WASHINGTON (Reuters) A prominent private U.S. health policy group on Thursday proposed creating a major new public health program and government-operated insurance exchange as part of a plan to expand coverage and rein in health care costs.

The Commonwealth Fund, a leading private health policy research group, unveiled a comprehensive plan for changing a U.S. health care system that is the world's most expensive yet lags many other nations in important measures of quality.

They hope the Obama administration and lawmakers consider the ideas as they move forward this year with plans for major changes in the health care system. This plan is one of many being advanced as U.S. policymakers move toward action.

The proposal favors a mix of public and private insurance options over the idea of a fully government-run health system.

Every American would be required to have some form of public or private health insurance, and one choice would be a new nationwide government program for anyone under 65, the age when eligibility for the existing Medicare program begins.

More than 40 million people would be expected initially to sign up for the new program, the group's Cathy Schoen said.

The government would also operate an insurance exchange similar to the one run by the state of Massachusetts, giving people the option of comparing coverage and choosing among a menu of private insurers or the new public program.

The plan envisions wide adoption of health information technology, greater disease prevention efforts and insurance payment changes that reward efficiency and penalize waste.

Commonwealth Fund leaders said their proposal is designed to achieve nearly universal insurance coverage while enhancing the quality of the health care system and controlling costs.

"The aim here is not to move away from the private insurance industry," said Dr. James Mongan, president and CEO of Partners HealthCare System Inc in Massachusetts, who headed the Commonwealth Fund commission that drafted the proposal.

U.S. Census Bureau figures show 15 percent of Americans had no health insurance in 2007, a total of 45.7 million people. Within two years, only about 4 million Americans would remain uninsured under the new proposal.

Americans spent $2.2 trillion on health care in 2007, according to a government report released in January, representing 16.2 percent of U.S. gross domestic product.

Health spending would continue to increase, but the rate of increase would be slower than current projections over the next decade. The plan would reduce annual growth from a projected 6.7 percent to 5.5 percent and save a cumulative total of about $3 trillion by 2020, the Commonwealth Fund said.

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