A health-care overhaul proposal by Senate Finance Chairman Max Baucus would establish a system of consumer-owned insurance cooperatives in lieu of a government-run “public plan,” and would expand Medicaid to millions more Americans.

Baucus, D-Mont., circulated his proposal over the Labor Day weekend to the “Gang of Six,” the bipartisan group of Finance Committee senators with whom he has been discussing health care overhaul for many weeks. The group was scheduled to meet Tuesday afternoon as Congress returned from its month-long recess.

The Baucus proposal would cost less than $900 billion over 10 years, at least $100 billion less than the overhaul bills approved by other congressional committees. It would be fully paid for over that period through a variety of fees on stakeholders — such as $6 billion a year from health insurers, and $2.3 billion a year from pharmaceutical companies — as well as a tax on insurance companies that offer the most expensive health insurance plans and cuts to Medicare.

To expand coverage to millions of the estimated 46 million Americans who lack insurance, everyone up to 133 percent of the poverty level would be covered by Medicaid, a Finance source said. “In addition, health care affordability tax credits would be provided to help low- and middle-income families purchase private insurance coverage,” the source added

Like the versions of overhaul approved by three House committees and the Senate Health, Education, Labor and Pensions (HELP) Committee, the Baucus proposal would bar insurers from denying insurance coverage to individuals because of pre-existing medical conditions or dropping coverage when policyholders become sick.

It calls for the creation of health insurance exchanges to make it easier for small businesses and individuals to purchase insurance, and includes funding to establish the health-care cooperatives, which would offer another choice of insurance coverage.

Much of the Baucus proposal, which the source called a “framework,” not a chairman’s mark, involves concepts that the Gang of Six has discussed at length in closed-door meetings.