FINANCE COMMITTEE PUNTS ON PUBLIC OPTION…. The Senate Finance Committee is moving forward with its health care reform plan. It’s not exactly encouraging.

A draft proposal in the Senate to overhaul the nation’s health-care system would require most people to buy health insurance, authorize an expansion of Medicaid coverage and create consumer-owned cooperative plans instead of the government coverage that President Obama is seeking.

The document, distributed among members of the Senate Finance Committee yesterday afternoon, addressed none of the funding questions that have consumed House and Senate negotiators in recent days. But it included an array of coverage provisions that were drastically scaled back from earlier versions, as lawmakers seek to shrink the bill’s overall cost. The proposal, for instance, would reduce the pool of middle-class beneficiaries eligible for a new tax credit meant to make insurance more affordable.

The absence of a “public option” marks perhaps the most significant omission. Obama and many Democrats had sought a public option to ensure affordable, universal coverage, but as many as 10 Senate Democrats have protested the idea as unfair to private insurers. In its place, the draft circulated yesterday outlines a co-op approach modeled after rural electricity and telecom providers, subject to government oversight and funded with federal seed money.

It’s the result of negotiations between Baucus, two other Democratic senators on the committee, and four Finance Committee Republicans.

Ezra Klein was the first to get a hold of the Finance Committee draft proposal, and he called the version “quite diminished” from the original Baucus approach, thanks to Baucus scaling it back after the CBO put a $1.6 trillion price tag on it.

Ezra described the approach as “comprehensive incrementalism,” because it makes everything in the system “a bit better.” He added, “This version of health reform is far from what the country needs. It is far from what any health-care experts would develop left to their own devices. But it is still a monumental initiative and, if passed, it would be the most significant step forward since the creation of Medicare and Medicaid.”

Of course, given all of the discussion lately about the cost of care, the inclusion of a public option is the one measure that would lower costs most effectively and efficiently. It’s also the one measure Republicans, insurance companies, and some center-right Democrats can’t stomach.

It’s worth emphasizing that the Finance Committee draft proposal is only a draft proposal; there’s still the HELP Committee measure to consider; and then there’s the House, where there are more than a few Dems who’ve said they won’t support a bill that lacks a public option.

House Speaker Nancy Pelosi told reporters yesterday, “The give and take, the back and forth of different ideas — you may call them snags, we call them the legislative process.”

That line about watching laws and sausages being made keeps coming to mind.

Steve Benen

Follow Steve on Twitter @stevebenen. Steve Benen is a producer at MSNBC's The Rachel Maddow Show. He was the principal contributor to the Washington Monthly's Political Animal blog from August 2008 until January 2012.