Congress back to wrestle with healthcare reform

WASHINGTON (Reuters) - After a week of holiday barbecues and hometown parades, the U.S. Congress returned to work Monday to face what could be the year's most severe test -- finding common ground on a huge and costly U.S. healthcare overhaul.

President Barack Obama's top legislative priority has made unsteady progress, with lawmakers struggling to meld five separate healthcare bills into versions that can pass the Senate and House of Representatives by the August 8 start of a month-long recess.

The proposals still face plenty of obstacles, with lawmakers trying to trim costs, find ways to cover a price tag of $1 trillion or more, and gather Republican support for a Democratic-backed government-run public insurance option to cover about 46 million uninsured Americans.

Congress returned from the weeklong Independence Day break with no clear resolution in sight on those and other issues that are at the heart of a long-sought comprehensive overhaul of the healthcare system.

"We are getting to the point where choices have to be made -- and choices are hard," said Len Nichols, director of the Health Policy program at the New America Foundation.

The drive for reform, knocked off stride earlier this year by estimates it would cost a staggering $1.6 trillion, regained some traction in the last two weeks as cost estimates for the two key Senate proposals were trimmed.

Senate Finance Committee Chairman Max Baucus, a key player in the negotiations, was upbeat after announcing before the holiday break that the panel had lowered the price tag to about $1 trillion over 10 years.

An increase in taxes to pay for the plan could carry heavy political consequences in a difficult economic climate. That increases pressure to scale back the proposal, analysts said.

LIMITING TAX INCREASES

"The issue is going to be getting a bill that looks affordable without a substantial increase in taxes," said Bob Blendon, a health policy and political analysis professor at Harvard University. "The lower the total cost, the less you are going to have to find the financing to do this."

Democrats, who control both chambers of Congress, also face difficult decisions on how to pay for reform, how to structure insurance subsidies for low-income Americans and soften the blow for the insurance and healthcare industries, and what the impact will be on Medicare -- the healthcare plan for the elderly.

Baucus has been working with the Senate panel's senior Republican, Chuck Grassley, to find compromises and build bipartisan support. But other Republicans have launched a steady torrent of criticism of the reform measures.

They have been particularly critical of plans for a government-run healthcare plan that would provide competition to private insurers, arguing the system could hurt the insurance industry and derail the long-standing employer-based insurance model used by most Americans.

"Americans want reform but they want the right reform, not a reform that ends up costing them more for worse care than they already receive," Republican Leader Mitch McConnell said in a Senate speech Monday.

"A government-run plan could force millions of Americans to give up the care they currently have and replace it with a system in which care is denied, delayed, and rationed," he said.

Obama has turned up the public pressure on Congress over healthcare in recent weeks and the administration is expected to take a more hands-on approach as lawmakers try to hammer out the final details of a package.

The president has called for Congress to pass legislation he can sign by the end of the year. Congressional leaders in both chambers hope to pass their versions by August so House and Senate negotiators can reconcile the two measures and win final approval by October or November.

"They need to have an outline of a bill by the summer recess. Then the debate can really begin in the fall," Blendon said.

(Editing by Vicki Allen; Washington newsroom, 202-898-8300)