Senate Finance Chairman Max Baucus (D-Mont.) continued working with Republicans on a bipartisan health care bill Wednesday, despite an urgent warning from Senate Democratic leaders that the potential cost of wooing GOP votes could have a devastating effect on Democratic support for the measure.

Majority Leader Harry Reid (D-Nev.) told Baucus on Tuesday that any health care reform plan should include a White House-backed, government-run insurance option and that he should abandon a proposal to tax health benefits as a means to finance it. But Baucus insisted Wednesday that taxing benefits and alternatives to a robust public plan remained in play.

“Everything’s on the table,— the Finance chairman said in a line that he repeated throughout the day. “By far the better approach is a bipartisan approach to get this moving.—

Baucus indicated he was attempting to thread a needle that would keep Republicans — who have supported taxing benefits to offset the massive bill — on board with a potential bipartisan bill, while softening the language to make Democrats more comfortable.

Baucus’ calculation, Democratic sources said, is that Democratic leaders and President Barack Obama would be hard-pressed to ignore any measure that attracts bipartisan support if the Finance chairman is actually able to get it done.

Baucus on Wednesday also sought out one-on-one meetings with centrist Democrats who have been cool to a public plan in an attempt to find out what they can support, one senior Democratic aide said.

But despite Baucus’ insistence that all options remain under consideration, top Democrats and Republicans signaled otherwise. Following a late-afternoon meeting of Finance Democrats, Conference Vice Chairman Charles Schumer (D-N.Y.), who strongly supports the government-run insurance option and opposes taxing health insurance benefits, said there were “lots of viable alternatives— to pay for the bill.

Sen. Jay Rockefeller (D-W.Va.), a senior member of Finance, was more blunt, saying flatly that both taxing benefits and alternatives to a public plan — such as a nonprofit health insurance cooperative — are virtually dead.

“Whether some think it is [viable] or not, it isn’t,— Rockefeller said, regarding the proposal to tax benefits. He added that the cooperative proposal is also off the table.

Even as Baucus appeared to cling to the idea of taxing benefits, Republicans who met with Reid on Wednesday appeared willing to forgo the revenue-raiser. Republicans have supported this idea in theory but have been hesitant to press for it absent Obama’s backing. The president campaigned last year against taxing health insurance benefits, equating it to a levy on the middle class.

[IMGCAP(1)]Reid came away from his meeting with four Finance Republicans — ranking member Chuck Grassley (Iowa) and Sens. Olympia Snowe (Maine), Mike Enzi (Wyo.) and Orrin Hatch (Utah) — with a sense that they were prepared to abandon the idea of taxing health care benefits, one senior Senate Democratic aide said. A GOP aide also said Republicans are not necessarily wedded to the idea.

Reid’s meeting with the GOP Senators appeared at odds with the revelation that he had strongly urged Baucus to get on board with the majority of the Democratic caucus by putting a public option into his bill and giving up the idea of taxing benefits. Reid’s directive to Baucus was widely seen as a push to eliminate negotiations with Republicans altogether, given their staunch opposition to a public plan and their preference for paying for health care reforms by taxing health insurance benefits.

Democratic aides said Reid met with the four to smooth any ruffled feathers, gauge their seriousness about supporting an overhaul of health care and find out what elements they could support once a bill makes it to the Senate floor.

“It was a very constructive meeting, and bipartisan talks are going to continue — and not continue under a very hard timeline,— Grassley said afterward. “And I think that’s very good progress coming from the meeting we just had.—

Grassley said Reid assured Republicans that news reports suggesting he was not interested in working with them “weren’t entirely accurate.—

The senior Senate Democratic aide said the Republicans’ comments about Reid indefinitely extending his July 20 deadline for health care to hit the floor “were a little too strong.— Reid remains committed to passing a bill out of the Senate by the August recess, the aide said.

Enzi expressed doubt about whether Reid would really give Baucus enough time to craft a bipartisan deal. “I don’t know,— he said when asked whether Democratic leaders were just posturing on their deadlines or whether they would allow time for reaching a bipartisan deal.

Democratic sources said Democratic leaders still do not see Republican support for health care reform as sustainable in the long run — even if Baucus succeeds in persuading a handful to back the bill that he ultimately pushes through his panel. That calculation played heavily into Reid’s decision Tuesday to encourage Baucus to abandon efforts that were sure to cause more Democrats to drop off the proposal and make it harder for the Senate to pass anything.

One Democratic Senator said leaders are focused on unifying the majority party.

“The question now is, how do we get the Democrats,— the Senator said.