to 10 margin. President Obama and liberal Democratic House and Senate leaders support a public option as a means of sparking competition within the insurance industry and expanding coverage to many uninsured Americans, but Republicans and many moderate Democrats oppose that approach, and Baucus has concluded it would be impossible to pass a bill in the Senate that includes a public option.

The Finance chairman is hoping the panel will wrap up work on the health bill this week. But to get the votes he needs, he’s sure to have to make more concessions, both in committee and on the floor, without alienating backers he already has.

For example, to appease committee Democrats with close ties to labor, the Montana Democrat might have to raise the dollar value of high-cost health care plans subject to an excise tax. To keep moderate Democrats, he will have to keep the size of the package to $900 billion over the next decade. That might make it trickier to assuage Democrats who want to include more generous subsidies to help lower-income people.

While the Finance committee has rejected the public insurance option, Schumer and Rockefeller have vowed to carry the fight to the floor. “We are going to keep at this and at this and at this until we succeed, because we believe in it so strongly,” Schumer said today. At the same time, a dozen or so centrist Democrats will surely raise concerns about the plan’s cost. While few, if any, Republicans are expected to support the bill, Baucus continues to press for bipartisan support.

“The central challenge is making the pieces of health reform fit together so that at the end of the day, we contain costs and all Americans get quality, affordable coverage,” said Finance member Ron Wyden, D-Ore. “If you don’t do that, what happens is you have this collection of various changes 聳 nearly always ratified by powerful interest groups — that at the end of the day don’t really significantly contain costs or reform health care. It’s all about fitting the pieces together.”

SOLIDLY WITH BAUCUS

The Democrats hold a 13 to 10 advantage over the Republicans on the Finance committee. Among the Democrats, those considered solidly behind Baucus’ plan are Jeff Bingaman of New Mexico, John Kerry of Massachusetts, Conrad of North Dakota, Maria Cantwell of Washington and Robert Menendez of New Jersey.

Two of these Democrats were part of the so-called “Gang of Six,” a group of three Democrats and three Republicans on the Finance committee handpicked by Baucus that held 61 meetings to draft the bill, which would require most people to buy insurance and create exchanges where individuals could purchase coverage. The bill also would provide subsidies to help people purchase health insurance. And it would expand Medicaid, the federal-state health insurance program for the poor and disabled.

While these senators have offered amendments to the bill 聳 Kerry, for example, wants to toughen the provisions that would allow insurers to charge different rates based on age 聳 they have appeared loyal to Baucus’ plan and are expected to be solid “yes” votes when the final tally is called.

This block could represent a significant number of votes when the Finance package hits the floor, with debate expected to begin later this month. Once the bill is melded with legislation passes by the Health, Education, Labor and Pensions Committee, which includes a government-run public plan option and a mandate that insurers provide coverage, Senate Democratic leaders such as Majority Leader Harry Reid of Nevada and Senate health committee chairman Tom Harkin of Iowa would likely embrace the bill and push for its passage.

LEANING STRONGLY TOWARD BAUCUS BUT DEMANDING CHANGES

Three other Democratic senators 聳 Rockefeller, Schumer and Debbie Stabenow of Michigan have made tough demands on Baucus.

For example, Rockefeller and Stabenow opposed provisions in Baucus’ original plan that would have taxed the insurance plans of many unionized workers in their states. Stabenow also has expressed concerns that any overhaul plan must guarantee that health insurance is affordable for middle-income workers.

Rockefeller and Schumer believe that the current bill, which sets up non-profit insurance cooperatives, would be inadequate to force private insurers to bring down their premiums and change discriminatory practices. While they have failed to add a public plan to the bill in committee, Rockefeller and Schumer, as well as Stabenow, are expected to be with Baucus when the final roll call vote is called. Like other Democrats who would have drafted a different bill than the Baucus plan, they nevertheless think the legislation has the best chance of passing the Senate. They don’t want to allow the opportunity to pass health care overhaul legislation to slip away as it did for former President Bill Clinton and Democrats in 1994.

Finance moderate Carper of Delaware is also expected to be with Baucus in the end but might push for changes in the bill. In a sign of loyalty to Baucus as well as pharmaceutical manufacturers in his home state, Carper voted with Baucus to defeat an amendment that would have weakened a deal struck by Baucus, the White House and the drug industry on the industry’s financial contribution to the cost of a health care overhaul.

WILD CARDS

Still another Finance group that Baucus must corral is the “wild card” Democrats who, due to an array of pressures, have not yet come to the Baucus camp.

They include Wyden of Oregon, who has warned that he might not vote for the Finance bill unless it is beefed up to promote more competition among insurers and to provide more affordable insurance to many Americans. Wyden’s bill that would make major changes to the nation’s system of employer-sponsored insurance has some Republican co-sponsors but has made little impact on the overall health care debate.

Bill Nelson is another lawmaker whose support for the Finance package is unclear. The Florida Democrat has failed in his attempts to amend the bill to protect some Medicare Advantage beneficiaries from the cuts slated for private health insurers in Medicare. He also pushed unsuccessfully for larger discounts on drugs to Medicare beneficiaries than those in the deal negotiated earlier this year by Baucus, the White House and the drug industry.

Political analysts put Blanche Lincoln, a conservative Democrat from Arkansas, in the wild-card category although she has been complimentary of the Baucus plan and is expected to support it. The reason: she is facing a tough reelection campaign. So far, she has carefully navigated the committee votes, generally siding with her party but a few times casting her lot with the Republicans.

She went along with conservative Republican Jim Bunning of Kentucky and other Republicans in seeking an amendment that would have required that the complete legislative language of the bill as well as its financial cost be posted on the Finance Committee Web site for 72 hours before a final vote. Baucus complained that the amendment as crafted would have delayed a final vote by as much as two weeks, and it failed.

Expect the wild-card crowd to grow on the Senate floor, with Democratic moderates such as Evan Bayh of Indiana, Nelson of Nebraska and Mary Landrieu of Louisiana.

While most Finance Republicans are not expected to vote for the final bill, Baucus and Obama continue to court Maine Republican Olympia Snowe, who has said she still has a number of concerns about the bill, ranging from the mandate that individuals purchase health insurance to the question of affordability and the measure’s final cost. Snowe’s proposal to trigger the public health insurance option only if coverage is not affordable to 95 percent of a state’s residents is likely to get more attention when聽a bill goes to the floor.

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Chairman Max Baucus (C) at the Senate Finance Committee with (L-R) Sens. John Kerry, D-Mass., Kent Conrad, D-N.D., Charles Grassley, R-Iowa, and Orrin Hatch, R-Utah. (Chip Somodevilla/Getty Images)

President Barack Obama and his congressional allies such as Senate Finance Committee Chairman Max Baucus have repeatedly vowed to “bend the curve” on health care costs, and Baucus’ new bill makes good on some of those promises.

It proposes new tools for attacking Medicare spending and imposes a hefty tax on high-cost health insurance plans 聳 a levy designed not only to raise money to cover the uninsured, but also to discourage excessive spending on health care. But many health care experts and budget hawks say the legislation doesn’t go far enough in taming long-term costs in the nation’s $2.5 trillion health care system. And they worry that the cost-control measures included in the bill might get watered down or eliminated as the congressional debate continues.

“Baucus clearly cares about bending the cost curve, but his plan doesn’t do enough and the risk is that it gets watered down even more,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a government watchdog group. “The plan gets two thumbs up in going further than any of the other plans, but it just shows you how big the challenge is that it doesn’t go nearly far enough — especially with this aggressive effort to expand insurance coverage.”

Princeton University economist Uwe Reinhardt agrees. “All of the bills that have emerged from Congress have had only very weak gestures toward cost control,” he said, adding, “The Baucus bill is no exception.”

Their view isn’t unanimous. Mark McClellan, a former administrator of the Centers for Medicare and Medicaid Services and now director of the Engelberg Center for Health Care Reform at The Brookings Institution, said “I think they do have a substantial amount of delivery reform” in the Finance bill.

He pointed to the bill’s proposal to create an independent Medicare commission to make recommendations to Congress on saving money, as well as a new CMS “innovations center” to test ways to make health care more efficient. He also noted there are several pilot projects to experiment with ways to save money. The tax on high-cost health insurance plans would also reduce costs, he said. “You can see the savings grow a lot over time.” The provision would raise revenue and encourage people to pick less generous health insurance plans, McClellan said.

Linking payments to quality聽

The measure also includes other provisions to reduce health care costs. For example, the bill would create a program that would link a percentage of Medicare payments to hospitals to the quality of care provided on a set of specific conditions, such as cardiac, surgical and pneumonia care. The measure would require physicians to report on a series of quality measures or face a cut in payments. The Finance bill also creates a voluntary pilot program to encourage hospitals, doctors and other health care providers to collaborate and improve patient health care in the Medicare program and share in the savings of coordinating care.

While the Congressional Budget Office is reluctant to score substantial savings on some of the provisions, McClellan said, “I think there’s a lot of potential for a big impact on health care costs.”

As the Finance Committee got down to work on the $774 billion 10-year Baucus bill Tuesday, the chairman offered some changes in his proposal. To appease concerns of his Democratic colleagues, Baucus raised the thresholds for plans for workers with high-risk jobs and for non-Medicare retirees age 55 and higher 聳 a concession to unionized workers who feared their health plans would be taxed.

Baucus’ original proposal would have compelled insurers to pay taxes on policies with annual premiums of $8,000 for individuals and $21,000 for families. His revised version raised the thresholds for individuals by $750 and for families by $2,000 for those with high risk jobs or retirees 55 and higher who are not eligible for Medicare.

He also raised the tax, which would be levied on insurers and plan administrators, from 35 to 40 percent. In addition, under his new plan, Baucus would index the level that plans would be taxed in the future to the consumer price index plus one percent; that was designed to ease fears that more and more middle-income workers would get hit by the tax over time. But some lawmakers may want those thresholds raised even higher and broadened to apply to more workers.

‘A lot of musical chairs?’

Baucus move to change the tax on high-cost insurance plans was a response to colleagues such as John D. Rockefeller IV, D-W.Va., who was worried that the tax would unfairly hit coal miners and others in high-risk jobs. While the proposed tax on high-cost health insurance plans would not affect most insurance policies, it already has encountered strong opposition from labor groups and their allies on Capitol Hill.

It’s not clear any tax on high-cost policies will survive, considering opposition in the House. And other provisions to slow the long-term rise in costs face skepticism-if not downright opposition.

For example, there has been concern among some lawmakers and patient groups that comparative effectiveness research, which tries to determine which medicines, medical devices or procedures work best at treating specific ailments, might be used to limit access to certain treatments. In addition, some members of Congress fear that the Medicare panel that Baucus envisions would have too much power to impose spending reductions. These lawmakers want to maintain their authority over reimbursements to hospitals, physicians and other health care providers.

If the bill’s Medicare commission is weakened, it’s projected $23 billion in savings from 2015-2019 could be reduced. Even in its current form, the commission would be barred from changing Medicare benefits or eligibility rules and Congress could vote to reject its proposals.

Other, more traditional ways to reduce the legislation’s costs also face some opposition. For example, the insurance industry is beginning to step up its protests of Baucus’ plans to reduce payments to Medicare Advantage plans 聳 the private-plan part of Medicare 聳 by about $123 billion over the next 10 years. And powerful trade groups, such as the Advanced Medical Technology Association or AdvaMed, are lobbying hard to stop proposed new fees on their industry. The Baucus plan would impose $ 4 billion in annual fees on medical-device manufacturers over the next decade but on Tuesday he proposed exempting retail products from the fee.

“Nobody has ideas that are going to fly off the page and go into effect very quickly that are really going to reduce total health spending as opposed to shifting it around so the federal cost is lower,” said Joe Antos of the conservative American Enterprise Institute. “In the end we’re going to see a lot of musical chairs on spending for whatever final bill comes out.”

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Just before the recess, the House Energy and Commerce Committee marked up the Democrats’ health reform bill. (Chip Somodevilla/Getty Images)

If health care reform has to be put on a diet to pass this year, how much must the proposal slim down?聽

Over the weekend, Senate Finance Committee Chairman Max Baucus, D-Mont.,聽proposed a health care overhaul “framework” for committee consideration that would cost under $900 billion over the next decade, according to a source close to the negotiations. The measure also would expand Medicaid coverage to 133 percent of the federal poverty level, provide tax credits for people with incomes up to 300 percent of poverty and establish a series of health insurance exchanges to help individuals find affordable coverage.

The proposal would also create health care insurance cooperatives rather than the government-run public health insurance option that many Democrats favor. The plan may also place a tax on high-cost health insurance policies as a way to raise revenue and insurers would be prohibited from denying coverage based on pre-existing medical conditions.

The Finance panel’s “group of six,” composed of three Democrats and three Republicans who are trying to reach consensus on a package, will meet Tuesday and are facing a Sept. 15 deadline to produce legislation. Baucus has told members that the proposal is not a final product and that more elements may be added. If members want to suggest changes to the bill that would increase its costs, however, they must also include financing offsets so the overall cost would not increase.聽

But members in both parties may see the Finance proposal as too large and propose possible cuts. Policy experts say that Democrats may have to accept a bill that is a far cry聽from the ambitious and costly health care overhaul blueprints on the drawing boards in the and that would extend coverage to many uninsured Americans, eliminate discriminatory practices within the insurance industry and try to rein in health costs in the coming decade.

These experts suggest that if President Barack Obama and lawmakers move to scale back the plan, they might end up having to shift to a middle ground or a bare-bones approach.

A middle-ground alternative, in the range of $500 billion to $700 billion over the coming decade, would likely include an expansion of the Medicaid program for the poor, subsidies to help low-income people buy coverage and some basic reforms in the insurance industry, these experts say. A bare-bones package, in the neighborhood of $200 billion to $300 billion, would focus primarily on a Medicaid expansion, more health care coverage for children and state health insurance exchanges.

“What you’re talking about then would appear to be very thin gruel to most Democrats,” said Robert Reischauer, president of the Urban Institute, a Washington think tank.

Obama’s Options

Since Congress departed for an August recess of angry town hall meetings on health care reform and widespread complaints about out-of-control government spending, Washington has been abuzz with talk about the need to scale back the Democrats’ proposals for health care reform or simply hit the restart button.

After months of private deal making with special interest groups and coaxing Democratic and Republican lawmakers from the sidelines, Obama next week will move to center stage with a prime time speech to House and Senate members in which he is expected to propose important refinements to health care legislative proposals pending on Capitol Hill in a bid to win over a majority of Democrats and at least one or two Senate Republicans. But Republicans are offering stiff opposition.

“It’s clear the American people don’t want a new speech, they want a new plan,” said House Republican leader John A. Boehner, Ohio, while Robert E. Moffit of the conservative Heritage Foundation advised the White House to “erase the blackboard, start over and do it right to expand insurance coverage, reduce costs and make the insurance markets work better.”

One thing Obama might do, much to the displeasure of liberal Democrats, is put off for at least a number of years the creation of a public health-insurance plan to compete with private insurers to drive down costs, along the lines of a proposal by Sen. Olympia J. Snowe that would have the government offer a health care insurance alternative only if private plans didn’t enter certain markets by certain dates. A scaled back package could also require most individuals to purchase insurance, create a government operated exchange in which individuals and small businesses could buy insurance, and provide subsidies or tax credits to defray the premiums for low-income Americans.

But it’s not clear that such a bill could capture enough support, and health care policy experts say that Democratic leaders may have to shed more to win final passage of health care legislation this year.

For example, rather than shooting for near universal coverage, these experts say, the Democrats might try to extend coverage to all uninsured children, which was Obama’s original campaign promise, or聽forget about creating a public insurance plan or co-ops, and instead substantially expand the Medicaid program for low-income children and adults.

The proposal might also include a far more limited version of a national health insurance exchange in which consumers could compare and purchase health care coverage. Finally, federal lawmakers might require state governments to pick up some of the cost of a Medicaid expansion, although this would almost certainly touch off loud complaints from governors and other cash-strapped state officials.

“This is deja vu all over again, when the Clinton administration plan failed in ’93 and ’94 and we turned to incrementalism.” said Jonathan Oberlander, an associate professor of health policy at the University of North Carolina at Chapel Hill. “No question incrementalism helped a lot of children. . . . But all the other problems we had got worse — more uninsured, higher spending, and more questions about health care. What we’ve learned is that more incrementalism doesn’t help.”

Taking such steps would almost certainly prompt an angry backlash from liberal Democrats, who want to use their majorities in the House and Senate and control of the White House to push for the biggest bill possible this year — one that would include a public insurance option, coverage for up to 95 percent of those currently uninsured, and generous premium subsidies for low-income families.

Dean A. Rosen, who was chief health care advisor to former Senate Majority Leader Bill Frist, R-Tenn., said, “My sense is it’s going to be challenging politically and substantively to pass a bill that costs less than $300 billion.”

Some experts also caution that trying to scale back the existing proposals on Capitol Hill might trigger unexpected or unintended consequences. Michael Tanner, a senior fellow at the libertarian Cato Institute, noted that portions of the plan are interlinked and that major changes or elimination of key provisions can have an undesirable ripple effect. “If you try to do insurance reform but you have no individual mandate to buy insurance, [the bill] falls apart,” he said.

To be sure, it may take weeks for Democrats and Obama to reach consensus on what elements will be included in a health care bill, and perhaps even longer to secure enough votes for passage.

“There is no good option here,” said Robert Laszewski, president of Health Policy and Strategy Associates, an Alexandria, Va., consulting firm. “Either [Democrats] do, ‘Damn the torpedoes’ and maybe lose the 2010 elections or they do the more modest kind of thing, in which case liberals will feel they bungled the greatest opportunity for health reform in 10 years.”

The Middle Ground

A scaled-back health overhaul approach could include subsidies to help individuals purchase coverage, an expansion of the Medicaid program and require the government to cover expenses for the highest-cost medical cases.

While Baucus’ proposal to allow individuals over 55 to buy into the Medicare program has gained little traction since he suggested it in a policy paper last November, it could resurface in a compromise package as a way to help older workers who have lost their jobs and their health insurance in the economic downturn.

Subsidies to help low-income people buy coverage could be scaled back from the 400 percent of poverty, or about $88,000 for a family of four, now included in the House Democrats’ package and legislation approved by the Senate Health, Education, Labor and Pensions Committee to 300 percent of the poverty level, or about $66,000 for a family of four.

Medicaid eligibility might be expanded to provide coverage to millions of uninsured poor adults who do not now qualify for the program.

Other ideas include targeting a mandate for health insurance coverage to a specific group, such as individuals age 25 or younger, or pegging it to income levels. Small businesses could receive tax incentives to spur coverage, an idea supported by many Republicans.

To reduce insurers’ expenses for the most expensive care, the government could cover catastrophic costs over a certain dollar amount, which could keep health insurance premiums down for everyone else.

Congress could also fund health insurance exchanges on the state or regional level, similar to programs ongoing in Massachusetts and other states.

A Bare-Bones Package

This smaller package might focus on three areas: expanding Medicaid, creating state and regional health insurance exchanges and mandating that all children have health care coverage.

While this option, which could cost $200 billion to $300 billion, might attract at “handful” of Republican votes, “it’s nothing anybody on the left would recognize as universal coverage,” Tanner said.

One benefit of a smaller plan is that less money would be needed to finance it, so there would be fewer reductions in Medicare spending or the need to raise taxes to pay for a health care overhaul. By contrast, to finance its current $1 trillion package, House Democrats would place a surtax on individuals earning more than $280,000 and couples making above $350,000 a year, although those levels may be raised.

There are other potential problems with a dramatically scaled-back approach. If premium subsidies are dropped to make the bill more affordable, fewer people will be covered. Without a requirement that everyone purchase coverage, insurers would not make good on their pledge to cover everyone with pre-existing medical conditions. Hospitals, which agreed to $155 billion in cuts over the next decade in return for fewer uninsured patients, may want to revisit that deal.

This less ambitious option would do little to control the growth of health costs, “because you are increasing demand by expanding the Medicaid component but aren’t able to do any of the broader cost control efforts,” Reischauer said.

KHN’s Julie Appleby contributed to this report.

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Senate Finance Committee Chairman Baucus, center, is trying to forge a Democratic coalition with Sens. Bingaman, top left, and Conrad, center left. Sens. Rockefeller, bottom left, and Stabenow, top right, are trying to change it, Sens. Wyden and Nelson, center and bottom right, haven’t signaled if they will support it.

UPDATED, 5:03 p.m.聽– The Finance Committee today thwarted efforts by liberal Democrats to include a government-run health insurance option in major health care legislation, as the Senate appears to be dividing into three important camps: those who are solidly behind Chairman Max Baucus, those reluctantly leaning in his direction and a handful of wild cards who will wield great influence.

After a lengthy morning debate over what is emerging as one of the most contentious issues in the health care debate, the committee voted to reject two separate proposals, by Sens. John D. (Jay) Rockefeller IV, D-W.Va., and Charles Schumer, D-N.Y., to add a public option to the legislation.

On the first roll call vote, Baucus and four other Democrats 聳 Thomas Carper of Delaware, Kent Conrad of North Dakota, Blanche Lincoln of Arkansas and Bill Nelson of Florida 聳 sided with 10 Republicans to kill the Rockefeller measure. Schumer’s proposal later went down by a 13 to 10 margin. President Obama and liberal Democratic House and Senate leaders support a public option as a means of sparking competition within the insurance industry and expanding coverage to many uninsured Americans, but Republicans and many moderate Democrats oppose that approach, and Baucus has concluded it would be impossible to pass a bill in the Senate that includes a public option.

The Finance chairman is hoping the panel will wrap up work on the health bill this week. But to get the votes he needs, he’s sure to have to make more concessions, both in committee and on the floor, without alienating backers he already has.

For example, to appease committee Democrats with close ties to labor, the Montana Democrat might have to raise the dollar value of high-cost health care plans subject to an excise tax. To keep moderate Democrats, he will have to keep the size of the package to $900 billion over the next decade. That might make it trickier to assuage Democrats who want to include more generous subsidies to help lower-income people.

While the Finance committee has rejected the public insurance option, Schumer and Rockefeller have vowed to carry the fight to the floor. “We are going to keep at this and at this and at this until we succeed, because we believe in it so strongly,” Schumer said today. At the same time, a dozen or so centrist Democrats will surely raise concerns about the plan’s cost. While few, if any, Republicans are expected to support the bill, Baucus continues to press for bipartisan support.

“The central challenge is making the pieces of health reform fit together so that at the end of the day, we contain costs and all Americans get quality, affordable coverage,” said Finance member Ron Wyden, D-Ore. “If you don’t do that, what happens is you have this collection of various changes 聳 nearly always ratified by powerful interest groups — that at the end of the day don’t really significantly contain costs or reform health care. It’s all about fitting the pieces together.”

SOLIDLY WITH BAUCUS

The Democrats hold a 13 to 10 advantage over the Republicans on the Finance committee. Among the Democrats, those considered solidly behind Baucus’ plan are Jeff Bingaman of New Mexico, John Kerry of Massachusetts, Conrad of North Dakota, Maria Cantwell of Washington and Robert Menendez of New Jersey.

Two of these Democrats were part of the so-called “Gang of Six,” a group of three Democrats and three Republicans on the Finance committee handpicked by Baucus that held 61 meetings to draft the bill, which would require most people to buy insurance and create exchanges where individuals could purchase coverage. The bill also would provide subsidies to help people purchase health insurance. And it would expand Medicaid, the federal-state health insurance program for the poor and disabled.

While these senators have offered amendments to the bill 聳 Kerry, for example, wants to toughen the provisions that would allow insurers to charge different rates based on age 聳 they have appeared loyal to Baucus’ plan and are expected to be solid “yes” votes when the final tally is called.

This block could represent a significant number of votes when the Finance package hits the floor, with debate expected to begin later this month. Once the bill is melded with legislation passes by the Health, Education, Labor and Pensions Committee, which includes a government-run public plan option and a mandate that insurers provide coverage, Senate Democratic leaders such as Majority Leader Harry Reid of Nevada and Senate health committee chairman Tom Harkin of Iowa would likely embrace the bill and push for its passage.

LEANING STRONGLY TOWARD BAUCUS BUT DEMANDING CHANGES

Three other Democratic senators 聳 Rockefeller, Schumer and Debbie Stabenow of Michigan have made tough demands on Baucus.

For example, Rockefeller and Stabenow opposed provisions in Baucus’ original plan that would have taxed the insurance plans of many unionized workers in their states. Stabenow also has expressed concerns that any overhaul plan must guarantee that health insurance is affordable for middle-income workers.

Rockefeller and Schumer believe that the current bill, which sets up non-profit insurance cooperatives, would be inadequate to force private insurers to bring down their premiums and change discriminatory practices. While they have failed to add a public plan to the bill in committee, Rockefeller and Schumer, as well as Stabenow, are expected to be with Baucus when the final roll call vote is called. Like other Democrats who would have drafted a different bill than the Baucus plan, they nevertheless think the legislation has the best chance of passing the Senate. They don’t want to allow the opportunity to pass health care overhaul legislation to slip away as it did for former President Bill Clinton and Democrats in 1994.

Finance moderate Carper of Delaware is also expected to be with Baucus in the end but might push for changes in the bill. In a sign of loyalty to Baucus as well as pharmaceutical manufacturers in his home state, Carper voted with Baucus to defeat an amendment that would have weakened a deal struck by Baucus, the White House and the drug industry on the industry’s financial contribution to the cost of a health care overhaul.

WILD CARDS

Still another Finance group that Baucus must corral is the “wild card” Democrats who, due to an array of pressures, have not yet come to the Baucus camp.

They include Wyden of Oregon, who has warned that he might not vote for the Finance bill unless it is beefed up to promote more competition among insurers and to provide more affordable insurance to many Americans. Wyden’s bill that would make major changes to the nation’s system of employer-sponsored insurance has some Republican co-sponsors but has made little impact on the overall health care debate.

Bill Nelson is another lawmaker whose support for the Finance package is unclear. The Florida Democrat has failed in his attempts to amend the bill to protect some Medicare Advantage beneficiaries from the cuts slated for private health insurers in Medicare. He also pushed unsuccessfully for larger discounts on drugs to Medicare beneficiaries than those in the deal negotiated earlier this year by Baucus, the White House and the drug industry.

Political analysts put Blanche Lincoln, a conservative Democrat from Arkansas, in the wild-card category although she has been complimentary of the Baucus plan and is expected to support it. The reason: she is facing a tough reelection campaign. So far, she has carefully navigated the committee votes, generally siding with her party but a few times casting her lot with the Republicans.

She went along with conservative Republican Jim Bunning of Kentucky and other Republicans in seeking an amendment that would have required that the complete legislative language of the bill as well as its financial cost be posted on the Finance Committee Web site for 72 hours before a final vote. Baucus complained that the amendment as crafted would have delayed a final vote by as much as two weeks, and it failed.

Expect the wild-card crowd to grow on the Senate floor, with Democratic moderates such as Evan Bayh of Indiana, Nelson of Nebraska and Mary Landrieu of Louisiana.

While most Finance Republicans are not expected to vote for the final bill, Baucus and Obama continue to court Maine Republican Olympia Snowe, who has said she still has a number of concerns about the bill, ranging from the mandate that individuals purchase health insurance to the question of affordability and the measure’s final cost. Snowe’s proposal to trigger the public health insurance option only if coverage is not affordable to 95 percent of a state’s residents is likely to get more attention when聽a bill goes to the floor.

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Chairman Max Baucus (C) at the Senate Finance Committee with (L-R) Sens. John Kerry, D-Mass., Kent Conrad, D-N.D., Charles Grassley, R-Iowa, and Orrin Hatch, R-Utah. (Chip Somodevilla/Getty Images)

President Barack Obama and his congressional allies such as Senate Finance Committee Chairman Max Baucus have repeatedly vowed to “bend the curve” on health care costs, and Baucus’ new bill makes good on some of those promises.

It proposes new tools for attacking Medicare spending and imposes a hefty tax on high-cost health insurance plans 聳 a levy designed not only to raise money to cover the uninsured, but also to discourage excessive spending on health care. But many health care experts and budget hawks say the legislation doesn’t go far enough in taming long-term costs in the nation’s $2.5 trillion health care system. And they worry that the cost-control measures included in the bill might get watered down or eliminated as the congressional debate continues.

“Baucus clearly cares about bending the cost curve, but his plan doesn’t do enough and the risk is that it gets watered down even more,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a government watchdog group. “The plan gets two thumbs up in going further than any of the other plans, but it just shows you how big the challenge is that it doesn’t go nearly far enough — especially with this aggressive effort to expand insurance coverage.”

Princeton University economist Uwe Reinhardt agrees. “All of the bills that have emerged from Congress have had only very weak gestures toward cost control,” he said, adding, “The Baucus bill is no exception.”

Their view isn’t unanimous. Mark McClellan, a former administrator of the Centers for Medicare and Medicaid Services and now director of the Engelberg Center for Health Care Reform at The Brookings Institution, said “I think they do have a substantial amount of delivery reform” in the Finance bill.

He pointed to the bill’s proposal to create an independent Medicare commission to make recommendations to Congress on saving money, as well as a new CMS “innovations center” to test ways to make health care more efficient. He also noted there are several pilot projects to experiment with ways to save money. The tax on high-cost health insurance plans would also reduce costs, he said. “You can see the savings grow a lot over time.” The provision would raise revenue and encourage people to pick less generous health insurance plans, McClellan said.

Linking payments to quality聽

The measure also includes other provisions to reduce health care costs. For example, the bill would create a program that would link a percentage of Medicare payments to hospitals to the quality of care provided on a set of specific conditions, such as cardiac, surgical and pneumonia care. The measure would require physicians to report on a series of quality measures or face a cut in payments. The Finance bill also creates a voluntary pilot program to encourage hospitals, doctors and other health care providers to collaborate and improve patient health care in the Medicare program and share in the savings of coordinating care.

While the Congressional Budget Office is reluctant to score substantial savings on some of the provisions, McClellan said, “I think there’s a lot of potential for a big impact on health care costs.”

As the Finance Committee got down to work on the $774 billion 10-year Baucus bill Tuesday, the chairman offered some changes in his proposal. To appease concerns of his Democratic colleagues, Baucus raised the thresholds for plans for workers with high-risk jobs and for non-Medicare retirees age 55 and higher 聳 a concession to unionized workers who feared their health plans would be taxed.

Baucus’ original proposal would have compelled insurers to pay taxes on policies with annual premiums of $8,000 for individuals and $21,000 for families. His revised version raised the thresholds for individuals by $750 and for families by $2,000 for those with high risk jobs or retirees 55 and higher who are not eligible for Medicare.

He also raised the tax, which would be levied on insurers and plan administrators, from 35 to 40 percent. In addition, under his new plan, Baucus would index the level that plans would be taxed in the future to the consumer price index plus one percent; that was designed to ease fears that more and more middle-income workers would get hit by the tax over time. But some lawmakers may want those thresholds raised even higher and broadened to apply to more workers.

‘A lot of musical chairs?’

Baucus move to change the tax on high-cost insurance plans was a response to colleagues such as John D. Rockefeller IV, D-W.Va., who was worried that the tax would unfairly hit coal miners and others in high-risk jobs. While the proposed tax on high-cost health insurance plans would not affect most insurance policies, it already has encountered strong opposition from labor groups and their allies on Capitol Hill.

It’s not clear any tax on high-cost policies will survive, considering opposition in the House. And other provisions to slow the long-term rise in costs face skepticism-if not downright opposition.

For example, there has been concern among some lawmakers and patient groups that comparative effectiveness research, which tries to determine which medicines, medical devices or procedures work best at treating specific ailments, might be used to limit access to certain treatments. In addition, some members of Congress fear that the Medicare panel that Baucus envisions would have too much power to impose spending reductions. These lawmakers want to maintain their authority over reimbursements to hospitals, physicians and other health care providers.

If the bill’s Medicare commission is weakened, it’s projected $23 billion in savings from 2015-2019 could be reduced. Even in its current form, the commission would be barred from changing Medicare benefits or eligibility rules and Congress could vote to reject its proposals.

Other, more traditional ways to reduce the legislation’s costs also face some opposition. For example, the insurance industry is beginning to step up its protests of Baucus’ plans to reduce payments to Medicare Advantage plans 聳 the private-plan part of Medicare 聳 by about $123 billion over the next 10 years. And powerful trade groups, such as the Advanced Medical Technology Association or AdvaMed, are lobbying hard to stop proposed new fees on their industry. The Baucus plan would impose $ 4 billion in annual fees on medical-device manufacturers over the next decade but on Tuesday he proposed exempting retail products from the fee.

“Nobody has ideas that are going to fly off the page and go into effect very quickly that are really going to reduce total health spending as opposed to shifting it around so the federal cost is lower,” said Joe Antos of the conservative American Enterprise Institute. “In the end we’re going to see a lot of musical chairs on spending for whatever final bill comes out.”

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Just before the recess, the House Energy and Commerce Committee marked up the Democrats’ health reform bill. (Chip Somodevilla/Getty Images)

If health care reform has to be put on a diet to pass this year, how much must the proposal slim down?聽

Over the weekend, Senate Finance Committee Chairman Max Baucus, D-Mont.,聽proposed a health care overhaul “framework” for committee consideration that would cost under $900 billion over the next decade, according to a source close to the negotiations. The measure also would expand Medicaid coverage to 133 percent of the federal poverty level, provide tax credits for people with incomes up to 300 percent of poverty and establish a series of health insurance exchanges to help individuals find affordable coverage.

The proposal would also create health care insurance cooperatives rather than the government-run public health insurance option that many Democrats favor. The plan may also place a tax on high-cost health insurance policies as a way to raise revenue and insurers would be prohibited from denying coverage based on pre-existing medical conditions.

The Finance panel’s “group of six,” composed of three Democrats and three Republicans who are trying to reach consensus on a package, will meet Tuesday and are facing a Sept. 15 deadline to produce legislation. Baucus has told members that the proposal is not a final product and that more elements may be added. If members want to suggest changes to the bill that would increase its costs, however, they must also include financing offsets so the overall cost would not increase.聽

But members in both parties may see the Finance proposal as too large and propose possible cuts. Policy experts say that Democrats may have to accept a bill that is a far cry聽from the ambitious and costly health care overhaul blueprints on the drawing boards in the and that would extend coverage to many uninsured Americans, eliminate discriminatory practices within the insurance industry and try to rein in health costs in the coming decade.

These experts suggest that if President Barack Obama and lawmakers move to scale back the plan, they might end up having to shift to a middle ground or a bare-bones approach.

A middle-ground alternative, in the range of $500 billion to $700 billion over the coming decade, would likely include an expansion of the Medicaid program for the poor, subsidies to help low-income people buy coverage and some basic reforms in the insurance industry, these experts say. A bare-bones package, in the neighborhood of $200 billion to $300 billion, would focus primarily on a Medicaid expansion, more health care coverage for children and state health insurance exchanges.

“What you’re talking about then would appear to be very thin gruel to most Democrats,” said Robert Reischauer, president of the Urban Institute, a Washington think tank.

Obama’s Options

Since Congress departed for an August recess of angry town hall meetings on health care reform and widespread complaints about out-of-control government spending, Washington has been abuzz with talk about the need to scale back the Democrats’ proposals for health care reform or simply hit the restart button.

After months of private deal making with special interest groups and coaxing Democratic and Republican lawmakers from the sidelines, Obama next week will move to center stage with a prime time speech to House and Senate members in which he is expected to propose important refinements to health care legislative proposals pending on Capitol Hill in a bid to win over a majority of Democrats and at least one or two Senate Republicans. But Republicans are offering stiff opposition.

“It’s clear the American people don’t want a new speech, they want a new plan,” said House Republican leader John A. Boehner, Ohio, while Robert E. Moffit of the conservative Heritage Foundation advised the White House to “erase the blackboard, start over and do it right to expand insurance coverage, reduce costs and make the insurance markets work better.”

One thing Obama might do, much to the displeasure of liberal Democrats, is put off for at least a number of years the creation of a public health-insurance plan to compete with private insurers to drive down costs, along the lines of a proposal by Sen. Olympia J. Snowe that would have the government offer a health care insurance alternative only if private plans didn’t enter certain markets by certain dates. A scaled back package could also require most individuals to purchase insurance, create a government operated exchange in which individuals and small businesses could buy insurance, and provide subsidies or tax credits to defray the premiums for low-income Americans.

But it’s not clear that such a bill could capture enough support, and health care policy experts say that Democratic leaders may have to shed more to win final passage of health care legislation this year.

For example, rather than shooting for near universal coverage, these experts say, the Democrats might try to extend coverage to all uninsured children, which was Obama’s original campaign promise, or聽forget about creating a public insurance plan or co-ops, and instead substantially expand the Medicaid program for low-income children and adults.

The proposal might also include a far more limited version of a national health insurance exchange in which consumers could compare and purchase health care coverage. Finally, federal lawmakers might require state governments to pick up some of the cost of a Medicaid expansion, although this would almost certainly touch off loud complaints from governors and other cash-strapped state officials.

“This is deja vu all over again, when the Clinton administration plan failed in ’93 and ’94 and we turned to incrementalism.” said Jonathan Oberlander, an associate professor of health policy at the University of North Carolina at Chapel Hill. “No question incrementalism helped a lot of children. . . . But all the other problems we had got worse — more uninsured, higher spending, and more questions about health care. What we’ve learned is that more incrementalism doesn’t help.”

Taking such steps would almost certainly prompt an angry backlash from liberal Democrats, who want to use their majorities in the House and Senate and control of the White House to push for the biggest bill possible this year — one that would include a public insurance option, coverage for up to 95 percent of those currently uninsured, and generous premium subsidies for low-income families.

Dean A. Rosen, who was chief health care advisor to former Senate Majority Leader Bill Frist, R-Tenn., said, “My sense is it’s going to be challenging politically and substantively to pass a bill that costs less than $300 billion.”

Some experts also caution that trying to scale back the existing proposals on Capitol Hill might trigger unexpected or unintended consequences. Michael Tanner, a senior fellow at the libertarian Cato Institute, noted that portions of the plan are interlinked and that major changes or elimination of key provisions can have an undesirable ripple effect. “If you try to do insurance reform but you have no individual mandate to buy insurance, [the bill] falls apart,” he said.

To be sure, it may take weeks for Democrats and Obama to reach consensus on what elements will be included in a health care bill, and perhaps even longer to secure enough votes for passage.

“There is no good option here,” said Robert Laszewski, president of Health Policy and Strategy Associates, an Alexandria, Va., consulting firm. “Either [Democrats] do, ‘Damn the torpedoes’ and maybe lose the 2010 elections or they do the more modest kind of thing, in which case liberals will feel they bungled the greatest opportunity for health reform in 10 years.”

The Middle Ground

A scaled-back health overhaul approach could include subsidies to help individuals purchase coverage, an expansion of the Medicaid program and require the government to cover expenses for the highest-cost medical cases.

While Baucus’ proposal to allow individuals over 55 to buy into the Medicare program has gained little traction since he suggested it in a policy paper last November, it could resurface in a compromise package as a way to help older workers who have lost their jobs and their health insurance in the economic downturn.

Subsidies to help low-income people buy coverage could be scaled back from the 400 percent of poverty, or about $88,000 for a family of four, now included in the House Democrats’ package and legislation approved by the Senate Health, Education, Labor and Pensions Committee to 300 percent of the poverty level, or about $66,000 for a family of four.

Medicaid eligibility might be expanded to provide coverage to millions of uninsured poor adults who do not now qualify for the program.

Other ideas include targeting a mandate for health insurance coverage to a specific group, such as individuals age 25 or younger, or pegging it to income levels. Small businesses could receive tax incentives to spur coverage, an idea supported by many Republicans.

To reduce insurers’ expenses for the most expensive care, the government could cover catastrophic costs over a certain dollar amount, which could keep health insurance premiums down for everyone else.

Congress could also fund health insurance exchanges on the state or regional level, similar to programs ongoing in Massachusetts and other states.

A Bare-Bones Package

This smaller package might focus on three areas: expanding Medicaid, creating state and regional health insurance exchanges and mandating that all children have health care coverage.

While this option, which could cost $200 billion to $300 billion, might attract at “handful” of Republican votes, “it’s nothing anybody on the left would recognize as universal coverage,” Tanner said.

One benefit of a smaller plan is that less money would be needed to finance it, so there would be fewer reductions in Medicare spending or the need to raise taxes to pay for a health care overhaul. By contrast, to finance its current $1 trillion package, House Democrats would place a surtax on individuals earning more than $280,000 and couples making above $350,000 a year, although those levels may be raised.

There are other potential problems with a dramatically scaled-back approach. If premium subsidies are dropped to make the bill more affordable, fewer people will be covered. Without a requirement that everyone purchase coverage, insurers would not make good on their pledge to cover everyone with pre-existing medical conditions. Hospitals, which agreed to $155 billion in cuts over the next decade in return for fewer uninsured patients, may want to revisit that deal.

This less ambitious option would do little to control the growth of health costs, “because you are increasing demand by expanding the Medicaid component but aren’t able to do any of the broader cost control efforts,” Reischauer said.

KHN’s Julie Appleby contributed to this report.

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