Washington (CNN) -- The new year will bring new challenges for President Obama, but the fight for health care reform continues to top his domestic agenda as Congress prepares to reconvene.
The House of Representatives is scheduled to return from vacation January 12; the Senate meets January 19. At issue for both chambers: how to merge two sweeping bills that differ on several critical details.
A House-Senate conference committee will begin formal negotiations this month, though legislative leaders have started discussions behind closed doors.
Should the measure that emerges from House-Senate negotiations become law, it would constitute the biggest expansion of federal health care guarantees since the enactment of Medicare and Medicaid more than four decades ago.
House Speaker Nancy Pelosi and other top House Democrats will come back to Washington this week to prepare for the negotiations, two Democratic leadership aides said Monday.
Pelosi and Senate Majority Leader Harry Reid, however, have discussed the issue over the phone, aides said.
The formal negotiations are tentatively slated to begin this month. However, senior Democratic sources have noted that a formal House-Senate conference committee is unlikely to meet because of the GOP's ability to slow the legislative process in the Senate.
Leaders from both chambers may instead circumvent the traditional process through informal, high-level talks, the sources stated.
Pelosi is scheduled to huddle in her office with other House Democratic leaders Tuesday afternoon. The House Democratic leadership also plans to hold a conference call Tuesday with their entire caucus.
A similar conference call was held shortly before Christmas. Since then, House Democratic aides have drafted an analysis laying out the differences between the House and Senate bills.
House Democratic leaders are also likely to meet with Obama as soon as this week, though Democratic leadership aides say such a meeting hasn't officially been scheduled.
Democrats would like to get a final bill to Obama's desk by early February, near the time of the president's annual State of the Union address, several Democratic sources have said. Pelosi admitted last month, however, that this deadline could slip.
Many observers believe that the more liberal House measure will be largely forced to conform to the Senate bill. The traditionally fractious 60-member Senate Democratic caucus struggled to unify behind a single measure and needs to remain united in order to overcome solid Republican opposition.
The $871 billion Senate measure and the $1 trillion House plan differ on several key components, starting with financing.
The House measure is paid for through a combination of a tax surcharge on wealthy Americans and new Medicare spending reductions. Individuals with annual incomes over $500,000 -- as well as families earning more than $1 million -- would face a 5.4 percent income tax surcharge.
The Senate bill also cuts Medicare by roughly $500 billion. But instead of an income tax surcharge on the wealthy, it would impose a 40 percent tax on insurance companies that provide what are called Cadillac health plans valued at more than $8,500 for individuals and $23,000 for families.
Proponents of the tax on high-end plans argue that it's one of the most effective ways to curb medical inflation. However, House Democrats oppose taxing such policies because it would hurt union members who traded higher salaries for more generous health benefits.
In December, Obama predicted that the final bill will probably end up with a variation of both the income tax surcharge and the tax on high-end plans.
"Cadillac plans ... don't make people healthier but just take more money out of their pockets," he argued in an interview with National Public Radio.
The Senate bill also would increase Medicare payroll taxes on families making more than $250,000; the House bill does not.
Another key sticking point is the public option. The House plan includes a public option; the more conservative Senate package would instead create nonprofit private plans overseen by the federal government.
Given the reality of the 60-vote threshold in the Senate, however, there hasn't been much serious discussion among House leaders about pushing hard to keep the public option.
One of the top House liberal leaders, South Carolina Rep. James Clyburn, recently said he could vote for a bill without the government insurance plan.
"We want a public option to do basically three things: create more choice for insurers, create more competition for insurance companies and to contain costs," Clyburn said on the CBS program "Face the Nation. "So if we can come up with a process by which these three things can be done, then I'm all for it. Whether or not we label it a public option or not is of no consequence."
Individuals under both plans would be required to purchase coverage, but the House bill includes more stringent penalties for most of those who fail to comply.
The House bill would impose a fine of up to 2.5 percent of an individual's income. The Senate plan would require individuals to purchase health insurance coverage or face a fine of up to $750 or 2 percent of his or her income, whichever is greater.
Both versions include a hardship exemption for poorer Americans.
Employers face a much stricter mandate under the House legislation, which would require companies with a payroll of more than $500,000 to provide insurance or pay a penalty of up to 8 percent of their payroll.
The Senate bill would require companies with more than 50 employees to pay a fee of up to $750 per worker if any of its employees rely on government subsidies to purchase coverage.
Abortion also has been a sticking point for both chambers. A compromise with Catholics and other conservatives in the House led to the adoption of an amendment banning most abortion coverage from the public option. It also would prohibit abortion coverage in private policies available in the exchange to people receiving federal subsidies.
Senate provisions, made more conservative than initially drafted in order to satisfy Nebraska Sen. Ben Nelson, would allow states to choose whether to ban abortion coverage in plans offered in the exchanges. Individuals purchasing plans through the exchanges would have to pay for abortion coverage out of their own funds.
Nelson recently warned on CNN's "State of the Union" that he would withdraw his support if the final bill gets changed too much from the Senate version.
Despite their differences, however, the House and Senate have already reached agreement on a broad range of topics.
Both chambers have agreed to subsidize insurance for a family of four making up to roughly $88,000 annually, or 400 percent of the federal poverty level.
They also have agreed to create health insurance exchanges designed to make it easier for small businesses, the self-employed and the unemployed to pool resources and purchase less expensive coverage. Both the House plan and the Senate bill would eventually limit total out-of-pocket expenses and prevent insurance companies from denying coverage for pre-existing conditions.
Insurers would also be barred from charging higher premiums based on a person's gender or medical history. However, both bills allow insurance companies to charge higher premiums for older customers.
Medicaid would be significantly expanded under both proposals. The House bill would extend coverage to individuals earning up to 150 percent of the poverty level, or roughly $33,000 for a family of four. The Senate plan ensures coverage to those earning up to 133 percent of the poverty level, or just over $29,000 for a family of four.
Both the House and Senate bills would permit the creation
CNN's Dana Bash, Alan Silverleib and Deirdre Walsh contributed to this report.