The Obama administration’s push for a wide-ranging reform of the US health system received a boost on Wednesday when the non-partisan Congressional Budget Office said the latest legislative proposals would reduce the federal deficit.

Leading Senate Democrats announced that a preliminary CBO study of legislation proposed by Harry Reid, Senate majority leader, calculated that the bill would cost $849bn (€567.5bn, £505bn) and would reduce the federal budget deficit by $127bn in the first 10 years even as it extended coverage to 31m uninsured Americans.

“It saves lives, saves money and protects Medicare [the government healthcare programme for the elderly],” said Harry Reid, the Democratic leader of the Senate. “We’re not going to add a dime to the deficit – in fact quite the opposite.”

Mr Reid now has to try to corral his Democratic senators to support the bill and approve it in the Senate. It would then be merged with a version from the House of Representatives.

The 2074-page bill presented in full on Wednesday would introduce an insurance exchange in 2014, where private companies and co-operatives would compete with a controversial government insurance “public option”. The bill allows individual states to opt out of the public option. “We believe it will drive insurance premiums down in the exchanges,” said a Democratic aide.

It would immediately prevent insurance companies from cutting off coverage to the sick and bans lifetime limits on coverage. “Children” under the age of 26 could stay on their parents’ policies and there would be a small business tax credit to enable small businesses to buy insurance for their workers.

”I look forward to working with the Senate and House to get a finished bill to my desk as soon as possible,” said Barack Obama, US president, in a statement.

The CBO’s judgment earlier this year that other versions of healthcare reform would increase the deficit, not shrink it, increased the obstacles confronting Mr Obama and congressional Democrats if legislation was passed. In an indication of the CBO’s clout, Mr Obama told CNN earlier on Wednesday that the Senate legislation had been held up for the office’s analysts to complete their work.

“I remain confident that we are going to get this done, and we are going to have a bill that reduces our deficit …covers millions of people who don’t have health insurance right now and for people who do have health insurance makes their insurance more secure,’’ he said.

When the CBO provides its official rating the Senate will choose whether to begin debate on the measure – a decision that would require 60 votes in the 100-member chamber, exactly the number of seats held by Democrats and their allies.

“This is good news for Reid,” said Norman Ornstein, an analyst at the American Enterprise Institute. “It’s not going to guarantee that he gets the 60 votes, at least not now, but if the cost had been much higher it would have been a big problem for him.”

Mr Ornstein added that one of the reasons the cost of the Senate measure was less than the House bill was because it would assure 94 per cent of Americans healthcare coverage, as opposed to 96 per cent in the House bill.

He said that disparity would create problems not only with liberal legislators who wanted to expand coverage but also with insurers who argue that they can only drop unpopular restrictions on patients’ insurance schemes if coverage was greatly expanded – a move that would increase their revenues.

In a bid to secure his 60 votes, Mr Reid met a trio of fiscally conservative Democratic Senators on Wednesday who have signalled scepticism about healthcare reform.

He is expected to push for a procedural vote this weekend, to clear the way for debate to begin after the Thanksgiving holiday at the end of next week.

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