Senator Eliot Shapleigh - El Paso, Texas

Senate Finance Committee Chairman Max Baucus unveiled an $856 billion health-care reform plan Wednesday that would require nearly all Americans to carry health insurance while barring insurance companies from discriminating against people based on their health status or denying coverage because of preexisting conditions.

The plan does not call for a government-run insurance option, as advocated by President Obama and most Democrats, but would set up a system of nonprofit consumer-owned cooperatives to compete with private insurers -- a provision intended to appeal to Republicans who have railed against the "public option" in recent weeks.

The Congressional Budget Office later issued a "preliminary analysis" saying that the plan would cost a total of $774 billion and would "result in a net reduction in federal budget deficits of $49 billion" from 2010 to 2019. There was no immediate explanation for the differing cost estimates.

Baucus (D-Mont.) released the plan aimed at overhauling America's $2.5 trillion health care system ahead of a vote scheduled in the Finance Committee for next week.

"The cost of America's broken health care system has stretched families, businesses and the economy too far for too long," he said in a statement. "For too many, quality, affordable health care is simply out of reach. This is a unique moment in history where we can finally reach an objective so many of us have sought for so long."

He said the "common-sense package" would work for patients, health-care providers and the economy and would not "add a dime to the deficit." He also pledged that it would rein in soaring health-care costs.

Although Baucus held more than 100 hours of meetings over several weeks with a bipartisan group of Senate health-care negotiators known as the "Gang of Six," he was unable to secure a public endorsement from any of the group's GOP members -- or any other Republicans -- before releasing the plan.

In a Capitol Hill news conference, Baucus nevertheless expressed confidence that his bill would pass with bipartisan support.

"This is probably one of the largest pieces of social legislation in American history since the depression," Baucus said, adding that it would take people "time to fully fathom" the plan.

"We have a moral obligation as Americans to pass meaningful health-care reform this year," he said. The costs of inaction, he said, "are just horrendous."

White House press secretary Robert Gibbs called the bill an "important building block" that "gets us closer to health-care reform." But he offered little explanation for why no Republicans have signed on, despite weeks of negotiation.

"I don't think the president looks at today as the end," he told reporters. "I think Republicans certainly on the committee will offer amendments to change the bill. And we hope in the end that they'll hear what their constituents are saying about the need to address the skyrocketing costs of health-care reform."

For different reasons, however, the plan promptly came under criticism from both Republicans and liberal Democrats. Republicans repeated vows to oppose what they view as a government "takeover" of the health-care system. Liberals lamented the absence of a public option.

Sen. Olympia J. Snowe (Maine), a moderate Republican member of the Gang of Six, did not endorse the Baucus plan but said that prospects for a bipartisan deal are not dead.

"This is a first step in the process," she said in a statement, and members of the group "fully intend to keep meeting, moving forward and continuing to work with the chairman . . . toward crafting a bill that I, and hopefully other Republican members of the Finance Committee, can support."

In a floor speech Wednesday morning before the Baucus plan was released, Senate Minority Leader Mitch McConnell (R-Ky.) charged that at every turn, "Democrats in Washington are pushing another trillion-dollar bill or calling for more spending, more taxes, and more debt."

He said: "The American people want health care reform -- not with more government, but with less. They don't want a new government-run system; they want us to repair the system we've got."

McConnell later said the plan "puts massive new tax burdens on families and small businesses" and would "create yet another thousand-page, trillion-dollar government program."

Other Republicans were unimpressed with what they deemed a partisan bill. Sen. John Cornyn (R-Tex.), a member of the GOP leadership, said he had "serious concerns with many of its proposals." House Minority Leader John A. Boehner (R-Ohio) called the effort "the wrong prescription during these tough economic times."

Democrats offered muted praise for the plan, and much relief that Baucus had finally moved forward. Senate Majority Leader Harry M. Reid (D-Nev.) called Baucus's bill "another important piece of the puzzle" that "brings us a step closer to having a comprehensive health insurance reform bill on the Senate floor." House Majority Leader Steny H. Hoyer (D-Md.) issued a similar statement.

Sen. Bill Nelson (D-Fla.), a Finance Committee member, said he backed the bill as a "starting point" but pledged to seek changes to protect his state's large number of Medicare beneficiaries.

Under the Baucus plan, new Web-based insurance exchanges would be established to allow consumers to shop for and compare insurance plans. The package would also expand Medicaid and place caps on patients' annual health-care costs. It would be paid for with $349 billion in new taxes and fees and $507 billion in cuts to government health programs.

According to a summary issued by Baucus, the 10-year cost of the plan "would be fully paid for mostly through increased focus on quality, efficiency, prevention and adjustments in federal health program payments, without adding to the federal deficit."

The plan would create state-based Internet portals, or exchanges, that would "direct consumers purchasing plans on the individual market to every health coverage option available in their zip code," the summary says. It says the exchanges would also allow people to determine whether they are eligible for "health-care affordability tax credits or public programs." Those without Internet access would be able to enroll through the mail or in person at various locations.

The plan, called the America's Health Future Act, would create a state-based "Small Business Health Options Program" to allow small businesses to compare and purchase health-care coverage for employees just as individuals would be able to do in the insurance exchanges.

Medicaid eligibility would be standardized starting in 2014 for parents, children, pregnant women and childless adults at or below 133 percent of the federal poverty level, or $30,000 a year for a family of four or $14,400 for an individual. People who fall between 100 and 133 percent of the federal poverty level would have the choice of enrolling in either Medicaid or a private health insurance plan offered through an exchange.

Noting that the cost of health insurance has increased five times faster than wages over the last eight years, the summary says Baucus's plan would make coverage more affordable by providing tax credits for low- and middle-income individuals and small businesses and by strengthening public programs. Otherwise, in seven years, most Americans will spend nearly half their income on health insurance, it warns, and U.S. businesses, which now pay nearly three times more for health-care benefits than competitors in other nations, will be further hampered in the global market.

The tax credits would be available to low- and middle-income people to subsidize the purchase of health insurance on a sliding scale. Beginning in 2013, the credits would be offered to those earning between 134 and 300 percent of the poverty level. The following year, they would be available to those earning between 100 and 133 percent of the poverty level.

The proposed cooperatives would operate at the state, regional or national level and serve as "nonprofit, member-run health plans," offering "consumer-focused alternatives to existing insurance plans," the summary says. The plan calls for the federal government to provide $6 billion in "seed money" to start up the cooperatives.

In addition, the plan would create a "personal responsibility requirement" for health-care coverage and impose penalties on those who fail to buy insurance. Exemptions would be available "for a variety of reasons including religious conscience," the summary says. "Undocumented workers" would also be exempt from the requirement.

For individuals earning between 100 and 300 percent of the poverty level, the penalty for failing to obtain health coverage would be $750 per person per year, with a maximum of $1,500 per family. For those earning more than 300 percent of the poverty level, the penalty would be set at $950 per person per year, with a maximum of $3,800 per family.

The plan would not require employers to offer health insurance, but starting Jan. 1, 2013, all employers with more than 50 workers would have to reimburse the government if they did not offer coverage. The reimbursement for each full-time employee receiving a health-care affordability tax credit would amount to 100 percent of the average exchange subsidy, "up to a cap of $400 per total number of employees whether they are receiving a tax credit or not."

The Finance Committee bill would seek to resolve one of the most urgent insurance-related problems: the denial of coverage to individuals with preexisting conditions. Within a year of enactment, the bill would allow any uninsured individual who has been denied coverage due to previous health problems to enroll in a special high-risk pool subsidized by $5 billion in federal funding.

Broad changes would be imposed on insurers who want to offer coverage on the exchanges. For instance, premiums may vary only based on tobacco use, age, and family composition. Some variation also would be allowed based on geographic differences.

The bill would require all private insurers in the individual and small group markets that operate nationally, regionally, statewide, or locally, to be available in newly established state exchanges, provided insurers are licensed by a given state. States would be required to establish exchanges for the individual and small group markets.

Beginning Jan. 1, 2013, all plans offered in the individual and small-group market, whether through the exchange or outside the exchange, would have to comply with the bill's rating reforms and benefit options.

Addressing a serious concern for many Republicans, the bill would limit access to the exchange to U.S. citizens and legal residents. People who are in the country illegally would not be able to buy personal insurance coverage through the state exchanges, but they would be able to buy insurance for their U.S. citizen or lawfully present children.

Plans offered through the exchanges would fall into four benefit categories: bronze, silver, gold and platinum. All health insurance plans in the individual and small-group market would be required, at a minimum, to offer coverage in the silver and gold categories.

All plans must provide preventive and primary care, emergency services, hospitalization, physician services, outpatient services, day surgery and related anesthesia, diagnostic imaging and screenings (including X-rays), maternity and newborn care, pediatric services (including dental and vision), medical/surgical care, prescription drugs, radiation and chemotherapy, and mental health and substance abuse services that at least meet minimum standards set by federal and state laws. In addition, plans could charge no deductibles or copayments for preventive care services, although the bill allows for some exceptions.

Plans could also not include lifetime limits on coverage or annual limits on any benefits.

The cost of the package -- $856 billion over the next decade -- would be more than offset, aides to Baucus said, by about the new fees and taxes and projected savings from government health programs, primarily Medicare. An official estimate was not immediately available, but aides said the package would save the government money by 2019 and begin to reduce an annual deficit that is forecast to approach $1 trillion that year.

If congressional budget analysts confirm that view, Baucus will have offered the first health-care package that actually delivers on Obama's promise that reform would not increase the deficit by a single dime.

The largest of the new funding sources would be a 35 percent excise tax on the most expensive insurance policies -- those that cost more than $8,000 a year for an individual and $21,000 for a family, a group that includes less than 10 percent of current policies. The tax would be imposed on insurance companies, rather than beneficiaries, but lawmakers hope the effect would be the same: to persuade people to stop plowing excessive sums into an already bloated health-care system and divert the savings into wages. Congressional tax analysts estimate the provision would generate nearly $215 billion over the next 10 years.

Obama endorsed the tax in his speech to Congress last week, but it has the potential to strike hard at a core constituency -- union members with generous health plans -- and to violate the president's campaign pledge not to raise taxes on people who earn less than $250,000 a year. The idea is also causing heartburn among House Democrats, who would prefer to finance an expansion of health coverage by imposing a surtax on the nation's wealthiest families.

Baucus is proposing a variety of other, much smaller tax changes that would reduce or eliminate tax deductions for other forms of health spending, such as flexible spending accounts. His plan would require companies for the first time to tell the IRS when they do business with corporations, a move that congressional tax analysts said would improve enforcement of existing tax laws, capturing an additional $17 billion over the next decade. And it would impose more than $93 billion in new fees on drugmakers, insurance companies, medical device manufacturers and laboratories.

Many Republicans oppose the fees, however, arguing that they would be passed on to consumers, increasing the cost of the very services the bill seeks to reduce.

The larger source of cash for the package would come, however, from projected savings in government health programs. Specific numbers were not immediately available, but aides said Baucus is proposing to reduce future payments to hospitals by about $155 billion, to nursing homes by around $40 billion and to other providers by smaller amounts. The Medicare Advantage program, in which the government pays private insurance companies to provide coverage to nearly one in five Medicare patients, would take a big hit, losing more than $100 billion over the next 10 years, aides said.

The package also would create an independent commission authorized to ensure that that those savings actually materialize. But critics worry that achieving those savings will require a potentially painful reduction in services to seniors, generating an outcry that could force Congress to backtrack.

"Basically, what you're talking about is going into the weeds of the health-care delivery in Medicare and, at the end of the day, that means less reimbursement" to providers, said Robert Moffitt, a health care expert at the Heritage Foundation. "Less reimbursement at a time when demand is increasing can't help but put the squeeze on benefits."

An independent commission might deflect some of that criticism, Moffitt said, but whether lawmakers could withstand it would be "a great experiment in political science."

In a statement, Sen. Kent Conrad (D-N.D.), a member of the "Gang of Six" senators who have been negotiating on health-care reform, called the Baucus plan "a very good start."

He said the proposal would expand coverage to 94 percent of Americans but would prevent illegal immigrants from benefiting from the expansion. "It also reforms the tax code, begins to address medical malpractice and prevents taxpayer dollars from being used to pay for abortions," he said, addressing Republican concerns.

"But we all know that, while this is a very good start, it is not a finished product," Conrad said. "That's why it's so important that we have an active amendment process both in committee and on the floor of the Senate. Colleagues from both sides of the aisle will have ample opportunity to further improve this already quality proposal."

The plan was also welcomed by fiscally conservative House Democrats in the 52-member Blue Dog Coalition. In a statement, Rep. Stephanie Herseth Sandlin (D-S.C.), a leader of the coalition, said the Baucus plan addresses two central goals of the Blue Dogs and the Obama administration: "It is deficit neutral, and it takes real steps to bring down the cost of health care over the long term."

Meeting those standards "is critical to reining in deficits and protecting our economy for future generations of Americans," she said. "I applaud Chairman Baucus and his colleagues in the Senate for their progress today and look forward to working together as we move to make health care reform a reality."

But the plan came under sharp attack from Gerald McEntee, president of the American Federation of State, County and Municipal Employees. He called on Democrats on the Senate Finance Committee to amend many of its key provisions.

"It's entirely unsatisfactory," McEntee said in an interview at the AFL-CIO convention in Pittsburgh. He cited the bill's lack of a public option and its reliance on revenue from an excise tax on high-cost insurance plans of the sort that many union members have. The tax would be passed on to employees in the form of higher premiums, he said.

"It will inevitably become a tax on benefits," he said. And without a public option, "there's no real competitive feature to go against the insurance companies," he said. "They're saying, 'We need a trigger; we need two or three years to find out what the insurance companies are going to do.' We already know what the insurance companies do."

McEntee objected above all to the political argument being made for why Democrats need to get behind the Baucus bill. While the bill was supposed to draw bipartisan support, he said, all signs suggest that at most one or two Republicans will back the bill.

"We worked like hell in the American labor movement to elect a Democratic president, a Democratic House, a Democratic Senate," he said. "The Democrats should make a stand, and amend the bill."

Staff writer Alec MacGillis in Pittsburgh contributed to this report.