Health reform gets House boost, battle heads home

WASHINGTON (Reuters) - Democrats pushed forward healthcare reform legislation in a key congressional panel on Friday but the battle over President Barack Obama's top domestic policy goal looked ready to move outside Washington as lawmakers prepared for a month-long break.

With opinion polls showing the public wary of the cost and scope of the healthcare legislation, Democrats said they needed Obama to keep up the pressure as they lobby their constituents to support legislation to rein in costs, improve care and cover most of the 46 million uninsured Americans.

"We need to go out and make an impressive case over August," White House political adviser David Axelrod told reporters after meeting with House of Representatives Democrats.

The third and last House panel, the Energy and Commerce Committee, approved its healthcare legislation by a vote of 31-28 after accepting changes to win votes of some fiscal conservatives and hold liberal support. Five Democrats joined all the Republicans on the panel voting against the bill.

With a price tag of $1 trillion over 10 years, the bill would set up a new government-run health insurance program and allow states to set up nonprofit insurance cooperatives to compete with private insurers.

Among insurance reforms, it would bar insurers from rejecting coverage if a person already has a medical condition. Most large employers would be required to help provide insurance for workers, and subsidies for individual coverage would be increased.

Obama has staked much of his political fortune on winning overhaul of the $2.5 trillion healthcare system this year to expand insurance coverage to most Americans and hold down skyrocketing growth in medical costs, which he has described as central to long-term economic recovery.

During the summer recess, lawmakers are expected to return to their congressional districts and try to sway public opinion to their side on the issue of healthcare, with Republicans trying to stop the legislation with arguments that it would decrease competition in healthcare and insert the government into personal health decisions.

The Republican National Committee is spending nearly $1 million on television and radio ads in 33 states targeting Senate leaders and fiscal conservatives of the House.

Many conservative Democrats could be vulnerable in the 2010 midterm elections -- one reason that Obama and his fellow Democrats who control Congress are eager to put healthcare behind them by the end of this year.

As for Democrats, House Speaker Nancy Pelosi has zeroed in on the insurance industry, which, unlike hospitals and drug companies, has not found ways to help pay for health reform. Democrats see insurance companies with high costs and restrictions on care and coverage as an easy target for populist criticism.

'GLORY DAYS'

"The glory days are coming to an end for the health insurance industry in our country," Pelosi said, adding that Democrats would counter the industry's "shock and awe carpet-bombing campaign" to keep the status quo.

Many industry and consumer groups backing healthcare reform also plan to speak out, including the AARP seniors' group and the American Medical Association doctors' group.

While the president has set the overall goal, he left the tough details to lawmakers in the House and Senate, which are both now working on specific reform legislation.

That effort was dealt a major setback on Thursday when Senate Democrats said they had not made sufficient progress in their effort to reach a bipartisan bill to permit a vote in the Finance Committee before they leave next week.

In the House, Democratic leaders agreed to a package of changes including savings in drug costs including expansion of subsidies for the poor to appease liberals upset with an earlier deal made with fiscal conservatives in their party.

"We've agreed that we need to pull together," House Energy and Commerce Committee Chairman Henry Waxman told reporters.

The panel also reversed a ban on government bargaining with manufacturers for lower drug prices for Medicare, the government insurance program for the elderly and disabled and, while allowing for cheaper biotech drugs, agreed to give brand-name drug manufacturers of these expensive drugs 12 years of protection from generic competition.

Waxman's panel is the last of three House committees to vote on healthcare legislation, and the deal pushed off until September the intra-party arguments over the shape of the final bill the full House expects to vote on in September.

But as discussions drag on, more Americans are voicing doubt over the reform plan, with many worried that a costly overhaul could reduce the quality of their care and limit choices of doctors.

STATES WORRIED

California Governor Arnold Schwarzenegger, a Republican, cautioned that Washington was pushing more of the cost of care for the poor onto states that can ill afford it. Although he told congressional leaders he supported expanded coverage, he said the plan underway in the Senate would cost California $8 billion more a year.

"I cannot and will not support federal healthcare reform proposals that impose billions of dollars in new costs on California each year," he wrote in a letter to congressional leaders.

The White House and leaders of the Democratic-controlled Congress had hoped the final committees mulling the measure -- the House Energy and Senate Finance panels -- could end deliberations before the August recess.

While the Senate Finance Committee will not have a final plan to vote on before the recess next week, its chairman said it will work during the month to craft a plan that will garner some Republican support when Congress returns in September.

(Additional reporting by Andy Sullivan, Susan Cornwell and Richard Cowan, Writing by Jackie Frank; Editing by Will Dunham)