White House sees healthcare reform this year

WASHINGTON (Reuters) - The Obama administration is optimistic about pushing through reforms to the U.S. healthcare system this year despite heavy opposition from Republicans in Congress, White House adviser David Axelrod said on Sunday.

Overhauling the $2.5 trillion U.S. healthcare system, by cutting costs and expanding coverage to the estimated 46 million Americans without health insurance, is President Barack Obama's top domestic policy priority.

But the Democratic-led Congress has struggled to craft reform legislation and most Republicans have fought it.

"I think we are going to have major reform this year," Axelrod told NBC's "Meet The Press" program. "The American people want us to do it and I think we are going to get it done."

Axelrod also said Obama believes a government-run insurance plan -- the so-called public option -- is an important part of healthcare reform.

"He said there must be an exchange where people can get insurance at a competitive price. He believes in competition and choice," Axelrod said.

"The public option is an important tool to help provoke that where there is no competition. He still believes that."

Still, the public option "should not define the whole healthcare debate," he added.

Obama, a Democrat, will lay out his plans for healthcare reform -- a key test of his presidency -- to wary lawmakers and an increasingly skeptical public in an address to a joint session of Congress on Wednesday.

The president will "draw some lines in the sand" in his speech, White House spokesman Robert Gibbs said on ABC's "This Week" program.

Gibbs also said Obama wants a public option included in the reforms but declined to answer a question about whether that provision was essential for the president to support healthcare legislation.

"GANG OF SIX"

Congress returns to session this week after a break in August marked by heated public meetings and heavy media coverage of the battle over the reforms.

Critics say the Obama plan is too costly and may hurt the insurance industry with unfair competition from the government, while conservative commentators have fanned fears of a state takeover of healthcare akin to socialism or communism.

A key Democrat in the Senate, Finance Committee Chairman Max Baucus, may try to end the stalemate with a proposal based on various suggestions and possible provisions discussed by committee members in recent months, Democratic aides said on Saturday.

Two aides said Baucus might present a proposal to "The Gang of Six" -- three Democrats and three Republicans who have struggled to find common ground -- before their meeting set for Tuesday.

Their effort may be the last hope for bipartisan healthcare legislation before Democrats are forced to decide whether to move forward without significant Republican support.

(Editing by John O'Callaghan and Eric Beech)