July 29 (Bloomberg) -- Senators negotiating a plan to
overhaul the U.S. health-care system said they are closer to a
deal even as House Democratic leaders signaled they will likely
miss a deadline to vote before a month-long recess.

The lawmakers are struggling over how to carry out
President Barack Obama’s goal of covering tens of millions of
uninsured Americans while curbing health-care costs, which make
up almost 18 percent of the world’s largest economy.

Democratic Senator Max Baucus, leading the talks among six
Democrats and Republicans on the finance committee, said they
made progress and will meet again today. House Democrats have
failed to reach a consensus, prompting Obama’s chief of staff,
Rahm Emanuel, to go to Capitol Hill yesterday for more than
seven hours of talks with lawmakers.

“We reached an agreement on a couple of very key points,”
Baucus told reporters after meeting with the other senators.

The Montana lawmaker earlier said the Senate plan will
likely include a provision taking away from Congress the
authority to set pay rates for Medicare, the U.S. program for
the elderly, and give it to a federal commission less subject to
political pressure. And it would probably ban insurers from
refusing to cover people with pre-existing medical conditions.

In the House, the legislation is tied up in the last of
three committees that consider it before a floor vote. The
disputes range from the more than $1 trillion cost of the
legislation to how deeply the government should get involved in
the insurance market.

‘Much Work’

Majority Leader Steny Hoyer said even if lawmakers settle
their differences, “It’s doubtful we can move it ahead” before
the August recess because “we have so much work to do on the
bill once it gets out of committee.”

A House delay would be the second setback in a week for
Obama’s top domestic priority. The Senate last week postponed a
floor vote until September.

Obama, who had set an August deadline for the House and
Senate to pass legislation, travels to North Carolina and
Virginia today in his bid to build support for transforming the
medical system. He pressed his case at the headquarters of the
biggest advocacy organization for retirees, AARP, yesterday.

“We’re now closer to health care reform than we ever have
been,” he said.

Insurer ‘Giveaways’

The president said emphasizing preventive care, converting
records from paper to electronic form and scrapping
“giveaways” to insurance companies in Medicare will save money
to help fund his proposal.

Health-care spending will consume about a third of the
gross domestic product by 2040 if costs rise at historical
rates, according to the administration.

Emanuel, Obama’s chief of staff, conferred with House
Speaker Nancy Pelosi, Hoyer and members of the so-called Blue
Dog Coalition of Democrats, who object to the bill’s cost and
structure.

The Blue Dogs are holding up the bill at the Energy and
Commerce Committee, and Hoyer said talks will continue with them
and panel Chairman Henry Waxman, a California Democrat.

Many issues remain unresolved, said Representative Mike
Ross, an Arkansas Democrat and a leader of the Blue Dogs.

“It might be impossible to come to a resolution on some of
them just because of ideological differences,” Ross said. The
Blue Dogs are prepared to relent on some issues because “the
legislative process is always about give and take,” he said.

Negotiations Timetable

Obama had wanted to have House and Senate bills passed by
early next month so negotiations on a compromise could begin
when lawmakers return in September.

“The legislative process has a lot of twists and turns,
and we all recognized that,” David Axelrod, a senior Obama
adviser, said in an interview. “The main thing is to keep this
process moving forward.”

Republicans opposing the Democratic proposals vowed to use
the recess to listen to what they say are growing voter concerns
over the cost and potential new taxes from overhaul plans.

“This is something that shouldn’t be rushed,” said Senate
Republican Leader Mitch McConnell of Kentucky. “The last thing
the American people want is a do-over.”

Hoyer said lawmakers will spend the break putting together
the measures drafted by House panels. They include a new
government program similar to Medicare that would compete
against private insurers for customers on an online exchange and
a mandate that employers provide insurance or pay a fine.

Insurance Cooperatives

The Senate Finance Committee isn’t likely to include a new
government insurance program, lawmakers say. Instead, they’re
looking at setting up health-insurance cooperatives.

The nonprofit health-care cooperatives would cover 12
million people and receive $6 billion in federal startup funds,
Senator Kent Conrad said.

Hoyer said the so-called public option was a “very
important” component of the House legislation to inject
competition in the health-care market.

To help fund the legislation, Massachusetts Senator John
Kerry would tax insurers and employers who offer the costliest
health plans. Kerry said his proposal is gaining support.

“There’s certainly consensus building now that it’s fair
to ask the most expensive plans to contribute something,” he
told reporters.

The House and Senate bills must be melded and sent for
Obama’s signature.

To contact the reporters on this story:
James Rowley in Washington at
jarowley@bloomberg.net ;
Nicole Gaouette at ngaouette@bloomberg.net