Senate Majority Leader Harry Reid (D-Nev.) on Tuesday ordered Finance Chairman Max Baucus (D-Mont.) to drop a proposal to tax health benefits and stop chasing Republican votes on a massive health care reform bill.

Reid, whose leadership is considered crucial if President Barack Obama is to deliver on his promise of enacting health care reform this year, offered the directive to Baucus through an intermediary after consulting with Senate Democratic leaders during Tuesday morning’s regularly scheduled leadership meeting. Baucus was meeting with Finance ranking member Chuck Grassley (R-Iowa) Tuesday afternoon to relay the information.

According to Democratic sources, Reid told Baucus that taxing health benefits and failing to include a strong government-run insurance option of some sort in his bill would cost 10 to 15 Democratic votes; Reid told Baucus it wasn’t worth securing the support of Grassley and at best a few additional Republicans.

By Tuesday afternoon, the Finance Committee began looking at ways other than taxing health benefits to deliver a health care overhaul that costs less than $1 trillion and is deficit-neutral, as Baucus wants.

“This was discussed in the weekly Democratic leadership meeting,— one Democratic source confirmed Tuesday afternoon. “These concerns were relayed to [Baucus] later on.—

Baucus for months has worked with Grassley on a health care reform bill that could garner bipartisan support. But the Finance chairman was forced last month to delay the markup of his committee’s bill because such a compromise remained elusive.

The Senate Health, Education, Labor and Pensions Committee is set to complete the markup of its health care reform legislation this week or next. One senior Democratic Senate aide warned Tuesday that further delays by the Finance Committee could result in the planned merger of the two panels’ bills being scrapped in favor of allowing each one to move to the floor on its own.

The HELP bill is unanimously supported by the panel’s Democrats, with all Republicans opposed. It was drafted with liberal reform goals in mind, including health care policies that many Democrats have sought for decades.

“The longer Baucus takes, the trickier it gets,— the senior Democratic Senate aide said.