Sen. Max Baucus unveils his healthcare overhaul plan

Senate Finance Committee Chairman Max Baucus (D-Mont.) released the crucial moderate alternative Wednesday in the struggle to refashion America’s healthcare system, a $856-billion bill that includes a mix of sweeping new insurance regulations but no government-run plan.

Under his proposal, nearly everyone would be required to get coverage or pay a penalty. Insurers, in turn, would not be able to deny policies to people with preexisting medical conditions or to cancel coverage after people got sick. And the federal government would provide hundreds of billions of dollars in subsidies to help lower-income people buy coverage.

The legislation fell short of Baucus’ goal of charting a course that could bring Republicans and Democrats together for the most ambitious overhaul of the health system since the 1960s.

Three key GOP lawmakers who had been working with Baucus for months have rejected his bill. The proposal also drew fire from liberals who insist that any overhaul must contain a “public option” insurance plan administered by the government.

But the Baucus plan still could serve as a template for a final Senate bill because it was designed to attract moderate and conservative Democrats.

“There are some on both sides of the aisle that think I’ve gone too far,” Baucus said in a news conference.

“This is . . . an effort to get balance again,” he added. “It’s an effort to get a bill that can pass.”

He called it “probably one of the largest pieces of social legislation in American history since the Depression.”

Responding to widespread concern about the effect on the federal budget deficit, Baucus produced a bill that would cost significantly less than a $1-trillion-plus version pending in the House. It would also impose less-stringent requirements on business.

All of that drew praise from centrist Democrats whose support has been elusive, especially those from relatively conservative states.

“It’s a strong step in the right direction,” said Sen. Mary L. Landrieu (D-La.).

But liberals argued Wednesday that the Baucus bill did not provide generous enough subsidies for families of modest means and did not stop insurance companies from charging exorbitant premiums.

“I continue to be concerned about affordability for hardworking, middle-class families,” said Sen. Ron Wyden (D-Ore.). “A lot of them can’t get by now. And the prospect of paying significantly more . . . or being penalized -- that is not going to meet their test of healthcare security.”

Baucus’ plan would not go as far as other leading proposals toward reducing the ranks of the uninsured. According to a preliminary analysis by the Congressional Budget Office, the bill would leave about 25 million people without insurance, compared with 17 million under the House version.

Nor was there much evidence that establishing nonprofit cooperatives -- Baucus’ alternative to the public option in legislation proposed by the House and by the Senate health committee -- would work to compete with private insurers and bring costs under control.

The cooperatives “seem unlikely to establish a significant market presence in many areas of the country,” the nonpartisan budget office concluded.

The Baucus legislation, like the other two health bills, was designed to largely preserve the current system of employment-based health coverage. Layered on top of that system, the legislation would create highly regulated, state-based insurance marketplaces, or exchanges, where millions of people who do not get coverage from their employers or from the government would be able to shop for insurance.

These people would be able to select from a range of private insurance plans, as well as one potentially offered by a member-owned cooperative.

Despite major concessions, the bill did not win the endorsement of a single Republican -- not even Sen. Olympia J. Snowe of Maine, one of the bipartisan group of six finance committee members who met for months to discuss the bill.

Snowe called the bill a “step in the right direction,” but said that she was still worried that it would be too costly to the government and consumers, and that it did not do enough to ensure a competitive insurance market.

Most other Republicans were far less charitable.

“This partisan proposal cuts Medicare by nearly a half-trillion dollars, and puts massive new tax burdens on families and small businesses, to create yet another thousand-page, trillion-dollar government program,” said Senate Republican leader Mitch McConnell of Kentucky.

“Only in Washington would anyone think that makes sense, especially in this economy,” he added.

Baucus’ bill would substantially expand eligibility for Medicaid, the federal-state insurance program for the poor. Under all of the Democratic bills, Medicaid would be opened to America’s poorest residents, regardless of their family status. In some states, the program now covers only poor children and their families.

Provisions in Baucus’ bill also would set up a series of initiatives to make Medicare more efficient, including incentives for hospitals to reduce readmissions and for doctors to do more to coordinate their patients’ care.

And in a bid to satisfy the business community, Baucus significantly weakened requirements on employers to provide insurance.

Whereas the House bill threatened businesses with annual payrolls above $750,000 with a penalty of as much as 8% of their payroll if they did not provide insurance, Baucus capped any penalty to $400 per worker for businesses with more than 50 employees.

Baucus’ bill also places no requirement on businesses to pay a minimum percentage of the cost of their workers’ premiums. The House bill requires employers to pay 72.5% of the insurance premium for workers with individual policies and 65% for workers with families.

To help pay for his bill, Baucus has proposed a series of excise tax on insurance plans worth more than $8,000 for singles and $21,000 for families, and new fees on insurers, drug makers, device makers and clinical labs.

In contrast, House Democrats’ healthcare legislation relies heavily on a surtax on high-income taxpayers.

The completion of Baucus’ bill marks the end of one phase of a healthcare debate in which senior Democrats developed three proposals -- one in the House and two in the Senate. Now, Democratic leaders on Capitol Hill will work to unify their party behind a final bill that could pass Congress and make it to President Obama’s desk.

“We worked to build a balanced, common-sense package that ensures quality, affordable coverage and doesn’t add a dime to the deficit,” the Montana senator said. “Now we can finally pass legislation that will rein in healthcare costs and deliver quality, affordable care to the American people.”

In the White House, reaction to the plan was low-key. Press Secretary Robert Gibbs called it “an important building block” that gets the country closer to a comprehensive healthcare overhaul.

Still, Obama did his part to keep peace in the Democratic family: He met with Sen. John D. Rockefeller IV (D-W.Va.), a senior member of the finance committee who has complained that the White House seemed to be willing to make any concession to get some kind of bill passed.

After the meeting, Rockefeller said he was convinced of Obama’s commitment to a strong bill, but reiterated his view that he could not support Baucus’ proposal without major changes.

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noam.levey@latimes.com

janet.hook@latimes.com