Senate Finance Chairman Max Baucus (D-Mont.) emerged from a Thursday afternoon negotiating session on health care reform and conceded that the Senate is unlikely to clear a bill that lacks a public plan option.

“I think a bill that passes the Senate will have some version of a public option,— Baucus said, two days after receiving a letter from President Barack Obama that labeled a public plan one of his priorities for health care reform.

Baucus was joined during the informal news conference by Sen. Chuck Grassley (R-Iowa), the ranking member on Finance, and Sens. Chris Dodd (D-Conn.) and Mike Enzi (R-Wyo.) of the Health, Education, Labor and Pensions Committee. Dodd was standing in for HELP Chairman Edward Kennedy (D-Mass.); Enzi is the panel’s ranking member.

Despite the happy talk from the four Senators about progress and compromise, Baucus’ concession that a government-run, public insurance option will likely be included in the reform bill could sink its bipartisan support. Additional items are also making compromise difficult, including the issues of government mandates and how to pay for it.

“Our caucus is very much against [a public plan.] It’s kind of a litmus test,— Grassley said. “That’s all you can say. There’s no follow-up question that you can ask me. There’s no further statement I can make about it.—

Baucus said the meeting, which included additional Senators — both Democrats and Republicans — who have been involved in the health care negotiations, centered on resolving disagreements over the public plan.

Baucus said “progress— was made toward compromise on that issue, the Republicans’ insistence that it is a deal breaker for them notwithstanding. The Finance chairman said his committee plans to mark up its health care bill in the next three weeks. That bill will then have to be merged with a health care bill being written by the HELP Committee.

Although inclusion of a public plan could discourage Republicans from supporting the final legislation, Enzi and Grassley gave today’s meeting positive reviews, saying it was truly a bipartisan effort.

“I think we’ve been surprised with the amount of agreement,— Enzi said. “There isn’t any bill I’ve ever worked on that’s as tough as this.—