Democrats scramble for new healthcare approach

House Majority Leader Rep. Steny Hoyer (D-MD)(L-MD) speaks at a press conference where a plan to deal with executive compensation at companies which received capital under the Troubled Asset Relief Program (TARP) was announced on Capitol Hill in Washington, March 18, 2009.

WASHINGTON (Reuters) - Democratic congressional leaders promised on Wednesday to push ahead with healthcare reform despite a stinging setback in a Senate election, but failed to agree quickly on a new approach.

The victory of Republican Scott Brown, who rode a wave of voter anger on the health bill and other elements of President Barack Obama's agenda to an upset in Massachusetts, denied Democrats the 60th Senate vote they need and left them with a handful of alternatives with significant drawbacks.

Senate Democratic leader Harry Reid said lawmakers would take a few days to explore their options and would not push through a healthcare bill before Brown takes his seat in the Senate.

"We're not going to rush into anything," Reid told reporters after a meeting of Democratic senators. "There are many different things that we can do to move forward on healthcare, but we're not making any of those decisions now."

Democrats were divided on how to proceed on the issue, with nearly all of the potential options for passing healthcare drawing criticism or doubts from some party members.

Obama urged lawmakers to agree quickly on core elements of the bill and signaled he might accept a scaled-back version of his sweeping healthcare overhaul, which he had made his top legislative priority.

"I would advise that we try to move quickly to coalesce around those elements in the package that people agree on," he told ABC News, citing insurance reforms, cost containment measures and help for small businesses.

House of Representatives Democratic leader Steny Hoyer suggested Democrats should focus on "that which we think the public can support." House Speaker Nancy Pelosi told the U.S. Conference of Mayors that lawmakers had received the message sent by Massachusetts voters.

'WE WILL MOVE FORWARD'

"Last night, we heard the people and hopefully we will move forward with their considerations in mind. But we will move forward," Pelosi said.

House and Senate Democratic leaders had been negotiating to merge the healthcare bills passed in each chamber into one version that could be passed again and sent to Obama.

Both bills would extend insurance coverage to more than 30 million uninsured Americans, create exchanges where individuals can shop for insurance plans and bar insurance practices like refusing coverage to people with pre-existing conditions.

The Massachusetts result had little effect on healthcare stocks on Wednesday. After rallying on anticipation of a Brown win, some health stocks drifted into negative territory in a weak market. The S&P Managed Health Care index of large insurers was down 1.4 percent in afternoon trading.

In the most discussed healthcare approach, Democrats could send the Senate bill directly to the House without changes, eliminating the need for another Senate ballot.

But many Democrats believe the House, which passed its version of healthcare reform with only three votes to spare in November, does not have the 218 votes needed to pass the Senate's version.

If that approach was used, the adjustments to the Senate bill sought by the House could be made through a parliamentary procedure called reconciliation that requires a simple majority of 51 Senate votes and can be used only for budget issues.

"Reconciliation is one of the things that we need to look at with the changed circumstances. But no decisions have been made," Reid told reporters.

Both reconciliation and passing a scaled-back version of the bill could take more time than Democrats want to spend on healthcare as they head into the campaign for November's congressional elections.

"There is a clear recognition that we've got to speak to and spend more time on the real concern people have, which is jobs and a basic sense of insecurity," Democratic Senator Robert Casey said.

For some Democrats, the failure to pass anything on healthcare after six months of work would be more politically damaging than passing an unpopular bill.

"One thing that was not suggested and will not be exercised is to do nothing. We're going forward with some path," said Democratic Senator Paul Kirk, who is temporarily filling the seat of the late Senator Edward Kennedy and will be replaced by Brown.

Republicans said American voters had spoken in heavily Democratic Massachusetts, where Brown promised to be the 41st Republican vote against healthcare reform.

"They don't want the government taking over healthcare. They made that abundantly clear," Republican Senate leader Mitch McConnell said. He told reporters he hoped the healthcare bill was dead for the year.

"We need to move in a new direction," he said.

(Additional reporting by Susan Heavey, Thomas Ferraro and Andy Sullivan; editing by Cynthia Osterman and Vicki Allen)