WASHINGTON (Reuters)—Senate Finance Committee Chairman Max Baucus said Thursday the panel had agreed to trim the cost of its health care overhaul plan to $1 trillion and could pay for it without increasing the budget deficit.

The agreement, reached in a closed-door meeting of panel members, could help ease the concerns of lawmakers in both parties about the high price tag of reforming the U.S. health care system. One recent estimate put the bill's cost at $1.6 trillion over 10 years.

Committee aides said their plan as currently envisioned would provide for health insurance coverage for 97% of the U.S. population.

"We have options that would enable us to write a $1 trillion bill, fully paid for," Sen. Baucus, D-Mont., told reporters.

President Barack Obama has made a health care overhaul that reins in costs and covers most of the 47 million uninsured Americans one of his top legislative priorities. He has turned up the pressure on Congress in recent days to pass health care reform this year.

The Finance Committee has been looking at cost savings achieved mostly through reducing proposed subsidies for people who would purchase their insurance through a proposed new insurance exchange, a kind of clearinghouse where people would compare policies and costs.

The legislation was expected to include a requirement for people to obtain insurance and subsidies to help them afford it. But the fear is some people would leave their employer-provided health plans in favor of the subsidized policies available in the exchange.

That would drive up government costs even further, and the panel has included a provision to discourage employers from dropping their health benefits.

The Finance Committee proposal is one of two health care plans in the Senate, which hopes to pass a health care bill before the August recess. Three committees in the House of Representatives are developing a health care plan.

The Finance Committee agreement comes amid signs of strain in the diverse coalition pushing for an overhaul of a U.S. health care system, which chews up 16% of the gross domestic product annually but trails many developed countries on measures such as infant mortality and longevity.

Insurers and doctors have expressed concern about President Obama's call for a public insurance option to compete with private insurers, while others have objected to the cost and a proposal to pay for it in part by raising taxes on some employer-paid insurance benefits.