Published: Thursday, 16 Jul 2009 | 3:36 AM ET

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Praising and prodding Congress at once, President Barack Obama on Wednesday said a vast reform of the nation's health insurance system is required to head off instability to families, industry and the government itself.

"Deferring reform is nothing more than defending the status quo — and those who would oppose our efforts should take a hard look at just what it is they're defending," Obama said in the Rose Garden, pushing for landmark legislation to hit his desk before Congress' August recess.

Putting more of his own political stake behind the effort each day, Obama outlined the troubles with the U.S. approach to health care coverage, with an emphasis on the cost to consumers. He spoke of soaring premiums, deductibles and out-of-pocket costs and promised with reform, "You'll save money."

"If you lose your job, change your job, or start a new business, you'll still be able to find quality health insurance you can afford," Obama promised. Once again assuring Americans who are dubious of what might be changing, he said anyone happy with their doctor and health care plan will be able to keep it.

To make his point, Obama surrounded himself with nurses and proclaimed that they're "on board" with reform.

Any proposed health care package still must clear the complexities and politics of getting through the House and Senate, with Obama's ambitious goals of slowing cost increases and bringing coverage to nearly 50 million uninsured. How to pay for the $1 trillion plan remains one of the most vexing parts of the debate.

Earlier Wednesday, a Senate panel took that chamber's first step on the plan to overhaul the $2.5 trillion industry by stepping up activity on legislation that would meet Obama's goal of giving all Americans guaranteed health care coverage.

The Senate health committee approved on a 13-10 party-line vote legislation that would set up a new government-run insurance program to compete with private insurers. The bill also would require most Americans to obtain health insurance and mandate most employers to provide coverage to their workers.

If passed by Congress, the healthcare overhaul would restructure an industry that represents one-sixth of the U.S. economy.

"No longer will insurance companies be able to deny coverage based on a pre-existing medical condition. No longer will Americans have to worry about their health insurance if they lose their job, change their job, or open a new business," Obama said of the legislation.

The House of Representatives is considering a bill that would make many of these same changes.

Insurers oppose the government-run health plan as unnecessary and say it would not lead to lower costs for consumers.

Acting Senate health committee chairman Senator Christopher Dodd praised Obama's commitment to healthcare overhaul. "He is willing to extend every bit of political capital he has ... that is an incredible commitment by an American president," he said as the committee began final action on the bill.

Healthcare overhaul is "not inexpensive, but it's a lot less expensive than the predictions were earlier," he added.

The senior Republican on the panel, Senator Mike Enzi, called the bill "a prescription for failure." He complained that Republicans were shut out of the drafting process.

"If America is going to believe in what we do, this cannot be a bill just put together by one side," he said.

In addition to healthcare coverage, the bill includes a provision sought by drug companies to give expensive biotechnology medicines protection from cheaper rivals for 12 years.

Taxes Controversial

Senators were cool to one of the most controversial parts of the House Democrats' bill, a tax on the wealthiest Americans to pay for the expanded coverage. The tax starts at $280,000 for individuals and $350,000 for a family.

"I don't think that is going to be part of the Senate Finance Committee's proposal," Senator Kent Conrad, a senior Democrat and member of the Finance Committee, told Reuters before a meeting of committee Democrats. Conrad is chairman of the Senate Budget Committee.

The second ranking Democrat in the Senate, Richard Durbin, said the Senate would not follow the House lead on taxes.

"Their (House) revenue sources will be different from ours. We have a different political mix here. We're trying to put together 60 votes; a majority that will pass," he said.

Pressed on what type of tax increases, if any, he would support, Durbin would only say that Baucus spoke at the party lunch on Tuesday and said he thought they would have to "come up with $300-400 billion he thought would be needed."

The Senate health panel is the first of five congressional committees to complete work on its version of a major overhaul for the industry. The full Senate must vote on healthcare legislation and reconcile its bill with a House of Representatives proposal before it goes to the White House.

Three House committees are to start work this week. The Senate finance panel, which has jurisdiction over how to pay for healthcare, was expected to begin debate soon, but a senior Republican said he doubted they would act this week or next.

"They tell me they are making progress," said Republican Senator Orrin Hatch, who is among a small group of lawmakers working with committee chairman Max Baucus on the effort. But asked if legislation could emerge this week or next, he said, "I personally doubt it."

Hatch also said the idea of taxing employer-paid health benefits was not going to be part of the Finance panel's plan, given opposition by both parties, and that the tax on the wealthy would meet strong opposition among Republicans.

• CNBC Special Report: Healthy Horizons

A group of Senate Democrats called for the insurance industry to submit to new fees help pay for the reforms, which they said could raise up to $100 billion over a decade.

The pharmaceutical industry has already agreed to measures that would raise $80 billion over 10 years for reforms and hospitals have agreed to $155 billion.

The far-reaching Senate health legislation would also urge Americans to become healthier.

One section requires chain restaurants with more than 20 locations to post calories on their menus. Another gives employers a larger discount for helping workers pay for wellness programs.

—AP and Reuters contributed to this report

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