Introducing a health care reform bill without the bipartisan support he had sought, Senate Finance Committee Chairman Max Baucus on Wednesday defended a series of concessions to Republicans in the $856 billion plan that have drawn sharp criticism from Democrats.

The bill forces insurance companies to change the way they do business, such as prohibiting them from dropping or denying coverage based on preexisting conditions. To force competition with private insurers, the Montana Democrat chose creating nonprofit consumer-owned cooperatives over the public insurance option, which most Democrats prefer.

Baucus said the legislation was a balanced, deficit-neutral, fully paid-for proposal that can pass the Senate. He acknowledged having to concede certain policy points to win Republicans, but said those were necessary to craft a bill that can overcome the Senate’s 60-vote filibuster-proof threshold.

“There are honest and principled differences on all of us working for reform, and this package may not represent all of our first choices,” Baucus said. “But at the end of the day, we all share a common purpose, that is to make the lives of Americans better tomorrow than they are today, and to get health care reform done, which means the time for action is now.

“It is common sense. It is a balanced bill. It certainly is a bill that can pass,” Baucus said. “The choice now is up to those on the other side of the aisle, if they want to vote for it or not.”

Early reaction from his party, though, was not enthusiastic, and two of the Republican senators with whom he has been negotiating for months were critical of the bill.

House Speaker Nancy Pelosi (D-Calif.) said she wanted to see the legislation to more closely mirror the House bill, including replacing the co-ops with the public insurance option.

“The House bill clearly does more to make coverage affordable for more Americans and provides more competition to drive insurance companies to charge lower premiums and improve coverage,” Pelosi said in a statement. “The House bill also does more to help seniors afford prescription coverage, closing the donut hole completely, while the Baucus proposal simply reduces the cost of brand name drugs in the donut hole.”

“As this proposal evolves, we hope to see modifications that result in the Senate bill better reflecting the work of the House to make health care more affordable for all Americans and promote competition that is key to keeping costs lower,” she said. “I believe the public option is the best way to achieve that goal.”

The long-awaited bill sets off a battle over what could be the shape of a health reform deal that wins at least one or two Republicans votes in the Senate.

By trying to add measures to appeal to some Democrats and some Republicans, Baucus has managed to upset all sides. Still, what he came up with could be viewed as the kind of balanced approach that threads the needle to achieve a final compromise.

The next challenge for the Baucus and the Senate leadership is to get the bill out of committee – but after that, Senate Majority Leader Harry Reid (D-Nev.) will need to merge the Finance bill with one approved in July by the Senate Health, Education, Labor and Pensions Committee.

“We’ve been waiting for it a very long time – I’m glad it’s finished,” Reid said Wednesday.

But he added, “Everyone should understand: it’s just the beginning. But it’s a good beginning – there will be some changes made before the markup starts, then there will be changes during the markup, so I’m happy we have it.”

The two Senate bills are expected to differ on subsidy levels, the Medicaid expansion and the creation of a competitor to private insurers. There are also significant differences with the House bill.

None of the three Republicans involved in the bipartisan negotiations has signed onto the bill, saying there are outstanding issues that need to be resolved. But they said they would continue talking with Baucus and the other two Democrats in the so-called Gang of Six.

“Unfortunately, there are fundamental issues that we were not able to resolve by the deadline that was set for us,” said Sen. Mike Enzi (R-Wyo.), adding that he was “deeply disappointed” at the outcome.

The proposal, he said, “still spends too much and…does too little to cut health care costs for those with health insurance.”

The lack of Republican support — at the outset, at least — suggests Democrats will need to make more concessions if they hope to produce a bipartisan bill. Otherwise, the Senate leadership may have to use a last-ditch procedural maneuver known as reconciliation to move the bill through the chamber with 51 votes.

The absence of Republicans could also damage President Barack Obama’s efforts to convince Americans that his reform plan has broad support.

“This partisan proposal cuts Medicare by nearly a half-trillion dollars and puts massive new tax burdens on families and small businesses, to create yet another thousand-page, trillion-dollar government program,”
Senate Minority Leader Mitch McConnell (R-Ky.) said in a statement. “Only in Washington would anyone think that makes sense, especially in this economy.

The Finance Committee markup is expected to begin Tuesday. Baucus will meet Thursday with the full committee, and amendments will be due Friday at 5 p.m.

The Baucus plan is a more conservative approach than those produced by three committees in the House and by the Senate’s HELP Committee, but it tracks closely with the concepts that Obama promoted in his speech to Congress last week. The bill is deficit neutral and fully paid for, and less costly than bills approved by other committees.

Baucus chose an alternative to the public insurance option – nongovernmental consumer cooperatives – to provide competition with private insurers.

The bill requires individuals to buy insurance, or face a penalty of $750 to $950 annually, depending on income level and a maximum of $3,800 for families with incomes 300 percent of the poverty line. The Senate HELP bill sets the fine at $750 per year, while the House bill levies a 2 percent tax on the adjusted gross income of an individual who does buy insurance.

The Finance Committee bill would not mandate businesses to provide coverage for their employees – as the House and Senate HELP bill does – but it would require them to defray the cost of any government subsidies for which their employees would qualify.

To pay for the overhaul, the legislation calls for raising $214 billion through a 35 percent excise tax on high-end insurance plans, assessing $93 billion in fees on industry players, including device manufacturers, insurers and clinical laboratories, and making a series of tax code changes.

Similar to the House bill, the Finance legislation expands Medicaid coverage to include adults whose incomes are 133 percent above the poverty line and requires states to pick up more of the tab for the federal-state cost-sharing program. The Senate HELP bill did not address the Medicaid expansion.

Government subsidies would be available to families from 100 percent to 300 percent of the poverty line to purchase insurance plans through a new marketplace known as an exchange. In the House and Senate HELP bills, the subsidies would go up to 400 percent of poverty.

For families with incomes 300 percent to 400 percent of poverty, their annual premiums would be capped at 13 percent of their income – a level that is higher than what the House bill proposes, drawing fire from Democrats such as Sen. Ron Wyden (D-Ore.).

Sen. Olympia Snowe (R-Maine), the likeliest Republicans to support the bill, said she was waiting for cost estimates from the Congressional Budget Office.

"Hopefully at some point through the committee process we can reach an agreement," Snowe said.

Sen. Chuck Grassley (R-Iowa) released a statement that was silent on his ultimate decision, but the tone of his message did not bode well for Baucus’s hopes of bringing him on board.

He ticked off a long list of concerns, saying the bill “does not meet the shared goals for affordable, accessible health coverage,” and it does not resolve outstanding issues dealing with abortion and illegal immigration.

He suggested as well that the bill does not include his alternative proposal to the individual mandate, nor does it include stronger medical liability reform measures he had pushed.

“We’ve been clear from the start that we’re willing to stay at the table,” Grassley said. “There’s no reason not to keep working until we get it right. In the end, legislation that impacts every American should have strong bipartisan support.”

The bill drew criticism from across the political spectrum Wednesday.

The conservative Club for Growth described the bill in a statement as "every bit as lethal as the government-run plan so loudly denounced across the nation last month. Clearly, President Obama and his congressional allies don’t realize the country has rejected what they’re proposing.”

Consumer Watchdog, a good government group, rapped the plan for allowing middle class families to continue to pay up to 20 percent of the annual income on health care coverage and imposing steep fines on Americans who do not buy coverage.

“Government cannot force families to pay more than their mortgage to purchase coverage from a for-profit insurer,” said Jerry Flanagan, health policy director of Consumer Watchdog. “Yet if families paying more than 10 percent are automatically exempted from the law, they will still be without health care. It’s an impossible bind, and tough, transparent regulation is the right start to fixing it.”