As the Senate responds to President Barack Obama’s demand for comprehensive health care reform by year’s end, Finance Chairman Max Baucus (D-Mont.) is filling the void left by Sen. Edward Kennedy (D-Mass.) and attempting to thread a complex and potentially explosive needle.

With Kennedy — arguably Congress’ foremost health care expert and a consummate deal-maker — largely absent from Capitol Hill as he battles brain cancer, the heavy lifting on health care legislation has fallen to Baucus and Sen. Chris Dodd (D-Conn.). Dodd is Kennedy’s closest friend in the Senate and second-in-command on the Health, Education, Labor, and Pensions Committee, which Kennedy chairs. Senate Majority Leader Harry Reid (D-Nev.) said he wants a bill to be ready before the August recess, and sources say Baucus is planning to introduce a finished product in June.

“Sen. Baucus has been working for months. He started working last year on a health care plan, and it’s moving along just fine,” Reid told reporters Wednesday, adding in response to a question about Kennedy’s role in the process: “His committee is working hard. They’ve been — they’ve been working with Sen. Baucus.”

Obama, during an address before a joint session of Congress on Tuesday night, did not reveal what form he would like the forthcoming health care legislation to take, and Senators on both sides of the aisle have been similarly vague. However, activity on the subject has been brisk, with Baucus leading a bipartisan task force on the issue since last year — which has been charged with drafting a bill — and Senate Republicans meeting separately in groups since January.

Baucus’ group includes fellow Democratic Sens. Dodd, Kennedy, Budget Chairman Kent Conrad (N.D.) and Jay Rockefeller (W.Va.), who on Wednesday was named chairman of the Finance Subcommittee on Health Care. Also serving on the bipartisan task force are HELP ranking member Mike Enzi (R-Wyo.), Finance ranking member Chuck Grassley (R-Iowa), Budget ranking member Judd Gregg (R-N.H.) and Sen. Orrin Hatch (Utah), a close confidant of Kennedy and the top Republican on the Finance Subcommittee on Health Care.

Even as a potentially partisan debate looms over health care policy and which direction an overhaul should go, the seeds have already been sown for possible internal Democratic battles for control over the process. One knowledgeable Democratic aide described the early jockeying as a “sort of a bucket of crabs where everybody is crawling all over each other, and as soon as one crab tries to climb to the top, another one pulls him back into the bucket.”

However, Democratic aides from all camps say they are working hard to prevent the power grab from overtaking the process.

When asked whether he was the Democrat in charge of health care legislation in the Senate, Baucus referred to himself as one of “several” leading the effort, adding that there were multiple committees with jurisdiction over the bill and that he was working hard to prevent a turf war. Baucus said he expects Kennedy to play a strong role in shaping legislation and confirmed that the two speak regularly, as do their staffs.

“I’m just working very hard to get health care this year,” Baucus said Wednesday. “There are many others who are part of this.”

Kennedy would have been the obvious choice to take the lead on the issue. It’s a subject he has been intimately involved in during his more than four decades in the Senate, he has the power to bring all of the Democratic interest groups to the table and he is a talented negotiator who has shown an ability to deal across the aisle. Hatch, among the Senate’s more conservative Republicans, is personally close to Kennedy, and the two collaborated in the 1990s on the inaugural State Children’s Health Insurance Program bill.

But with Kennedy spending most of his time away from the Senate to battle cancer, there has been speculation over who would take up the slack: Dodd — who is Kennedy’s deputy on HELP, a key committee in the passage of any health care legislation — or Baucus, whose Finance Committee also has jurisdiction over such bills. Although Democrats, including Baucus and Rockefeller, declined to refer to the Montanan as the point man on health care legislation, that’s exactly how Senate Republicans see it.

In fact, Grassley, who enjoys a close relationship with Baucus, recalls a Nov. 13 meeting in which Kennedy subtly suggested that such an arrangement had his blessing. “He pointed to Baucus as a point person in a very friendly way,” Grassley said.

Kennedy spokesman Anthony Coley said the two chairmen have been working “hand-in-glove” on the issue for months. “They’re full partners on this,” Coley said, noting that Baucus and Kennedy have co-authored an op-ed on the need for health care reform set to appear next week in a major paper that he declined to identify.

Despite the fact that their staffs meet regularly, sources say Baucus and Kennedy have been moving on slightly different tracks, with the two Senators holding separate meetings with business and interest-group stakeholders. And Baucus received approval from Finance Committee members on Wednesday to hold a closed-door session next week to discuss his goal of having a bill ready by June.

And then there’s Dodd.

Dodd’s No. 1 priority is the Banking Committee, set to oversee legislation to address the ongoing mortgage and credit crises. But Kennedy tapped the Connecticut Senator to be his chief deputy for health care last fall, and Dodd said he has been attending meetings on Kennedy’s behalf.

Additionally, Hatch said he expects to be dealing with Dodd on the upcoming health care bill should Kennedy not return to the Senate on an everyday basis, although he stressed that he has a good working relationship with and confidence in Baucus.

“I go to meetings when obviously he can’t be there — as he isn’t right now — with his staff, obviously, and to make sure we’re raising the points that he would raise in these meetings with Sen. Baucus, Sen. Grassley, Sen. Rockefeller, Sen. Conrad, Sen. Gregg,” Dodd said, adding that Kennedy would likely be back in Washington sometime next month “and will be picking up the mantle on this. This is just an interim thing here.”

The Republican-only group is led by Enzi, Grassley, Gregg and Hatch. Its purpose has not been to draft legislation but to hash out ideas and ensure Republicans are prepared to speak with one voice on the issue.

Thus far, the Republicans on Baucus’ bipartisan task force are pleased with both its progress and how they have been treated by the majority Democrats. They believe Obama’s goal of enacting health care reform by the end of the year is possible, but caution that their optimism is predicated on the Democrats not pushing for a single-payer, universal system, and including more Republican input than was included in the president’s $787 billion economic stimulus bill.

“I think it’s been the goal of all of us on the task force to get something done this year, and I think we recognize the importance of getting it done before the election year,” Enzi said. “The devil is always in the details on the policy. … That’s something the White House doesn’t do. They get to do concepts; we have to do details.”