* Democrats cite CBO report to bolster public option
* Senators meet to find bipartisan solution
By Donna Smith
WASHINGTON, July 27 (Reuters) - Democrats in the U.S. House of Representatives pounced on a congressional budget report to promote their plan for a government-run health insurance option on Monday, as party leaders said they were closer to agreement on healthcare reform.
The analysis by the nonpartisan Congressional Budget Office said a government-run health insurance plan proposed by Democrats would not drive private insurers out of business, and most people would still choose to get their medical coverage through their employers.
The public option proposed by House Democrats has come under heavy fire from Republicans who say it will devastate the private insurance industry.
"We're moving closer to a point where we can hold insurance companies accountable," House Speaker Nancy Pelosi told reporters, repeating her frequent prediction that once a bill hits the floor "it will win."
She declined to predict, however, whether the full House would be able to take a vote on the legislation before it leaves for a monthlong August recess, saying "we're good to do it now or to do it whenever."
President Barack Obama's drive for healthcare reform has slowed in the Senate and House, both controlled by his fellow Democrats, amid criticism from all sides about the cost, scope and funding of the more than $1 trillion measure.
Democrats in the House have argued over reining in the proposal's costs, while Republicans in both chambers have slammed the measures as an expensive first step toward a government takeover of healthcare.
A bipartisan group of senators on the Finance Committee resumed their deliberations on Monday night, searching for an agreement to move the reform plan forward in that chamber.
The legislation is designed to control costs, improve care and expand health insurance coverage to most of the 46 million uninsured Americans.
The House plan includes the government healthcare option.
The CBO report estimated only about 10 million to 11 million people would sign up for the public option by 2019, far fewer than the 83 million cited in another analysis by the Lewin Group. The Lewin Group is part of Ingenix, a wholly-owned subsidiary of UnitedHealth Group (UNH.N).
The CBO report also estimated that about 12 million people who otherwise would not be enrolled in employer-based plans would fall under the Democratic proposal because the mandate for individuals to be insured would increase workers' demands for employer-based insurance.
Republicans often cite Lewin Group analysis to make their point that millions of people would lose their current health coverage if the proposed overhaul became law. But the CBO disputed the Lewin Group conclusions.
"For several reasons, we anticipate that our estimate of the number of enrollees in the public plan would be substantially smaller than the Lewin Group's, even if we assumed that all employers would have that option," CBO said.
Pelosi and other Democratic leaders said their bill would move the healthcare system in a new direction after years of "immoral" profits by insurance companies.
The insurance industry sharply rejected the accusation.
"For every dollar our country spends on health care, less than one penny goes towards health plans' profits. In order to make health care more affordable for families and small businesses, we need to focus on the other 99 cents," said Richard Zirkelbach, a spokesman for America's Health Insurance Plans, which represents the industry.
The No. 3 health insurer Aetna Inc (AET.N) slashed its full-year earnings forecast on Monday because of higher-than- projected medical costs, sending its shares down more than 5 percent. The health insurer also posted a 28 percent drop in second-quarter net income.
The CBO said some doctors and other health providers would choose not to participate in the government plan, discouraging some people from enrolling in it despite premiums that would be about 10 percent lower than in the private sector.
The latest CBO analysis also said the healthcare reform proposal would increase budget deficits in the long run even though a proposed new tax on millionaires would help cover costs over the next decade.
"When you find yourself in a hole, the first rule is to stop digging," Representative David Camp, the top Republican on the House Ways and Means Committee, said in a statement. "If they can't stop digging, for the good of the nation they should at least get a smaller shovel." (Additional reporting by John Whitesides and Jackie Frank; Editing by Paul Simao; Washington newsroom +1 202-898-8300)