By LAURA MECKLER and GREG HITT

WASHINGTON -- A key Senate committee, pressed to find ways to pay for a health-care expansion, is considering cuts in Medicare that would kick in automatically if other efforts to trim spending in the program fail.

Senate Finance Committee Chairman Max Baucus (D., Mont.) presented the plan to members of the committee this week, and it is under discussion as part of the effort to pass a bill overhauling the U.S. health-care system, committee aides said.

Mr. Baucus is also looking for ways to ensure that employers don't drop coverage for their employees when new insurance options become available. He pitched a plan that would require companies that don't cover their workers to pay part of the bill if those employees get government help, including, for the first time, part of the cost of Medicaid, the health program for the poor.

The Finance Committee is navigating a thicket of complex issues in an effort to reach a bipartisan agreement. The committee is one of several in Congress trying to craft a deal that aims to reduce the ranks of uninsured Americans and bring down health-care costs over the long term.

One of the toughest problems is how to pay for the overhaul. The Congressional Budget Office this week estimated that one version of the plan under consideration would cost more than $1.6 trillion over 10 years. The committee is working to bring that figure down, but would need substantial cuts to current spending, plus tax increases, to pass a bill that doesn't add to the deficit, as Democrats have vowed.

In a meeting Wednesday, Mr. Baucus suggested that Congress set a cost-cutting goal for Medicare -- for instance, a 1.5% annual reduction from projected spending, Senate aides said. To meet it, the Medicare Payment Advisory Commission, or MedPAC, would suggest policy changes to meet that goal. Congress could then approve or reject the entire package, bolstering its chances.

In the past, Congress has been reluctant to make politically difficult cuts to Medicare spending due to protests from industry and patients.

President Barack Obama praised the Medicare proposal and noted that many cost-cutting MedPAC recommendations haven't been implemented. But the plan being considered would go further. If the congressionally set target remains unmet, automatic across-the-board cuts would kick in.

"We do not want to pass legislation and then, five years down the road, look back and say, 'Why didn't this work?' " one committee aide said.

The provision also is meant to satisfy doubts registered by the CBO over whether cuts would really happen. The automatic trigger would allow the CBO, which serves as official referee on the budget impact of legislation, to credit the cuts against the new spending, Senate aides said.

The provision wouldn't replace other spending cuts being considered, including more than $600 billion over 10 years proposed by the White House. Instead, it would serve as a backup in case these or other Medicare cost-cutting measures fail to materialize.

Congress passed a similar Medicare cost-cutting trigger in 1995, but then-President Bill Clinton vetoed it. Many industry groups oppose the approach, saying it is too blunt.

The proposal on employer contributions is meant to discourage employers from dropping workers once new options are available, as CBO has said they would absent other incentives.

Mr. Baucus stressed to the senators that no employer would be required to provide coverage. He said businesses would be required to shoulder 50% of the cost if their employees ended up in Medicaid, or 100% of the cost if they received federal subsidies to help purchase insurance through a newly created insurance exchange.

After senators met Wednesday, Mr. Baucus backed away from plans to release a bill on Friday and force committee action next week. Instead, committee action is now expected in July, a delay that could make it difficult to move the sweeping initiative through the full Senate before an August break, as Democrats still hope.

Some senators have raised concerns that companies would be discouraged from hiring low-wage workers and the disabled, who often rely on Medicaid for insurance, people familiar with the meeting said. Some also voiced concern that the proposal could penalize companies in low-wage states.

Write to Laura Meckler at laura.meckler@wsj.com and Greg Hitt at greg.hitt@wsj.com