A view of the emergency entrance at Queens Medical Center in Honolulu, Hawaii, December 30, 2009. REUTERS/Hugh Gentry

The proposal comes three days ahead of a bipartisan White House healthcare summit on Thursday as Obama tries to rally flagging congressional and U.S. public support for a sweeping overhaul that would tighten regulations on insurers and expand coverage to tens of millions of Americans.

But Obama also made an implicit threat to try to bypass Republican procedural roadblocks and force his proposals through Congress with a simple Senate majority of 51 votes rather than the customary 60 needed in the 100-seat body on controversial legislation. The need for 60 votes has stymied his healthcare reform efforts up to now.

Dan Pfeiffer, the White House communications director, said no decision had been made on whether to follow this route, but added the president wanted and believed that people deserve an up-or-down vote on health reform.

This package is designed to provide us the flexibility to achieve that if the Republican Party decides to filibuster, he told reporters, referring to the procedural tactic used to try to thwart legislation.

Health insurer stocks soon shrugged off the news after an initial wobble, with the Morgan Stanley Healthcare Payor index up 1.4 percent in mid-morning trade, buoyed by a better-than-expected announcement late on Friday on 2011 Medicare payment rates.

Nevertheless, insurers have underperformed the broad market this month, since the Obama administration seized on premium increases by WellPoint Inc's Anthem Blue Cross unit in California to ratchet up attacks on the industry.

Republicans have demanded Obama scrap the healthcare bills passed by the Democratic-controlled Senate and House of Representatives last year. But White House officials rejected the idea and said they hoped the new plan would resolve the differences in the two versions.

We took our best shot at bridging the differences, Pfeiffer said. Hopefully this will move the process forward.


But a senior U.S. House Republican rejected Obama's proposal.

This is not a serious attempt to address the concerns the American people have expressed about the Democrats' bills and does not truly include important policy changes Republicans have been pushing to address them, like ending junk lawsuits that drive up healthcare costs, Representative Dave Camp, the top Republican on the tax-writing House Ways and Means Committee, said in a statement.

The new proposal, based on the Senate bill, would cost $950 billion over 10 years and reduce the deficit by about $100 billion over the same period, White House officials said.

It expands tax credits for middle-class workers to make insurance more affordable and strengthens federal oversight of insurance premium hikes.

It also eliminates a controversial Senate deal exempting the state of Nebraska from Medicaid increases, closes a donut hole gap in prescription drug coverage, and incorporates a January deal raising the income threshold for a tax on high-cost Cadillac health insurance plans.

The proposal provides more tax credits to small businesses than either the Senate or House bills and provides all states full federal funding for an expansion of Medicaid, the government health insurance program for the poor, for four years, the White House said.

The proposal would extend coverage to about 31 million uninsured Americans, the White House said.

Congressional leaders have scrambled for a way forward on healthcare since a surprise Republican victory in a special Massachusetts U.S. Senate election cost Democrats their crucial 60th Senate vote and brought negotiations on merging their two bills to a halt.

One option would include a budget process called reconciliation that requires only a simple majority -- 51 votes in the Senate -- and would bypass Republicans.

But it is unclear if Democrats can muster even that many votes on the unpopular healthcare bill, with congressional Democrats anxious to turn to job issues ahead of November congressional elections that could see Republicans challenge for control of Congress.

The Obama proposal would close the donut hole in prescription drug coverage under Medicare, the federal health program for the elderly and disabled, by imposing $10 billion more in fees on drugmakers.