US Senate Democrats look for healthcare compromise

(For full coverage of healthcare reform, click on [nN20512341])

* Senate begins talks to merge two healthcare bills

* Government-run insurance option a key sticking point

* House of Representatives also aims for single bill

By John Whitesides and Donna Smith

WASHINGTON, Oct 14 (Reuters) - Democrats in the U.S. Senate began a difficult hunt on Wednesday for common ground on healthcare reform, seeking to bridge party differences on how to cut costs and extend coverage to millions of people.

Democratic leaders opened talks on ways to merge two proposals on the health overhaul while keeping party liberals, moderates and key Republican Senator Olympia Snowe happy.

Snowe became the first Republican in Congress to support a Democratic healthcare reform plan when she voted for the bill in the Senate Finance Committee on Tuesday.

Her support gave a lift to President Barack Obama's drive for healthcare reform, his main domestic priority, but Democrats were still divided on an approach that could win the 60 votes needed for Senate approval.

Snowe warned that her continued backing would depend on how the bill changes as it makes its way through Congress.

"I thought that this was a good place to start," she said on ABC's "Good Morning America" show. "I decided to set aside my own differences and try to see what was right for the country."

One of the biggest difficulties in the merger of the finance panel's bill with one approved by the Senate health committee will be the government-run "public" insurance option.

The public option, backed by Obama and liberal Democrats as a way to create competition in the insurance market, is included in the health bill but not the finance bill. Three Democrats voted against the plan in the Finance Committee, but the fight will be renewed in the full Senate.

"That's going to be an uphill lift, but who knows what the dynamic will be that will set in," Democratic Senator John Kerry, a supporter of a public plan, said of its chances in a full Senate vote.

OTHER DIFFERENCES

Other differences to be hammered out in the bills include whether to require employers to provide health insurance and the level of subsidies offered help lower- and middle-income people buy health insurance.

Democratic leaders in the House of Representatives also are trying to develop a single bill from three separate House healthcare measures as the debate over Obama's top domestic priority moves to a bigger stage.

The insurance industry, labor unions and other outside groups have cranked up their opposition to the Finance proposal ahead of the debates expected in the full Senate and House in the next few weeks.

Obama has set the end of the year as his goal for passage of a reform measure that would begin to slow increases in healthcare costs, regulate the insurance market and expand health coverage without increasing the budget deficit.

The White House was to send a team of five led by Chief of Staff Rahm Emanuel to the Capitol for the Senate negotiations on Wednesday. Senate Democratic leader Harry Reid, Finance Committee Chairman Max Baucus and Chris Dodd of the Health panel were to attend from the Senate.

Obama and Senate Democrats have wooed Snowe for months, hoping she could be a swing vote in the Senate -- where Democrats control 60 votes, the exact number needed for passage -- and even bring along one or two Republican colleagues.

Susan Collins, her fellow Republican moderate from Maine, issued a statement saying the Finance committee measure was a big improvement on the Health committee's plan and the House bills but still "falls short." However, she offered hope for Democrats, that she might come on board.

"I am hopeful that many improvements will continue to be made to produce a bill that can achieve bipartisan support," she said.

(Editing by Vicki Allen)