July 27 (Bloomberg) -- President Barack Obama and
Democratic leaders are trying to salvage health-care legislation
as disputes within their own party stall progress on the
president’s top domestic priority.

Senate Finance Committee Chairman Max Baucus is struggling
to get a bipartisan deal on his panel before an Aug. 7 recess
after weeks of delay, and party leaders postponed a vote by the
full Senate until September. Leaders in the House, which is
scheduled to adjourn July 31, are fighting to contain a mutiny
over the $1 trillion cost of the bill that last week had them
threatening to force a quick floor vote.

Obama, who has been speaking publicly almost every day
about the need to transform the nation’s medical-care system,
has been summoning lawmakers to the White House and dispatching
aides to Capitol Hill. Administration officials tried to play
down disappointment over the failure to meet a goal of passing
legislation before the recess.

“August is both a peril and an opportunity,” White House
Chief of Staff Rahm Emanuel told a group of reporters on July
24. “The peril is that the interest groups will come out and
change course. The opportunity, which I think it is, is there’s
not a group in the middle saying, ‘don’t do this.’ They’re
saying, ‘do it right.’”

Even insurers don’t want the status quo, Emanuel said. The
industry has “made a calculation that, even while demonized,
that reform is better than not,â€

‘No Better off’

Connecticut Senator Christopher Dodd, whose health
committee was the first panel to pass a version of the plan,
said the recess might give opponents an opening. “We could come
back here in September and find we are no better off than all
the Congresses that have tried for 70 years,â€

Obama wants a bill that would expand coverage to tens of
millions of Americans without adding to the deficit. That’s left
lawmakers grappling over how to scale back costs and fund the
measure, and whether to set up a government-run entity to
compete with insurers such as Minnetonka, Minnesota-based
UnitedHealth Group Inc.

Among the steps they are considering: taxing insurance
companies on their most expensive health-care plans to avoid a
direct levy on the benefits of middle-class Americans, and
setting up an independent commission to oversee Medicare
payments, a move that would take much of that authority out of
Congress’s hands.

Big Turnaround

“The health-care bill is unfortunately in trouble,” said
Representative John Conyers, a Michigan Democrat, during a July
24 speech.

That’s a turnaround from 10 days ago, when top Democrats
were heralding the passage of legislation by three of the five
committees with jurisdiction over health care. In the days that
followed, talks faltered in the two remaining panels, House
Energy and Commerce and Senate Finance.

House leaders are facing a rebellion by the Blue Dog
Coalition, 52 Democrats who call themselves fiscal conservatives
and want to find more cost savings. Seven Blue Dogs on the
energy and commerce committee threatened to vote against the
legislation.

Committee Chairman Henry Waxman of California canceled
debate while he pursued a deal. The group spent three hours at
the White House on July 21, including more than an hour with
Obama, said Arkansas Representative Mike Ross, chairman of the
Blue Dog health-care task force.

Blue Dog Talks

The next day featured talks with Waxman and then White
House officials in House Speaker Nancy Pelosi’s office. On July
24, negotiations fell apart, and House leaders said they might
give up on the committee and go right to a floor vote.

“I won’t allow them to turn over the control of the
committee to the Republicans,” Waxman told reporters.

While talks later got back on track, Ross said Pelosi can’t
pass the legislation now.

“I don’t think they have the votes,” Ross said on
Bloomberg Television’s “Political Capital With Al Hunt”
program. The opposition is more than Blue Dogs, he said.

In the Senate, Baucus and Majority Leader Harry Reid are
pushing the finance panel to finish so its version can be melded
with the Senate health committee plan.

The panel’s top Republican, Charles Grassley of Iowa,
predicted in another “Political Capital” interview that Baucus
wouldn’t get a deal by Aug. 7, though he and Ross said Congress
can get health care done later this year.

Cadillac Plans

Grassley said he and others are open to a proposal to
impose an excise tax on insurers’ most expensive health-care
plans. Obama opposes taxing benefits for middle-class Americans
and many lawmakers have said they won’t accept a plan to tax the
policies of the wealthiest.

They are also considering a new independent panel to
oversee payments by Medicare, the U.S. program for the elderly,
meeting a demand of House Blue Dogs.

The Congressional Budget Office on July 25 estimated such a
panel would save only $2 billion over 10 years. Yesterday, the
agency gave a boost to the House Democrats’ plan by saying it
wouldn’t result in a significant number of companies dropping
coverage or individuals opting out of private insurance,
criticisms leveled by Republicans.

The House and Senate eventually have to combine their plans
and send a compromise measure back to each chamber for a vote
before going to Obama’s desk.

Daunting as that seems, former first lady Hillary Clinton,
a veteran of the Clinton administration’s failed effort to
overhaul health care, gave Obama reason for optimism. Emanuel
quoted Clinton, now secretary of state, offering encouraging
words after a July 24 lunch with the president, saying, “I wish
I was this close in 1994.”

To contact the reporters on this story:
Kristin Jensen in Washington at
kjensen@bloomberg.net ;
Edwin Chen in Washington at
Echen32@bloomberg.net