U.S. Senate Democrats discuss Medicare expansion

(For more on U.S. healthcare reform, click [nN20512341])

* Senators race to meet end-of-year deadline on bill

* Vote on abortion amendment possible Tuesday

By John Whitesides and Donna Smith

WASHINGTON, Dec 7 (Reuters) - U.S. Senate Democrats on Monday examined expanding the Medicare health program for the elderly to people as young as 55 as they sought a compromise on a government-run insurance plan in the healthcare reform bill.

With the clock ticking toward a self-imposed year-end deadline for passage, the Senate also debated Democratic Senator Ben Nelson's divisive amendment to tighten the bill's restrictions on the use of federal funds for abortions.

The abortion issue and the government-run insurance plan are the two biggest hurdles remaining for the Senate's version of the healthcare overhaul, President Barack Obama's top domestic priority.

A group of 10 Democratic senators -- five liberals and five moderates -- negotiated privately for a third consecutive day on the public insurance plan and said they were edging closer to an answer.

Several senators said the idea of expanding the Medicare federal health program for the elderly, now available to those 65 and older, gained ground but needed cost estimates from congressional budget analysts.

Under the proposal, backed by liberals seeking to make low-cost insurance more available, people as young as 55 who lack affordable coverage could buy plans under Medicare.

"There has been a pretty reasonable reaction to it," Senator John Rockefeller, one of the five liberal negotiators, said of the idea. "We're negotiating."

Republicans, who have spent days criticizing the bill's more than $400 billion in cuts to Medicare, condemned the idea.

"If your goal was to come up with a plan for financial ruin, you couldn't come up with a better idea than cutting a program by $500 billion and simultaneously expanding the number of people it is required to cover," said Senate Republican leader Mitch McConnell.

The Democratic senators also considered expanding a provision to let states negotiate with private insurers to provide coverage for lower-income workers.

Another proposal would create a non-profit plan operated by private insurers but administered by the Office of Personnel Management, which handles health coverage for federal workers.

WIN OVER MODERATES

That compromise was designed to win over moderate Democrats concerned there was too much government involvement in the Senate bill's public plan -- while not driving off liberals who see the option as key to creating competition for insurers.

"I think a national plan that OPM could negotiate makes a lot of sense. I think it would create a lot more options, a lot more choices," said Democratic Senator Blanche Lincoln, one of the five moderate negotiators.

The public insurance option, designed to create more competition for insurers, has been a flashpoint in the debate on a healthcare bill that would expand coverage to 30 million uninsured people and end industry practices like denying coverage to those with pre-existing medical conditions.

The other potential hot-button issue in the debate is abortion. Nelson, a crucial swing vote in the healthcare debate, has threatened to oppose the bill if his amendment fails.

The amendment would block people who receive federal subsidies from buying insurance plans to cover abortions and prohibit a proposed government insurance plan from offering abortion coverage in most circumstances.

"For more than three decades taxpayers' money hasn't been used for abortions and it shouldn't under any new health reform legislation," Nelson said.

The restrictions were the same as those in a bill passed by the House of Representatives last month, but Senate liberals said they went beyond current law and they would not accept them.

"The compromise within the current bill is as far as we can go," Democratic Senator Al Franken said.

Democratic Senate leader Harry Reid must hold the support of all 60 of his caucus members to overcome Republican procedural hurdles. The defection of Nelson or any of the Democrats concerned by the public insurance option would put the bill at risk.

Democratic defections would make it crucial for Reid to win the backing of moderate Republicans like Olympia Snowe, who met with Obama at the White House on Saturday, to make up the difference. (Editing by Chris Wilson)