June 8 (Bloomberg) -- A group of Senate Republicans sent a letter to President Barack Obama declaring their opposition to including a government-run plan in a health-care overhaul, saying it would be a “federal government takeover” of the health system.

“Creating a brand-new government program will not only worsen our long-term financial outlook but also negatively impact American families who enjoy the private coverage of their choice,” said the letter from nine Republicans who are working on bipartisan health-care legislation.

The senators include Charles Grassley of Iowa, the top Republican on the Senate Finance Committee, and Mike Enzi of Wyoming, the ranking Republican on the Senate’s health panel.

Obama said last week in a letter to Senate Democrats that he “strongly” supports offering a government-run insurance program to compete with private coverage. Democrats in the House and Senate have said such a program will be included in their legislation.

The question of whether to have a public plan is emerging as the most divisive issue between the political parties. Senate Finance Committee Chairman Max Baucus, a Montana Democrat, has said he wants a bipartisan compromise on the “public option” that can attract Grassley’s support.

Meet This Week

Baucus, Grassley and others will meet this week to continue working to draft legislation. All House Democrats will be briefed tomorrow night about the possible contents of House legislation that three committees will consider later this month.

Democrats, who control the House and Senate, are considering proposals that would require employers to cover all full-time workers or pay a penalty; mandate that almost all Americans have health insurance; create a “health exchange” to allow consumers to buy insurance at lower, group rates; set up a government-run plan; and levy taxes to pay for universal coverage.

The letter to Obama was signed by all Republican members of the Senate Finance Committee, with the exception of Senator Olympia Snowe of Maine. Snowe has said she wants to find a middle ground on the government-plan issue.

Public Option

The signatories argued that creation of a so-called “public option” will undermine private insurers and eventually limit provider and treatment choices for consumers.

“Washington-run programs undermine market-based competition through their ability to impose price controls and shift costs to other purchasers,” they wrote. “Forcing free- market plans to compete with these government-run programs would create an unlevel playing field and inevitably doom true competition.”

The Republican senators said they want to seek common ground on other matters.

“We have a real need for reform and an opportunity on behalf of the American people to get it done,” they said. “If we are responsible in our policy approaches and strive for true bipartisanship, we can get meaningful reform done this year.”

To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net

Last Updated: June 8, 2009 11:13 EDT