Sept. 25 (Bloomberg) -- Democrats will step up their challenge to Senate Finance Committee Chairman Max Baucus’s health-care-overhaul plan next week, the opening salvo in a larger fight over the shape and scope of final legislation.

Senators Charles Schumer of New York and Jay Rockefeller of West Virginia will push for a government-run insurance plan to compete with private insurers such as Indianapolis-based WellPoint Inc. While four other congressional panels have adopted that “public option,” Baucus, a Montana Democrat, has endorsed more limited health cooperatives instead in a bid to draw Republican support, antagonizing members of his own party.

“It will be a big fight all the way down to the wire,” Schumer, a member of the Democratic leadership, said last night in an interview. “The health-care bill that will be signed by the president will have a good, strong, robust public option.”

While the lawmakers had planned to raise the issue today, Baucus pushed the debate over that amendment and the health- care overhaul into next week.

“It’s an extremely important amendment,” he said today. “We don’t have time to get into all that, but we will get into that Tuesday,” he said of the public option.

Contentious Issue

The public option is the most contentious element of President Barack Obama’s effort to lower costs and expand coverage to tens of millions of uninsured Americans, and the dispute will dominate committee action. Republicans say a government-operated competitor would drive many private insurance companies out of business.

Baucus has yet to secure Republican support, though he has come closer than any of the other panel chairmen to drafting a bipartisan measure and has won praise from the White House. He’s also thwarted challenges to his bill from both parties during his committee’s debate on the legislation this week.

When the panel will finish its work is in question. Senator Olympia Snowe of Maine -- Baucus’s most likely Republican supporter -- is joining other Republicans in demanding that the Congressional Budget Office complete an assessment of the final bill’s cost before the panel votes. She said in an interview today that a vote would be unlikely until after next week if such an analysis is ordered.

“It’s the chairman’s decision,” Snowe said of the CBO assessment. “I just hope it’s the right one. It’s essential to the integrity of the process.”

‘Weaker Health Plan’

On the public option, Schumer and Rockefeller each intend to introduce amendments that would include a public option in the finance committee bill. Rockefeller said including a federally backed insurance alternative was crucial to bringing down costs.

“A health-care plan without a public option is a much weaker health plan because insurance companies continue to rule,” Rockefeller said in an interview.

He said a public plan would help keep costs down because it wouldn’t need to make a profit or spend money on marketing. “That’s going to force other companies to bring down costs over time,” he said.

Schumer said that in 40 states, two insurance companies have more than half the market share. “It’s very, very important to have a competitor” for insurers, he said.

Support From Caucus

He said he was confident he and other “progressives” would prevail in the end on the public option, even if their amendments fail in the finance committee. The overall Senate Democratic caucus is more supportive of a public option than some party members on the finance panel, he said.

The finance committee consists of 13 Democrats and 10 Republicans.

Baucus’s staff has estimated that after the changes to his bill this week, the measure will cost $900 billion over 10 years and reduce the federal budget deficit by $23 billion.

Baucus yesterday fended off Democratic amendments that would have torpedoed a deal he made with drugmakers. A Republican proposal to kill a commission designed to set payment rates for the Medicare program for the elderly was defeated earlier this week.

His victories in defending his proposal may bode well for final passage by the committee and lessen the chance that medical industries would organize to defeat it. Still, Baucus has faced criticism from Democrats for wooing Republicans, most of whom have responded to his efforts by attacking the proposal.

‘Too Much Money’

Senator John Cornyn, a Texas Republican, told reporters the plan “spends too much money, borrows too much money and cuts too much out of Medicare benefits.”

In one of the livelier debates yesterday, Baucus helped defeat a proposal by Senator Bill Nelson, a Florida Democrat, that would have required drugmakers to provide $106 billion in rebates over 10 years. The amendment would have overridden an $80 billion agreement Baucus reached with the industry in June.

“This might undermine our ability to pass comprehensive health-care reform this Congress,” said Senator Thomas Carper, a Delaware Democrat. He and Democratic Senator Robert Menendez of New Jersey, whose state is home to drugmakers including Merck & Co. of Whitehouse Station, joined Baucus and panel Republicans in voting against the amendment.

Legislation passed by three House committees is now being melded together. While all three contain the public option, lawmakers are debating whether to require the new program to negotiate rates with providers, as private insurers do, or peg them to the lower levels paid by Medicare.

The Blue Dog Coalition of fiscally conservative Democrats is pushing the requirement for negotiated rates. House Speaker Nancy Pelosi, a California Democrat, said yesterday pegging the rates to Medicare is the best way to cut costs.

“Where else would we go to bend the curve and pay for the legislation?” she said during a news conference in Washington.

To contact the reporters on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.netKristin Jensen in Washington at kjensen@bloomberg.net

Last Updated: September 25, 2009 13:01 EDT