Major changes were in the works this weekend for a new $856 billion health care reform plan introduced in the Senate on Wednesday after it failed to be endorsed by even one Republican -- and it upset some Democrats, too.

According to industry and Senate sources, as well some of the more than 500 proposed amendments to the measure, a government-run health insurance company -- a "public option" -- was back on the table because of the Republican response.

Most Republicans oppose a public option, arguing it would lead to a government takeover of the U.S. health-care system. The plan's author, Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, had excluded it in part in an effort to win support from at least a few Republican senators.

But their unanimous rejection of Baucus's initial draft has revived the idea of adding at least a "triggered" public option to it. In a proposed amendment submitted to Baucus on Friday -- from a moderate Republican, no less, Sen. Olympia Snowe (R-Maine) -- a state could launch a nonprofit government insurance firm if "affordable" coverage were not available to at least 95% of residents.

Other emerging changes were designed to shore up support for the Baucus plan among the chamber's 59 Democrats. Analysts refer to it as the "60-vote strategy."

Under Senate rules, most bills require 60 votes to end debate -- a "cloture" vote -- and move on to votes that require a simple majority for passing a measure. However, since Democrats have only 59 senators at present, due to the vacancy created by the death of Sen. Edward Kennedy (D-Mass.), they'll need at least one Republican to join them in the cloture vote.

Democrats are lobbying Snowe for the 60th vote. She proposed a triggered public option earlier this year and calls it "a safety-net fallback plan." Her public-option amendment is one of 22 she submitted to Baucus. She also co-sponsored another five amendments, including some with Democrats.

If Senate Democratic leaders cannot round up 60 votes for cloture on a reform plan, they may to try pass it under another, less-used procedural move called "reconciliation," which requires just a simple majority vote to pass a measure. But it would require separating a plan's tax and budget components from its non-budget provisions -- which would be difficult, create political risks and could make it easier for opponents to block critical non-financial pieces.

Strategies to win Senate passage are clouded by efforts by Massachusetts lawmakers to quickly adopt legislation that would allow the state's Democratic governor to appoint a temporary successor to Kennedy soon. The temporary appointee would hold the seat until a special election in January but would provide Democrats with one more vote at a critical time.

Other significant changes senators are considering for the Baucus plan include:

• Increasing proposed government subsidies for uninsured people, especially in the middle class, to help them buy coverage.
• Adopting additional limits on a 35% excise tax Baucus proposed on generous "Cadillac" benefit plans that might hit not only corporate executives, but also union members.

Some key Democrats favor both changes. The Omaba Administration gave the Baucus plan a measured welcome last week, and many observers see it as a platform for a compromise that could eventually pass both chambers.

In an interview on ABC's "This Week" on Sunday, President Obama suggested he could endorse bigger government subsidies to help uninsured people purchase coverage, especially because the Baucus plan, like the four other Democratic reform plans introduced in Congress this year, would mandate uninsured people have coverage and force them to pay a penalty if they don't. Under the Baucus plan, the penalty would be up to $950 a year.

"If you're saying to people, 'You've got to get health insurance,' but they can't actually afford it, and they have to pay a penalty if they don't get it, then that's a pretty big burden on middle-class families," the President said. "That's a concern I share: making sure that this is affordable."

The President will wrap up two days of television appearances to promote health care reform on Monday night with an hour-long appearance on "Late Night with David Letterman" on CBS.

The Finance Committee will meet Tuesday to start formally considering the plan and amendments, which you can read here: http://finance.senate.gov/sitepages/legislation.htm.

Baucus said last week that he would fight to keep the cost of any plan reported out of his committee below $900 billion over 10 years, a figure embraced by the President as well. He warned committee members that amendments that could raise the plan's cost must be accompanied by details on how to finance them.

Instead of the public option, Baucus proposed allowing states to set up nonprofit health insurance co-operatives to compete with health-insurance companies. Co-ops would be owned by their customers, would collect premiums from them and contract with doctor groups, hospitals, pharmacies and other health care providers for products and services.

But Sen. Jay Rockefeller (D-W. Va.) submitted an amendment that would strike co-ops from the plan. Rockefeller argues co-ops are "untested and unsubstantiated," and the nonpartisan Congressional Budget Office appeared to give his criticism a boost in the preliminary analysis of Baucus's legislation it released last week.

“The proposed co-ops had very little effect" on helping expand coverage to the uninsured or on controlling federal health care spending "because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country,” the CBO wrote in its analysis, which it completed with the Congressional Joint Committee on Taxation.

Despite that evaluation, the CBO estimated the Baucus plan would expand health coverage to an additional 29 million legal residents by 2019 -- about two-thirds of the projected number of legal residents that the CBO said will be eligible for coverage by then. It said this would increase the number of legal U.S. residents with health coverage to 94% over the decade, from about 83% today.

CBO analysts projected that about 25 million of the newly insured would purchase benefit plans from private insurance firms through proposed web-based health insurance purchasing exchanges designed to increase access to and competition in the insurance market. But many new beneficiaries would need a government subsidy of some kind to make the purchase; about half of the proposed spending in the Baucus plan would provide such subsidies.

The other four million newly insured by 2019 would get coverage under Medicaid, the joint state-federal health insurance program for lower income people. The Baucus plan would expand Medicaid significantly, with the federal  government picking up 90% of the future tab, compared to about 60% now.

The four other Democratic reform plans -- three in the House and another in the Senate -- also envision expanding Medicaid substantially and, with many states strapped financially, would require Washington to provide the bulk of financing.

Baucus, many other lawmakers and the Obama Administration have pledged that no final plan will cover illegal aliens, though health care for them -- they often get treatment through hospital emergency rooms, which cannot turn them away -- remains a major unresolved policy matter and a hot-button issue among many voters.

The other four proposed reform plans also include a public option. In the House, Democratic leaders have pledged that the plan that chamber passes will include it.

The Committee for a Responsible Federal Budget provides details of all the plans here.

Some reform supporters, including the President and Baucus, have targeted cutting “waste, fraud and abuse” in Medicare to help finance their plans, but the CBO threw cold water on that proposition.

In his press release Wednesday, Baucus noted that the “improper payment rate” for Medicare in 2008 was $10.4 billion. He also cited a figure from the National Health Care Anti-Fraud Association that 3% of all health care spending, more than $60 billion, was lost to fraud in 2007.

But the CBO, which is known for its conservative analysis, estimated that the Baucus plan would eliminate just $200 million a year in such spending, or $2 billion over 10 years.

Baucus proposed financing his plan mainly by saving about $500 billion in other projected Medicare spending over 10 years and through about $350 billion in new taxes and fees on insurance and health care companies. In addition, CBO and JCT estimated the Baucus plan would cut the federal deficit by $49 billion over 10 years.

You can read the CBO's portion of the analysis here.

You can read the JCT's portion here.