Obama confident of passing healthcare reform

* Obama says tough talks ahead after some Democrats rebel

* "Blue Dog" Democrats oppose public insurance option

By David Alexander

WASHINGTON (Reuters) - U.S. President Barack Obama acknowledged on Friday that tough negotiations on overhauling U.S. healthcare lie ahead after some of his own Democrats rebelled but he expressed confidence a plan will be passed.

Obama's remarks, at the end of a Group of Eight summit in Italy, came a day after a group of 40 fiscally conservative Democrats in the House of Representatives said they had "strong reservations about the process and direction" of a healthcare plan moving in the House.

Lawmakers in the Democratic-controlled Congress are working on draft proposals to revamp the 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, and finding a way to pay for the cost is proving to be a major obstacle.

"There are going to be some tough negotiations in the days and weeks to come, but I'm confident that we're going to get it done," Obama said.

As Obama traveled abroad, his domestic agenda took some blows at home. In addition to the hiccup on his healthcare plan, Democrats on Thursday put off until September work on a bill to reduce greenhouse gases blamed for global warming.

And a political scrap broke out over the effectiveness of a $787 billion economic stimulus plan pushed through Congress by Democrats in February. Republicans argued it has failed to stop the rising jobless rate while Democrats led by Vice President Joe Biden said it needs more time to work.

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

OPPOSE PUBLIC OPTION

The conservative Democrats, known as the Blue Dog Democrats, also took aim at the president's proposal for a public insurance option to compete with private insurers in a marketplace that would provide plans for those who cannot buy coverage through their employers.

"A "Medicare-like" public option would negatively impact hospitals, doctors and patients," they wrote in a letter to House Speaker Nancy Pelosi, noting that payments to doctors through the government health plan for the elderly are 20 percent to 30 percent lower than private plans.

"Using Medicare's below-market rates would seriously weaken the financial stability of our local hospitals and doctors," the letter said.

Obama has called for a marketplace with rules that would create a level playing field for public and private insurers, but many conservatives fear the public plan would have an advantage that would ultimately drive the private plans out of business.