By ROBERT PEAR
Published: July 14, 2007

WASHINGTON, July 13 �" Leaders of the Senate Finance Committee reached agreement Friday on a bipartisan plan calling for a big increase in the cigarette tax to pay for a $35 billion expansion of the Children’s Health Insurance Program over the next five years.

The agreement, probably to be approved next week by the committee, sets the stage for a confrontation with President Bush, who proposed a much smaller increase, $5 billion over five years. House Democrats favor a much larger increase, $50 billion over five years..

Senator Max Baucus, Democrat of Montana and chairman of the Finance Committee, said, “This plan will get coverage to three million more low-income children �" more than a third of the kids who are uninsured today.”

Under the proposal, the federal excise tax on cigarettes would be abruptly increased by 61 cents a pack, to $1 a pack. The plan calls for proportional increases for other tobacco products.

Renewal of the children’s insurance program, which is set to expire on Sept. 30, is the most important health care issue facing Congress this year, lawmakers of both parties say.

Debate on the program provides a foretaste of a much larger struggle over the future of the nation’s health care system, as Mr. Bush and Democrats argue about the proper role of government and private insurance.

The Senate plan was negotiated by Mr. Baucus and Senators Charles E. Grassley of Iowa, the senior Republican on the Finance Committee; John D. Rockefeller IV, Democrat of West Virginia; and Orrin G. Hatch, Republican of Utah.

Mr. Grassley said the agreement would refocus the program on low-income children. It would reduce payments to the states for coverage of children with family incomes exceeding three times the poverty level. (The poverty level is $20,650 for a family of four.)

Under current law, the federal government provides $5 billion a year to states for the Children’s Health Insurance Program, which covered 7.4 million people at some time in the last year. The bipartisan Senate plan would add $35 billion, bringing the five-year total to $60 billion. House Democrats, by adding $50 billion to the current level of spending, would increase the total to $75 billion.

Mr. Bush, by contrast, has proposed an increase of $5 billion and has denounced the Democratic proposals as a step toward “government-run health care” for all.

For several weeks, the White House has been predicting a showdown with Congress over the program, which was created in 1997 with broad bipartisan support to insure children in families who have too much income to qualify for Medicaid but not enough to afford private insurance.

Under the Senate agreement, states could use information from food stamps and other assistance programs to locate and enroll youngsters eligible for the Children’s Health Insurance Program. States could also use the child health program to cover the costs of prenatal care for pregnant women.

But federal officials could not grant additional waivers to the states for coverage of adults. About 670,000 adults were covered last year as a result of such waivers, some of which were granted or renewed by the Bush administration.

Earlier this week, before seeing details of the Senate plan, some White House officials were hinting at the possibility of a veto.

In a joint statement, Senators Grassley and Hatch said such threats were “disappointing, even a little unbelievable.”

Mr. Grassley said the Republicans had done a good job by limiting the increase in spending to $35 billion. The 2008 budget resolution �" a blueprint for spending approved by both houses of Congress �" allowed an increase up to $50 billion, he noted.

Supporters of a higher cigarette tax said it would discourage smoking, particularly among young people. But economists say the tax is highly regressive and falls more heavily on lower-income people, among whom smoking is more prevalent.
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