A national health care plan with a government run public option moved dramatically closer to reality this morning with the release of a new proposal by Sens. Edward Kennedy, D-Mass., and Christopher Dodd, D-Conn.

In a detailed statement the senators said their plan would cost much less than what the Senate now has on the table and would cover 97 percent of all Americans.

In a major blow to Republicans, who have attacked the high cost of health care overhaul, the Congressional Budget Office put the cost of the Kennedy-Dodd plan at $611.4 billion over 10 years, down from the $1 trillion estimates for the plan the Senate has been discussing up until now. The senators said the revisions “virtually eliminate” an earlier prediction that the proposal would cause many companies to drop coverage for their workers.

The statement from the senators said the cost reduction comes in part from inclusion of the government run health insurance option, which has been opposed by Republicans, and, in part, from fees that would be paid by employers.

Employers with more than 25 employees who do not offer coverage to workers would pay an annual fee of $750 for each employee. The fee would be set at $375 for part-time workers. The fees would generate $52 billion over 10 years, money the government would use to help provide subsidies to those who cannot afford insurance.

It is this same provision that would reduce the number of workers whose employers would drop coverage, the senators said.

Kennedy and Dodd submitted the plan just before the July 4th recess because senators will turn to health care legislation as soon as they return after the holiday.

The Senate’s Health Committee will meet next week. It is expected, with the new proposal, that the committee will approve a [plan with a public option.

Under separate cover, the Senate Finance Committee has been working on reaching a “bi-partisan” compromise. It is not expected that a plan with a public option would emerge from that committee. More likely to emerge from the Finance Committee, would be a plan with a “non-profit” cooperative to sell insurance as a competitor to private companies.

In the House, meanwhile, three committees are working on a bill that should come to a vote by the end of July. It is expected that any measure emerging from the House will include a public option.

The Obama administration has campaigned hard this year to urge Congress to overhaul the nation’s health care system.

Kennedy has fought hard for years to win the fight for universal health care.

The statement by Kennedy and Dodd read, in part, “Like the president and a strong majority of Americans, we believe that a strong public option is an important component of any health reform bill that keeps costs down, expands coverage and offers American families a wide variety of options. We must not settle for legislation that merely gestures at reform. We must deliver on the promise of true change.”