Senators on a key committee are putting the finishing touches on a government health insurance option that they hope will win broad support among Democrats and the public.

According to a draft summary circulating Tuesday, the Senate Health, Education, Labor and Pensions Committee proposal calls for a nationwide plan to be run by the federal government. An upfront loan from taxpayers would get the plan started, but it would have to pay its own way after a few months, relying on premiums collected from beneficiaries to stay solvent.

The public plan would be offered alongside private coverage through new insurance purchasing pools called exchanges. The government option would have to follow the same consumer protection rules as private plans it competes with.

The idea of government medical coverage for middle-class workers and their families has become the hottest issue in the debate over how to overhaul the health care system. President Obama and most Democrats say the choice of a public plan would serve to balance the power of private insurers. But insurance companies see it as a step toward a government takeover, and many business groups agree. Polls indicate public support for a government option.

"This has the ability to unify Democrats," Ron Pollack, executive director of Families USA, said Tuesday. His organization is a liberal advocacy group that supports coverage for all.

The health committee proposal will be one of at least four major options for lawmakers to consider on a government plan after they return from their weeklong July 4th recess.

The first option is to have no public plan, maintaining the current system in which the government covers the elderly and low-income people, but most workers and their families get job-based insurance. Having no public plan is the option favored by Republicans, who are almost unanimously opposed to the idea.

At the other end of the spectrum is the House Democrats' proposal. It calls for a public plan that would pay doctors and hospitals using reimbursement rates keyed to Medicare's, which medical providers say are often too low.

In an important distinction, the Senate HELP committee's plan would not use Medicare payment rates.

Instead it would set fees to doctors and hospitals using an average of what private insurers pay in each local area, according to the summary. That seemingly technical difference could help neutralize opposition from medical providers, who are wary that a public plan will translate into a significant pay cut for them. The health panel's plan also stipulates that hospitals and doctors would be free to opt in or out.

Finally, the Senate Finance Committee is trying to come up with a bipartisan compromise. Ideas include setting up nonprofit co-ops that would not be controlled by the government, and having a public plan as a fallback only if private insurers fail to bring costs down and expand coverage.

The health committee plan reflects some of the ideas outlined by Sen. Chuck Schumer, D-N.Y., a Finance Committee member. Schumer, who's unhappy with the direction of bipartisan talks on a public plan, said Tuesday he's preparing his own proposal for a vote in the Finance panel.

"We believe it is possible to devise a public plan option that exerts competitive pressure on insurers without relying on unfair, built-in advantages," Schumer said in a statement. "We are going to keep up our push to include this kind of plan in the health care reform bill."

A spokesman for Sen. Christopher Dodd, D-Conn., who's standing in for Sen. Edward Kennedy, D-Mass., at the head of the health committee, had no immediate comment.