WRAPUP 5-U.S. House takes new step with healthcare bill

(For full coverage of U.S. healthcare reform, click [nN20512341])

* House Democrats unveil healthcare reform bill

* Bill draws Republican critics, some Democratic doubts

* Cost, size of bill sparks fresh political battle (Adds reaction to spending estimates, details)

By John Whitesides and Donna Smith

WASHINGTON, Oct 29 (Reuters) - Democrats in the U.S. House of Representatives unveiled a sweeping healthcare overhaul on Thursday that would transform the insurance market, create a government-run insurance plan and levy new taxes on the rich.

Weeks of closed-door talks to merge three House healthcare plans produced a 1,990-page bill that drew cheers from President Barack Obama but sparked an immediate fight with Republicans over its cost and size.

"Today we are about to deliver on the promise of making affordable, quality health care available for all Americans," House Speaker Nancy Pelosi said in a ceremony on the steps of the U.S. Capitol.

The bill's release was another step forward in Obama's drive for a healthcare overhaul that reins in costs, reforms the insurance industry and expands coverage to many of the 46 million uninsured living in the United States.

Obama has made reform of the $2.5 trillion healthcare industry, which constitutes one-sixth of the economy, his top domestic priority.

The bill was met with unanimous opposition from Republicans and grumbling from some Democrats. Party liberals had sought a stronger public insurance option and party moderates want assurances that federal funds will not be used to pay for abortions under the measure.

The legislation could be debated in the House as soon as next week. The Senate is putting together its own version, and the House and Senate bills eventually must be combined before being sent to Obama for his signature.

The nonpartisan Congressional Budget Office said the measure would cost a net $894 billion over 10 years -- just below Obama's target of $900 billion -- and reduce the deficit by $104 billion over the same period.

But Republicans highlighted the CBO's estimate that the bill's health coverage would cost a gross $1.055 trillion, and a public insurance plan would "typically have premiums that are somewhat higher than the average premiums for the private plans in the exchanges."

'1,990 PAGES OF BUREAUCRACY'

"Tell me how we're going to fix our healthcare system with 1,990 pages of bureaucracy," said House Republican leader John Boehner, who urged Democrats to slow down the process and allow a full floor debate.

"This huge bill is designed to be so complex that nobody would ever know for sure what's in it," he told reporters.

Obama praised the bill's insurance industry reforms and said he was pleased it featured a public insurance option and was fiscally responsible.

"The House bill clearly meets two of the fundamental criteria I have set out: it is fully paid for and will reduce the deficit in the long term," he said in a statement.

The House bill would expand coverage to 36 million uninsured people living in the United States, the CBO said. It would offer subsidies to help the uninsured purchase insurance through newly created exchanges.

It requires individuals to buy insurance and all but the smallest employers to offer health coverage to workers. It also would bar insurers from refusing to cover people with pre-existing medical conditions and eliminate the industry's exemption from federal antitrust laws.

The House proposal includes a 5.4 percent surtax on individuals making more than $500,000 and couples earning more than $1 million to help pay for covering the uninsured.

It would save money by expanding eligibility for the government's Medicaid health insurance program for the poor to those with incomes up to 150 percent of the official poverty level. Covering people through Medicaid is cheaper for the government than providing subsidies to purchase insurance.

The proposed government-run "public" insurance program has been a flashpoint in the debate. Obama and liberals see it as a way to increase competition with private insurers, but critics say it would lead to a government takeover.

In the House bill, the public option would use reimbursement rates negotiated with doctors and hospitals. House liberals led by Pelosi could not muster the votes for a stronger version pegged to rates for Medicare, the government's health insurance program.

The healthcare measure being prepared for debate in the Senate also includes a public option based on negotiated reimbursement rates but, unlike the House bill, it would allow states to decline to participate.

The House bill also differs from the Senate version by not including a proposal to tax high-cost "Cadillac" insurance plans, which has been opposed by House Democrats and labor unions who fear it will hurt too many middle-income workers.

The lobbying group for the insurance industry, America's Health Insurance Plans, criticized the proposed government-run insurance program and said it would cause people to lose their existing coverage.

"A new government-run plan would bankrupt hospitals, dismantle employer coverage ... and ultimately increase the federal deficit," said Karen Ignagni, the group's president. (Editing by Chris Wilson)