There were some major developments in both houses of Congress on Thursday. And while it's not clear (to me) exactly why these developments took place--let alone what they mean--reform advocates both on and off Capitol Hill seem more than a little bit concerned.

What follows is a rough sketch of what's happened, based partly on printed accounts in publications like Politico and Congressional Quarterly--and based partly on conversations in the last few hours with sources familiar with the latest news.*

Let's start with the House, where the storyline is clearer. On Wednesday, House Energy and Commerce Chairman Henry Waxman announced that he had reached an agreement with four Blue Dog Democrats on his committee.

The precise terms of that agreement are still not public. But it appears that Waxman promised to trim the outlays in the bill by $100 billion overall and to change the public plan so that it would no longer pay at rates pegged to Medicare. (This is important, because paying at rates pegged to Medicare would make the plan less expensive--and, naturally, less remunerative for those who provide medical services.)

Waxman also obtained a guarantee from leadership that a full floor vote would wait until after the August recess, so that Democrats wouldn't have to take "tough" votes--to raise taxes, cut back payments to industry, whatever--without first seeing what the Senate decides to do.

The agremeent, if it holds, should allow Waxman to move legislation out of his committee. That would mean all three of the House committees working on health reform legislation will have produced bills--a historic achievement, particularly given that the three bills will remain very similar even after the amendments. And, yes, they are pretty good bills, all things considered.

But word of the compromise angered many liberals. My colleague Suzy Khimm has a dispatch from a Thursday press conference, where some liberals suggested they might not vote for a bill at all if it contains all of those compromises. Of particular concern are the changes to the public plan.

Over in the Senate, meanwhile, the Finance Committee remains the center of attention--although not, it seems, the center of productive activity.

Earlier this week, chairman Max Baucus promised (for what I believe is the ninety-seventh time) that his committee was on the verge of producing legislation. It's now became apparent (again, for the ninety-seventh time) that his committee is not on the verge of anything except, perhaps, a breakdown. 

Baucus, as you may know, has been trying to hammer out a deal with a bipartisan group of six members. But on Thursday the most conservative member of the bunch, Republican Mike Enzi of Wyoming, made it clear he didn't think it possible to get legislation ready for the August recess.

By all accounts, Enzi has been under enormous pressure from Republican leadership, which wants no bill at all and sees time as its ally. Whether Enzi was responding to their pressure or simply following his own conscience is anybody's guess. But ranking Republican Charles Grassley has made it clear he does not want to be the only Republican not from Maine voting for the bill.

And so, like Enzi, Grassley on Thursday indicated he doesn't think it's possible to get a deal in time for the recess (although neither walked away from the table). Not long after, Baucus announced publicly that there would be no markup before the recess. That's where things stand now, pending further announcements.

Of course, if the Republicans hadn't slammed on the brakes, some Democrats might have. West Virginia Senator Jay Rockefeller, who has spent most of his career championing health care reform and is chairman of the health subcommittee on Finance, has been stewing for weeks. He feels marginalized--note that he's not among the six bipartisan members at the table--and, more important, he doesn't like the legislation the bipartisan group is producing.

Rockefeller has been particularly angry about a proposal from North Dakota Democrat Kent Conrad, who is part of the bipartisan group, to create co-ops rather than a true public insurance option. (They've had several heated exchanges, according to several sources.) On Thursday, Rockefeller fired off a series of letters demading information about the idea--which is Rockefeller's way of attacking it as inadequate.

Lurking behind this dispute is a deeper division among the Finance Democrats, over not just the public plan but also the overall size of reform and--in particular--how to pay for it. And, to be clear, it's not just Rockefeller angry at Baucus and the bipartisan group of six. Charles Schumer is right there with Rockefeller, along with some of the other committee liberals. Oregon Senator Ron Wyden is also unhappy with the process, although his ongoing advocacy for the Health Americans Act--the bill he wrote and has been promoting for two years--means he's more or less operating on his own, at least within the committee.

The White House, anong others, has been pushing to get a bill--any bill--out of Finance, just to keep the process moving along. But this dissension among Democrats would make it difficult to pass a bill out of Finance on a straight party-line vote. Even if that were possible, the division among Finance Democrats mirrors division within the Senate Democratic caucus as a whole.

What happens next? I'm not quite sure. While delays would seem to strengthen the opponents of reform, an August vote was already off the table anyway. It's not clear this latest stoppage in Finance, at least, is a problem for its own sake. If anything, a little respite might do some good. It's easy to forget, but congressional staff and the members themselves are human beings, prone to same behavior as anybody else when under stress. Everybody is tired and on edge. Tempers are flaring. This is not an environment conducive to progress of any sort.

Nor is dissension always the apocalpytic sign Washington, particularly the media, makes it out to be. The liberals' concern about Senate Finance negotiations were absolutely warranted; in order to satisfy the likes of Enzi and Grassley, the bipartisan group was producing a bill whose resemblance to real reform was becoming more and more difficult to discern. They are right to raise a fuss publicly--and, indeed, should probably have fussed like this earlier. In an ideal world, one way or another this latest episode will shake things up in a way that produces better legislation.

Still, the numbers in the Senate are what they are. Getting 60 votes is not easy to do if the only Republicans supporting reform are the two Senators from Maine, neither of whom has pledged support anyway. Without more conservative Republicans to provide political cover, Democrats like Ben Nelson and Mary Landrieu get very, very antsy. Yes, it'd be nice if they didn't need that cover in the first place. But, to paraphrase the great Donald Rumsfeld, you go to war with the Congress you have.

And, yes, there's always the budget reconciliation process, where you need just 50 votes--rather than 60--to pass a bill. But it's a risky option, at best, given the complicated rules for what the Seante can--and cannot--consider as part of the reconciliation process.

More worrisome still, Democrats still haven't agreed among themselves on the most challenging issue in reform: how to pay for it. There's no shortage of viable ideas on that front. Senator John Kerry's proposal to tax health benefits by taxing insurers, rather than the insured, offers some hope for a broadly acceptable compromise. But the Democrats aren't there yet.

Will they get there soon? And get there in time? It's the question not just about financing, but about reform as a whole. And one to which I don't have a really solid answer right now.

*Update: As often happens, I'm feeling a bit less glum after a (half) night's sleep. Also, keep in mind--as always--that I know far less about the political process than I do about policy.

--Jonathan Cohn

Related: Scenes From the Progressive Revolt
Waxman Closes the Deal

Baucus Sets a Deadline