Reforming the nation’s health care system is a process so complicated and full of philosophical and political potholes that most of those involved are downright stunned at how well it’s going so far.

The impetus for the action is a failing health care system. About 48 million Americans are uninsured. And rising costs of health care are gobbling up more and more of the economic pie—it’s expected to cost $2.5 trillion this year, consuming 17 percent of gross domestic product. In the current recession, businesses are struggling with health care costs.

Both the House and Senate held hearings this week, and leaders are hoping to vote on bills by July 4, or at least before the August recess. “Who knew they would get this far this fast?” says Ed Howard, executive vice president of the Alliance for Health Reform, a nonpartisan educational group. “They’re even still talking to each other across the partisan divide, at least in the Senate.”

Although numerous stumbling blocks remain, progress on several fronts already has many involved in health reform optimistic:

* The various lobby groups that helped kill health reform 15 years ago are holed up together with advocates of reform, working through details of a bill under the auspices of Sen. Edward Kennedy, D-Mass.

* Although there are several sticky issues, some aspects of reform meet widespread agreement across different interest groups and parties. One major point of agreement is that everyone needs access to health insurance.

* Democrats in both chambers have set aside the usual jurisdictional power squabbles. In each chamber, the chairmen of the relevant committees plan to produce similar legislation.

* Insurance companies have offered several major concessions. They would quit the process of barring people from getting insurance if they have preexisting medical conditions and would stop charging sick people higher premiums—if the government expands the pool of customers by requiring that everyone carry insurance.

* The White House has offered a plan, including $634 million in tax hikes and spending cuts to pay for it. President Obama has taken a mostly hands-off approach to the details of the legislation since then, a tactic that has been mostly well-received on the Hill.

“The process is moving very fast,” said John Rother, AARP’s director of policy, who adds that the next six weeks will be intense as the committees hold more hearings, craft bills and take votes.

The Senate is expected to produce bipartisan legislation, at least in part because of the close working relationship between Finance Chairman Max Baucus, D-Mont., and top Republican member, Chuck Grassley of Iowa.

In contrast, the House, where Democrats hold a wider majority, is expected to pass a more liberal version of reform. But flashes of partisan rancor flared up during a hearing Wednesday of the Ways and Means Committee. Republican Rep. Dave Camp of Michigan argued with Democrats about his party getting to choose only one of the six witnesses for a hearing. He called for more bipartisanship on health reform. Camp contended that Democratic support for a government-sponsored health plan that would compete with the private sector was misguided. Medicare is proof that government plans aren’t always the best, he said, adding that many beneficiaries buy medigap insurance because they aren’t satisfied with the program. And Medicare patients have higher hospital readmission rates, he said. “The government doesn’t always do it adequately.”

Ways and Means Chairman Charles Rangel, D-N.Y., said in an interview that he expects the main disagreement in the House to concern whether to include a so-called public plan. Many lawmakers want to require that everyone has coverage, but the question is how to make insurance affordable to the people who can’t now afford the premiums and other costs. Democrats—including candidate Barack Obama on the campaign trail—proposed setting up a government-sponsored insurance plan that would keep the costs down. People with their own insurance or with plans sponsored by their employers could keep that coverage. But the new “public plan” would in theory provide an affordable alternative.

Many Republicans hate the idea. A government-run plan would have an unfair marketplace advantage and could drive private insurance companies out of business, they say.

John Murray, a spokesman for Rep. Eric Cantor of Virginia, the Republican whip, called the public plan a “Trojan horse” that would lead to nationalized health care. The question, he says, is “should the government be at the steering wheel, or should the private sector? We do not believe you need a new government-centric solution.”

And businesses are leery, said Kenneth L. Sperling of Hewitt Associates and the National Coalition on Benefits, because government plans like Medicare reimburse medical providers less, so that they end up shifting costs onto patients with private insurance. “That would be an unlevel playing field,” if the federal government’s plan was allowed to set rates the way it does with Medicare, said Robert Zirkelbach, spokesman for the trade group America’s Health Insurance Plans.

Although Obama had backed the public plan during the campaign, the White House said recently that it was open to compromise. Rangel says the public plan definitely will be part of the House bill and that Congress should take the lead on reform specifics is consistent with the White House approach. But, he adds, “sooner or later they’ve got to jump in the pool with us.”

Other big issues

Whether to have a public plan is part of the larger question of how to cover everyone. Two other major issues are how to pay for reform and how the regulation of the new health system will work.

In sorting out how to cover everyone, Congress must decide whether individuals are required to have insurance and whether employers are required to provide it. In the current system, employers have a choice. Most large companies offer health insurance, although not all workers can afford the escalating premiums. But many smaller businesses cannot afford to offer their employees coverage.

AARP’s Rother says the Massachusetts law requiring insurance for all residents shows that coverage for all is workable. The uninsured rate there has dropped to 2.6 percent, while the national average is 15 percent.

In paying for a system that insures more people, Congress is likely to spread the pain around. Reform advocates hope that they can cut costs by improving the quality of care—for instance, by having Medicare reward hospitals and doctors that do a better job of healing people, thereby reducing medical complications and hospital readmissions that jack up costs.

“The biggest stumbling block is how to pay for it,” says Howard of the Alliance for Health Reform. “Even in this town, a trillion here and a trillion there, and pretty soon you’re talking about real money.”

Despite the many difficult issues, those watching the reform process say there is an impressive amount of agreement on issues like improving medical information technology, better research on which treatment options are most effective and rewarding good performance by doctors and hospitals.

“That would be a big change,” Rother says of the pay-for-performance concept. “Our current fee-for-service system rewards volume, not value.”

If the Senate and House vote on legislation before the August recess, then negotiations between the two will begin in earnest, so that final votes could come as early as September.

Interest in health reform is so high that Howard’s reform group posted an online sign-up for a briefing Monday on the public plan issue, and the 250-person capacity was reached in two hours.

All across the philosophical spectrum, when people talk about the current health care system, they often use the word “unsustainable.” That, many of them say, is why they believe reform could pass this year.

Zirkelbach said that his insurance trade group did not support reform 15 years ago when the Clinton administration tried an ambitious overhaul. But now, “we do not believe the status quo is acceptable.”

Tamara Lytle was a correspondent and Washington bureau chief for the Orlando Sentinel from 1997 to 2008.