Published: Monday, 26 Oct 2009 | 5:05 PM ET

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U.S. Senate Democratic leader Harry Reid said Monday the Senate's sweeping healthcare reform bill would include a government-run insurance plan that lets states opt out of participation if they choose.

Reid said he would send the bill, which combines two pending Senate measures, to the Congressional Budget Office for a cost analysis and begin Senate debate on the measure as soon as the analysts report their findings.

"As soon as we get the bill back from CBO and people have a chance to look at it ... I believe we clearly will have the support of my caucus to move to this bill and start legislating," Reid said.

The Senate healthcare bill is the result of more than a week of negotiations between Reid, other Senate Democrats and White House officials, who merged two bills passed by Senate panels into one piece of legislation.

Reid did not say whether he had the 60 Senate votes needed to pass a healthcare reform bill that includes the government-run plan, a flashpoint in the raging debate over President Barack Obama's top domestic priority.

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President Barack Obama said he was pleased the Senate has included a public option for health insurance coverage, the White House reported Monday.

Obama and liberals support the public option as a way to increase competition in the insurance market, but critics call it a government takeover that would hurt private industry.

About a dozen moderate Democrats have voiced concerns about a public option. Reid needs them all to pass the bill in the Senate, where Democrats control exactly 60 votes.

Reid said Senator Olympia Snowe, the only Republican to support any of the pending healthcare measures in a committee vote, did not support the public insurance option.

"So we'll have to move forward on this, and there comes a time, I hope, where she sees the wisdom of supporting a healthcare bill," he said.

Obama has pushed for a sweeping overhaul of the $2.5 trillion healthcare system with a goal of reining in costs, expanding coverage to millions of uninsured and barring insurers from denying coverage for pre-existing conditions or dropping coverage for the sick.

But the reform measures have bogged down in the U.S. Congress, where Republican critics criticized the cost at a time of expanding federal deficits and Democratic leaders have had trouble winning over party moderates concerned by the price tag and the cost for lower-and middle-income consumers.

At their core, the legislation would expand coverage to millions who lack it; ban insurance industry practices such as denying coverage because of pre-existing medical conditions; and rein in the growth in health care costs nationwide.

Nominally, the majority leader is melding bills passed by the Senate Finance Committee and the Senate Health, Education, Labor and Pensions Committee earlier this year. But in reality, he has a virtual free hand to craft a new bill in his discussions with the chairman of the two panels and top White House aides.

Any measure would need 60 votes to overcome a threatened Republican filibuster. Given skepticism expressed by some moderates, it was not clear whether Reid yet had the votes to prevail. Once the measure reaches the floor, further changes are always possible.

While the controversy over government-run insurance is the most intense, there are numerous other issues to be settled before legislation can win passage.

Officials said over the weekend that Reid did not intend to require large companies to provide insurance for their workers. But any that don't will be liable for large fines if any of their employees qualified for government subsidies to handle the expense of private coverage.

Individuals would be required to purchase insurance, with exemptions for individuals and families who could not find affordable coverage.

Obama has set a $900-billion, 10-year price tag for the legislation, and the program would be funded through cuts in future payments to Medicare providers and higher taxes -- an income surcharge on million-dollar earners in the House and a new levy on high-cost insurance policies in the Senate.

Organized labor has strongly opposed taxing insurance policies, fearful that union members would be disadvantaged. But the head of the AFL-CIO, Richard Trumka, seemed to indicate new flexibility on the issue in a conference call with reporters.

"If you show me a definition of a Cadillac plan that hits the Cadillac plans and not the middle class, then we'd take a look at that, of course," Trumka said. "If you wanted to tax the Goldman Sachs plans, I think that's fine," he said.

Advocates of the tax say it is one of the most effective ways of restraining the overall cost of health care, a key goal of Obama's.

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