Q+A: What are main points in Obama's healthcare reform plan?

WASHINGTON (Reuters) - U.S. President Barack Obama made a major address to Congress on Wednesday in which he outlined his plan to overhaul the country's $2.5 trillion healthcare system.

The speech was not the final word on a healthcare reform plan, versions of which are being considered in the House of Representatives and Senate, and it must pass both chambers before Obama can sign it into law.

Obama was still vague on key details, including how the overhaul would be paid for and how the government might offer a public insurance option to compete with private insurers and cover 46 million uninsured Americans.

Here are some questions and answers about the proposal, which Obama estimated would cost $900 billion over 10 years:

HOW WOULD IT BE PAID FOR?

Obama said the plan would not add to the U.S. budget deficit, but did not offer many specifics on how it would be financed.

He said it would be paid for by eliminating hundreds of billions of dollars in waste and fraud, as well as subsidies in Medicare that go to insurance companies. The rest of the cost would be covered by revenues from drug and insurance companies, Obama said, and the plan would charge insurance companies an unspecified fee for their most expensive policies.

It will include a provision requiring more spending cuts if promised savings do not materialize. It would create an independent commission of doctors and medical experts charged with identifying more waste in the years ahead.

DOES THE PLAN CREATE A PUBLIC OPTION?

It proposes a not-for-profit government-run healthcare insurance program to be part of new "insurance exchange" and compete with private insurers.

The public option -- which has been strongly resisted by insurance companies -- would be available only to those without insurance. Obama said less than 5 percent of Americans would sign up for it, based on Congressional Budget Office estimates.

The public option would not be taxpayer subsidized, and would have to be self-sufficient and rely on premiums it collects.

The insurance exchange, a marketplace where individuals and small businesses would be able to shop for health insurance, would take effect in four years. Obama said customers would benefit because they would bargain with insurers as a large group. The plan would provide need-based tax credits for those who could not afford insurance from the exchange.

WHAT DOES IT MEAN FOR INSURANCE COMPANIES?

The plan would make it illegal for insurance companies to deny healthcare coverage because a customer has a pre-existing condition, or to drop or water down coverage to those who get sick. Insurance companies would also be barred from placing annual or lifetime caps on coverage.

It would also limit how much Americans could be charged for out-of-pocket expenses and require insurance companies to cover, at no extra charge, routine checkups and preventive care like mammograms and colonoscopies.

But the plan would also greatly expand insurance companies' customer base by requiring individuals to carry basic health insurance. It would also require that businesses offer workers healthcare, or chip in to cover the cost for their workers. There would be a "hardship waiver" for those who still could not afford coverage, and 95 percent of small businesses would be exempt from the requirements.

WHAT HAPPENS BEFORE THE INSURANCE EXCHANGE STARTS?

Because it would be four years before the exchange starts, the government would offer low-cost coverage to those who cannot get insurance because they have pre-existing conditions, to protect them against financial ruin if they become seriously ill. Obama said that plan was proposed by Senator John McCain, his Republican rival in the 2008 presidential election.

DOES THE PLAN CAP MALPRACTICE SUITS?

Many Republicans have asked that Obama's healthcare plan limit or cap malpractice awards. Obama did not offer any such caps or limits.

He said he was proposing that "we move forward on a range of ideas," on malpractice suits. He said that his predecessor, Republican President George W. Bush, considered authorizing demonstration projects in individuals states to test ways to limit doctors' fears of lawsuits, and said he was directing his Secretary of Health and Human Services to move forward on that initiative.

(Editing by Andrew Quinn and Jackie Frank)