A government-run insurance program would be an “obstacle” to health care overhaul, a top Senate Republican said Sunday, and such “unfair competition” would lead to nationalized health insurance, while a top Senate Democrat defended it as one means to “keep the private insurance companies honest.”

The Senate Health, Education, Labor and Pensions Committee is expected to resume work this week on the latest version of its overhaul bill, which would create a government-run “public plan option” to compete with private insurers, in a bid to spur better service and lower costs.

The measure also would require employers of 25 or more workers to provide health insurance to their workers and cover 60 percent of the premium costs, or pay the government an annual fee of $750 per full-time worker or $375 for part-time workers.

“Most of the small town America and even large cities, small business is the backbone of our economy,” said Sen. Charles E. Grassley , R-Iowa. “And such an employer mandate would put a lot of small businesses out of business. It would have the same faults that the Clinton bill did 15 years ago. And that’s going down the road of not getting health care reform.

“More importantly and more of an obstacle is what you call the public option or the government-run insurance program,” he said on CBS’s “Face the Nation.” “The federal government is in the process of nationalizing banks, nationalizing General Motors. I’m going to make sure we don’t nationalize health insurance and [a] public option is the first step to doing that.”

Sen. Charles E. Schumer , D-N.Y., disagreed with that assessment. Appearing on the same program, he said, “I am not saying that the public option should be the only option. There are some who do say that, particularly in my party. But we shouldn’t say there should be no public option. We should have this insurance exchange and let both sides compete. And let’s see which one does better.”

The Congressional Budget Office estimated that the latest version of the HELP bill would cost $611 billion over 10 years, and would provide insurance to 90 percent of Americans, excluding illegal immigrants. Committee aides told reporters in a conference call July 2 that an assumed expansion of Medicaid to cover people earning less than 1.5 times the federal poverty level — about $33,075 for a family of four in 2009 — would bring total coverage to 97 percent of the population.

The Medicaid expansion is part of a bill under development by the Finance Committee, where Grassley is the ranking Republican. It and other Finance provisions are expected to bring the total cost of an overhaul bill to about $1 trillion over 10 years.

Grassley said “the power of government is an unfair competitor ... So we want to make sure that we do to private health insurance what it takes to do to a accomplish two things. One, to make health care insurance affordable and accessible.”

“And we will do that by taking away the discrimination that is in the present health insurance system through pre-existing conditions,” he added. “And we would make it affordable with community rating. And for people that can’t afford health insurance, low-income people, we would help them purchase their health insurance. ”

Schumer supports the public option but added that lawmakers involved in health care overhaul are “making every effort to reach common ground.”

Schumer, who also sits on the Finance panel, announced July 1 that he would seek to amend that committee’s emerging health care overhaul bill to include the sort of government-run insurance plan desired by liberals. He called his plan a “level playing field option” because under it, the public insurance plan would be required to adhere to the same regulations and financial requirements as private insurance plans.

“Let me just say this,” he said on the news program. “We need somebody to keep the private insurance companies honest. They are terribly concentrated. In Chuck Grassley’s own state, 71 percent by one company.”