Democratic faction uneasy about U.S. healthcare bill

WASHINGTON (Reuters) - A crack in the fragile coalition crafting a U.S. healthcare reform bill emerged on Thursday when fiscally conservative Democrats balked at the cost and direction of the House of Representatives' plan.

Lawmakers in Congress, controlled by Democrats, are working on draft proposals to revamp the bureaucratic U.S. healthcare system at a cost of about $1 trillion over a decade. Healthcare reform is a key part of the Obama administration's agenda.

But in a letter to Democratic House Speaker Nancy Pelosi and Senate Republican Leader Mitch McConnell, about 50 House Democrats said the House should "pare back some of the cost-drivers to produce a bill that we can afford."

The so-called Democratic Blue Dog Coalition, an influential faction within the majority party, also said they had "strong reservations about the process and direction" of the proposed legislation.

"Paying for health care reform must start with finding savings within the current delivery system and maximizing the value of our health care dollar before we ask the public to pay more," they said.

President Barack Obama has demanded that Congress send him a bill by October that will cut costs while providing medical insurance to most of the 46 million Americans who currently have no coverage.

But the estimated cost of restructuring the $2.5 trillion healthcare system has raised alarms among Republicans and some Democrats, who have argued that the proposed reforms are unaffordable for a country mired in a deep recession.

PELOSI CONFIDENT

The Blue Dog Democrats complained that the proposed House bill failed to reform payments to doctors, hospitals and insurers and lacked provisions to shield small businesses from excessive costs.

They also expressed concern about the establishment of a government-run health insurance plan favored by some Democrats, saying it would hurt small hospitals and doctors.

With the House and Senate due to adjourn in August, the conservative Democrats also insisted there must be sufficient time to review any legislation and discuss it before a floor vote.

"Significant progress on the draft tri-committee health care reform proposal needs to be made in order to address each of these concerns. We cannot support a final product that fails to do so," the letter said.

Pelosi, however, reaffirmed her intention earlier on Thursday to meet the August deadline and win House passage of a healthcare plan that includes a government-run insurance option and doesn't tax employer provided health care benefits.

"We are in the process of bringing our health care proposal to the floor," Pelosi said in a weekly news conference. "It will happen."

"It will have, coming out of the House, a public option," Pelosi said. "The only debate on that is what it will be called -- a patient option, a public option, write in your suggestions."

She added that the House bill would not tax healthcare benefits

Separately on Thursday, Democratic senators crafting their version of a healthcare reform bill said they were trying to wring billions of dollars more in savings out of proposals to reform Medicare payments to doctors, hospitals and insurers.

Kent Conrad, a senior Democrat on the Senate Finance Committee, said he hoped to persuade the non-partisan Congressional Budget Office to "score" more savings by, for example, bundling payments to providers or assigning care coordinators for all chronically ill Medicare beneficiaries.

"We got to marshal the evidence to convince them," Conrad said. "If you save 5 percent just on the chronically ill, you'd be in the hundreds of billions of dollars."

It may be a tough sell because it is hard to estimate the savings from efforts to improve healthcare.

"The problem is, for all the work that has been done, this is all in its infancy," said Paul Heldman, a policy analyst at Potomac Research Group. "For that reason and also the fact that there are all sorts of good but potentially costly consequences to helping people live longer, it's hard to put a score on it."

Asked if legislation must include penalties for providers who do not abide by such coordinated care measures, Conrad said he preferred to offer incentives to win compliance.

(Additional reporting by Thomas Ferraro, Editing by Paul Simao)