Oct. 26 (Bloomberg) -- Congressional Democrats are counting and recounting to 60 as the House and Senate prepare to release their plans to overhaul the U.S. health-care system.

While House Speaker Nancy Pelosi refines her legislation, Senate Majority Leader Harry Reid is still pushing for consensus among the 60 senators in his Democratic caucus on how best to insure more Americans and curb rising medical costs. Both are likely to produce bills this week.

Each senator has assumed added importance as Reid wrestles with whether to require employers to insure workers and how to pay for the legislation. He’s leaning toward including a government-run insurance program, or public option, which would risk losing support from Republican Olympia Snowe and maybe some Democrats.

“I made it clear,” Nebraska Senator Ben Nelson said of his talks with Reid last week. Instead of a national program, Nelson said there should be “a state-based public option, the nature of which would be determined by the states.”

Spurred by President Barack Obama, lawmakers are weighing the biggest health-care changes since the creation of Medicare in 1965. Versions in both the House and Senate would cost more than $800 billion over 10 years, require all Americans to get insurance, and create new online purchasing exchanges and subsidies to help lower-income Americans afford coverage.

Most Divisive

The idea of a public option to compete with private insurers such as Indianapolis-based WellPoint Inc. has been the most divisive issue. Republicans and some Democrats say it would undermine the market; supporters say it’s the best way to bring costs down.

Senator Charles Schumer, a New York Democrat who sits on the finance and banking committees, said Reid is tilting strongly toward proposing a public option that would allow states to decline to participate if they choose.

“The liberals, they’d like it stronger, but they are willing to live with” the opt-out provision, Schumer said yesterday on NBC’s “Meet the Press” program. “The more moderate Democrats -- there are some who actually like it.”

Schumer said Senate Democrats are close to having 60 votes to ensure passage of the legislation.

‘Extremely Concerned’

Senator Mary Landrieu, a Louisiana Democrat who has voiced misgivings about a public option, said after meeting today with Reid that she’s optimistic a compromise can be reached.

She told Reid that “a number of moderates still were extremely concerned about a government-run, taxpayer-funded, national public plan,” Landrieu said in a statement. “However, I am encouraged that the conversations taking place over the past week among senators who back different versions of a public option could potentially lead to a compromise.”

Republican Senator John McCain of Arizona said health-care legislation will probably pass in Congress. “I think that the Democrats have the votes,” McCain said on CBS TV’s “Face the Nation” yesterday.

“The Democrats are very aware that they don’t want a repeat of the Clinton failure in 1994,” McCain said, referring to the collapse of a health-care overhaul pushed by then- President Bill Clinton’s adminitration. “So I think it’s likely they will get something through.”

Senate Democrats, meanwhile, are likely to drop plans for a mandate that all employers offer insurance to workers or pay a penalty, according to a person familiar with the negotiations. Instead, companies with 50 or more employees would be subject to penalties if they don’t provide coverage and have workers who buy their own policies through taxpayer- funded subsidies.

Penalties to Multiply

The penalties would be as high as $750 multiplied by the number of full-time workers at a company, the person said. This differs from a plan adopted last month by the Senate Finance Committee, which had penalties of as much as $400 per worker.

The Senate measure would also include a mandate that all Americans have health coverage, and face penalties if they don’t, the person said.

In the House, the question has been how to structure the public option, not whether to include one. Pelosi has pushed for what she calls the most “robust” version, a plan that would peg its provider reimbursements to 5 percent above the rates paid by Medicare, the government program for the elderly.

That’s a nonstarter with Senate Democrats including North Dakota’s Kent Conrad, who says those rates are too low and would bankrupt hospitals in his state.

Snowe Says No

In the Senate, 60 votes are often needed to bring major legislation to the floor. Snowe said she wouldn’t vote to start debate if a health-care measure included the immediate creation of a public option.

The Senate is considering a public program that would have to negotiate rates with providers, as private insurers do, likely resulting in higher reimbursements. There are other compromises, including Snowe’s plan to trigger a public option if there isn’t enough affordable insurance on the market.

Snowe’s vote is crucial because Democrats such as Nelson say they won’t back a bill that has no Republican support. Snowe might also bring along Republicans such as fellow Maine Senator Susan Collins.

Reid spent most of Oct. 23 calling senators to gauge support after a week of discussions with White House officials, committee chairman and wavering lawmakers.

‘Long Ways to Go’

“The bill could be fixed and substantially improved, but it has a long ways to go,” Collins said last week, citing concerns about small businesses and affordability.

Collins and Nelson said they wouldn’t rule out joining most Republicans to block debate on the legislation. Nelson said he and Snowe told Reid last week many of their colleagues are also concerned about a mandate on employers.

Three House committees and two Senate panels approved versions of the legislation, leaving Reid and Pelosi to combine the bills. Each chamber has to debate and vote, then join together on a compromise version for a new round of votes.

Reid is melding a measure passed by the Senate health committee in July with an $829 billion proposal approved by the finance panel on Oct. 13. The health committee included a public option and a requirement that employers offer insurance; the finance panel rejected both provisions.

All the measures restrict insurers’ ability to deny people coverage and encourage preventive care, electronic records and research on the effectiveness of treatments. The thornier questions will be thrashed out in a House-Senate conference.

Pelosi said she’s talking to colleagues about what legislation would be best to bring to the House-Senate conference. The Congressional Budget Office’s preliminary estimate of the House measure puts the cost of expanding health-insurance coverage to 95 percent of Americans at $871 billion.

“This is about the end-game now,” Pelosi said at an Oct. 13 Washington news conference.

To contact the reporters on this story: Kristin Jensen in Washington at kjensen@bloomberg.net; Laura Litvan in Washington at llitvan@bloomberg.net

Last Updated: October 26, 2009 12:35 EDT