The battle over health policy escalated Tuesday, with President Barack Obama promising reform would put thousands of dollars annually in the pockets of American families and Republicans countering that Democrats were leading the country down the road to medical rationing.

Senate Democrats huddled at the White House in an attempt to bridge intraparty differences on health care reform, with Obama wading ever deeper into the political fight to deliver on his signature domestic campaign promise. Republicans were not invited to the meetings, which were held amid rising tensions over the direction of health care reform within the Senate Democratic Conference.

Armed with a new administration report claiming a health care overhaul would equal $10,000 in annual income for an average family of four by 2030, Democrats emerged from a day of high-level meetings with a more focused message likening reform to economic recovery and future growth. Although not completely new, this communications strategy appeared to receive a new, pronounced emphasis.

“When you’ve got health care costs rising faster than the economy of your country, this is no longer unacceptable, it’s unsustainable, so we have no choice but to get this done,— said Sen. Chris Dodd (Conn.), the No. 2 Democrat on the Health, Education, Labor and Pensions Committee and a participant in Tuesday’s White House meetings.

In a 56-page report from the president’s Council of Economic Advisers titled “The Economic Case for Health Care Reform,— the Obama administration contends that overhauling health care will generate a jump in annual income of $2,600 for the “typical— family of four by 2020, with that increase hitting $10,000 annually by 2030.

Meanwhile, Senate Republicans stepped up their rhetoric, staking out what they call a pro-health care reform position that is squarely against a government-run insurance option, commonly referred to as a public plan. That is likely to be a deal-breaker for Obama and most Democrats.

[IMGCAP(1)]In a twist on their standard health care message that underscores their agreement with Obama and Senate Democrats on the need to lower costs and increase access, Senate Republicans argued that reform legislation must not diminish the quality of American health care, which they contend is among the best in the world. The word “rationing— is key to their rhetorical arsenal and one that they’re likely to constantly repeat.

Senate Republicans, realizing they don’t have the votes to stop a Democratic health care bill on their own, are relying on a strategy designed to win the public relations battle over defining what it would mean to create a public plan. By the time the Democrats introduce a bill on the floor, Republicans hope to have made it politically impossible to vote for anything that includes a public plan.

“Americans need to realize that when someone says government option,’ what could really occur is a government takeover that could soon lead to government bureaucrats denying and delaying care and telling Americans what kind of care they can have,— Senate Minority Leader Mitch McConnell (R-Ky.) said Tuesday.

How to pay for health care is the other major issue to be worked out — one that continues to concern Senate Democrats and Republicans.

“It is incredibly important that we get the cost effects of all this right because we’re on a course that’s absolutely unsustainable,— Senate Budget Chairman Kent Conrad (D-N.D.) said. “It’s entirely possible we could bend the cost curve the wrong way.—

Finance Chairman Max Baucus (D-Mont.) emerged from the Tuesday meeting with Obama expressing confidence that the House and Senate could pass health care bills before adjourning for the August recess.

Obama said the period before the recess is “make or break— for passing bills in each chamber.

Accordingly, the plan is for the two chambers to negotiate a conference report in September and get a bill to the president’s desk by October.

Prior to all of that, Baucus, the lead Democrat on health care, and HELP Chairman Edward Kennedy (D-Mass.), who is battling brain cancer, must merge the bills that they are marking up in their respective committees.

Senate Majority Leader Harry Reid (D-Nev.) on Tuesday expressed optimism that melding the bills would go smoothly, while affirming the possibility of a floor vote on health care reform before August. But divisions within the Democratic Conference persist, as Baucus favors a bipartisan outcome versus Kennedy’s push for liberal priorities.

Before the Tuesday meetings at the White House, Baucus said a significant Republican buy-in was necessary to ensure that the reform legislation takes hold and lasts over the long term. He cited Medicare as an example, noting its passage by wide margins on both sides of the aisle and the fact that the program endures.

But Senate Democratic Conference Vice Chairman Charles Schumer (N.Y.), an influential member of his caucus, signaled that bipartisanship should not be prioritized over good policy. Schumer, an outspoken advocate of the public plan option, met privately Tuesday with White House health care czar Nancy-Ann DeParle.

“Hopefully you can get reform that is bipartisan,— Schumer said. “Our first hope would be to get it bipartisan, and we’ll see what happens.—

Although no Republicans were invited to the White House for Tuesday’s series of meetings, Obama’s staff stressed the president’s desire for bipartisanship.

“The president wants this to be a bipartisan process,— a White House official said. “He has met with Congressional Republicans throughout the process, and he’ll continue to do so.—

But foreshadowing the fights to come, Sen. Judd Gregg (R-N.H.) reiterated Tuesday that inclusion of a public plan in health care reform is a nonstarter for the GOP.

Gregg, who sits on Finance and has praised Baucus’ effort at bipartisanship, said he is pessimistic that the bill that ultimately makes it to the floor will be able to garner his support and that of his GOP colleagues. Gregg this week unveiled his own blueprint for health care reform.

“I think it’s going to be very challenging. A public plan is nothing more than a stalking horse for a single-payer system,— Gregg said. “It leads inevitably to a nationalized system. If that is a prerequisite for the president to have a plan — that there must be a public plan option — it’s going to be very hard for Republicans to participate in that.—

Keith Koffler contributed to this report.