Sept. 22 (Bloomberg) -- Congress will likely complete a health-care bill within six weeks, and a measure being drafted by the Senate Finance Committee may provide the basis for final legislation, White House Budget Director Peter Orszag said.

“The goal would be, yes, over next six weeks or so, maybe sooner,” Orszag said in an interview as the finance panel headed by Montana Democrat Max Baucus began revising the measure, President Barack Obama’s top domestic priority.

Orszag praised Baucus’s $856 billion proposal, saying it “definitely” shows that “you can devise a health-reform bill that significantly expands coverage while doing so in a way that is not only deficit-neutral” but “deficit-reducing.”

Baucus’s plan would extend health care to most of the 46 million people who lack insurance and provide federal subsidies to help individuals buy coverage. About 25 million individuals would purchase insurance through exchanges, while Medicaid enrollment would grow by 11 million, according to the nonpartisan Congressional Budget Office.

Orszag signaled the administration doesn’t consider a government-run insurance program essential to the legislation. He suggested it would be sufficient to either create nonprofit insurance-purchasing cooperatives or set “triggers” to activate a public option if needed to cut costs.

More Competition

“The goal here is just to introduce more competition where competition is inadequate,” Orszag said. “Either one could work.”

Three House committees and one Senate panel already have approved health-care legislation. Baucus spent months trying to achieve a bipartisan compromise before releasing his plan without Republican backing on Sept. 16.

Obama has said he could accept a package of about $900 billion over 10 years. Orszag said he’s “confident” the Senate will pass a bill that’s “at least neutral” to the deficit.

Working today to defuse criticisms of his plan, Baucus agreed to shield some retirees and union workers in “high- risk” industries such as coal mining and firefighting from a tax on “Cadillac” insurance plans.

In Baucus’s original plan, he proposed a 35 percent excise tax on plans valued at $8,000 for individuals and $21,000 for family coverage. The tax is aimed helping cover costs of changes in the health-care system.

Cadillac Plans

The higher threshold for taxing Cadillac plans “is very modestly positive” for managed-care plans, said Matt Perry, a senior analyst at Wells Fargo Securities LLC in New York, in a note.

The new Baucus proposal reducing the penalty for not having insurance is “negative,” said Perry, who researches more than a dozen companies, including Minnetonka, Minnesota- based UnitedHealth Group Inc. and Indianapolis-based WellPoint Inc., the two largest U.S. health insurers.

The new formula for taxing Cadillac plans, keyed to the inflation rate with 1 percentage point added, means fewer plans will cross into the taxable range each year than under the original Baucus formula, which relied just on the consumer price index, Perry said.

The revision lifts the threshold for retirees and employees in high-risk industries to $8,750 for individual coverage and $23,000 for family coverage.

Baucus originally proposed a $215 billion tax on the high- value insurance plans as a way to raise revenue and discourage use of unneeded medical services.

Orszag said he “would be surprised” if modifications to the Cadillac provisions reduced revenue by more than the “low tens of billions.”

Revenue Expectations

Perry, at Wells Fargo, said that because the revised Baucus bill increases the tax rate on high-cost plans to 40 percent from 35 percent, “overall the tax will bring in nearly the same amount of revenue as before.”

On the economy, Orszag said there’s a “big wind” behind it from the $787 billion stimulus package and from inventory rebuilding. He estimated that 2 to 3 percentage points of this quarter’s growth was due to the stimulus.

Economists surveyed by Bloomberg News earlier this month forecast that gross domestic product will expand 2.9 percent in the third quarter after contracting by 1 percent in the second.

What happens in the coming quarters is critical as the impact of the government’s programs to promote recovery and the restocking by industry fade, Orszag said.

“The question is whether the economy will have enough escape velocity, whether the push from the recovery act and the inventory cycle is enough to jump-start the motor enough that consumer spending starts to pick up and business investment starts to pick up,” he said.

He cautioned against prematurely tightening budget policy, saying that was a mistake the U.S. made in 1937, and in the process pushed the economy back into recession.

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.netEdwin Chen in Washington at echen32@bloomberg.net

Last Updated: September 22, 2009 16:30 EDT