Oct. 29 (Bloomberg) -- U.S. House leaders today plan to unveil legislation that would create a government-run health- insurance program, require employers to offer coverage to their workers and impose a new tax on the wealthiest Americans.

The legislation comes after three months of negotiations by House Democrats and represents the most sweeping changes to the nation’s health-care system since the 1965 creation of the federal Medicare program for the elderly. The measure would overhaul the insurance market, encourage greater use of preventive medicine and help Americans buy coverage.

“We think we’ll have the votes,” said California Representative George Miller, who runs the House Education and Labor Committee, after meeting with fellow Democrats yesterday. Formal debate is planned for next week, Miller said.

Lawmakers said House Speaker Nancy Pelosi agreed to a compromise over one of the most divisive issues facing Congress -- the establishment of the government insurance program to compete with private insurers try to and drive down costs.

Lacking votes for a program that would tie the program’s reimbursements to doctors to the lower rates paid by Medicare, Pelosi settled on a plan that would instead negotiate rates with providers, as private insurers do, lawmakers said.

Obstacles Ahead

Pelosi’s office scheduled a news conference for this morning in Washington to announce the legislation. The measure would cost $894 billion over 10 years and extend coverage to 36 million uninsured Americans, according to a preliminary Congressional Budget Office estimate, House Democrats said.

The campaign to revamp the health system still faces major hurdles. The Senate is also considering legislation, and Majority Leader Harry Reid is struggling to reach consensus on a host of issues including a public option that would allow states to opt out of the program.

If both the House and Senate pass their own versions of the bill, lawmakers must work together on a compromise before a new round of votes, a process that may take months.

The House measure, which lawmakers said the Congressional Budget Office estimated will cost less than $900 billion over 10 years, is the product of work done by three committees and White House officials. President Barack Obama has made health care his top domestic priority and said he wants to sign a bill into law by the end of the year.

Legislative Goals

The legislation aims to extend coverage to tens of millions of uninsured Americans while curbing rising medical costs and cutting hundreds of billions of dollars in spending. Proposals in both the House and Senate would require all Americans to get insurance, creating purchasing exchanges and increasing government aid to help lower-income Americans.

The measures also encourage greater use of preventive care, electronic records and research on the effectiveness of treatments. Under all the plans, insurers would have to accept new clients, regardless of preexisting conditions.

Miller said House leaders favor an expansion of the government Medicaid program for the poor, which could cost the federal government less than providing subsidies to help people buy insurance. The plan would expand eligibility to people whose incomes are 150 percent of the official poverty level, a congressional aide said, up from 133 percent in the original House proposal.

House lawmakers have also backed a requirement that employers offer insurance or pay a penalty. That is a subject of debate in the Senate, where the health committee included a mandate and the finance panel rejected it.

Millionaire Tax

To finance the bill, House Democrats plan a surtax on couples who make more than $1 million a year. Leaders are also planning fees on medical-device makers that will add up to $20 billion over 10 years, according to another congressional aide. The Senate has proposed $40 billion in fees on device makers, as well as levies on drugmakers and insurers.

Pelosi said in an Oct. 21 interview with Bloomberg Television that the measure has more than $500 billion in savings. Lawmakers said that comes in part from reducing fraud in Medicare and from initiatives such as electronic records.

Democrat Marion Berry of Arkansas, a member of the self- described fiscally conservative Blue Dog Coalition, said he still hasn’t decided if he’ll support the overhaul because he wants to see the changes in the bill. He said his biggest concern is how the plan is paid for.

“I don’t think we’re getting near enough out of the drug companies and the insurance companies,” he said.

Republican Opposition

In the Senate, Reid has been melding legislation passed by the health committee in July with an $829 billion plan approved by the finance panel on Oct. 13. The health panel included a public option; the finance committee rejected it.

The public option is opposed by Republicans and some Senate Democrats, who say it would undermine the market for insurance dominated by such companies as Indianapolis-based WellPoint Inc. and Hartford, Connecticut-based Aetna Inc.

Connecticut Senator Joseph Lieberman, an independent who organizes with the Democrats, said he will oppose the public option. At least four Senate Democrats have criticized the idea and won’t commit to backing their party.

Two Maine senators seen as possible supporters of health- care legislation, Republicans Olympia Snowe and Susan Collins, said they won’t support a public option. Snowe favors a plan to trigger the program if the private market fails to lower costs.

To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.net; Kristin Jensen in Washington at kjensen@bloomberg.net

Last Updated: October 29, 2009 10:29 EDT