President Barack Obama on Tuesday welcomed progress on health care overhaul as Senate Democrats and the administration closed in on a deal with hospitals to help pay for his proposed expansion of medical coverage to the uninsured.

Several officials said Monday that after talks involving the White House and Sen. Max Baucus, the chairman of the Senate Finance Committee, that hospitals were on the verge of agreeing to reduce their anticipated payments from Medicare and Medicaid by about $155 billion over a decade. The government could use the money to help provide health coverage to millions who now lack it.

The officials said a White House announcement was possible as early as Wednesday, with Vice President Joe Biden standing in for a traveling president. The officials spoke on condition of anonymity, citing the confidential nature of the discussions.

Planned federal payments to hospitals for their care of uninsured and low-income patients would be trimmed by 10 percent a year after 2014, saving perhaps $40 billion, according to one lobbyist. Delaying the cuts would give people a chance to buy insurance under the new system the legislation creates, presumably reducing the size of the uninsured population.


In a White House statement, Obama said he was pleased with the progress and reiterated his support for creation of a government-run plan to compete with private insurance. "One of the best ways to bring down costs, provide more choices and assure quality is a public option that will force the insurance companies to ... keep them honest," he said.

Obama wants to sign a comprehensive bill in October that would reduce health costs and provide coverage to the nearly 50 million uninsured Americans. The next few weeks are critical in Congress as various committees craft legislation that Democrats hope the House and Senate can vote on before the August recess.

Separately, the White House expressed its support for creation of a program to help families struggling with long-term care costs, calling the program innovative and saying it should be part of health care overhaul. The voluntary insurance program sponsored by Sen. Edward M. Kennedy, D-Mass. would pay a modest daily cash benefit of at least $50 that people could use for a range of in-home services or nursing home expenses.

Kennedy's own Senate health committee will include the long-term care provisions in its version of health care legislation.

Baucus, D-Mont., and other committee Democrats have been negotiating with Iowa Sen. Charles Grassley and a small group of other Senate Republicans in hopes of agreeing on a bill that could command bipartisan support.

Baucus is under pressure to draft legislation quickly so Democrats can keep to their timetable. At the same time, Grassley faces political pressure from some Republicans opposed to handing Obama and the Democrats a bipartisan victory on such an important issue.

One sticking point is the demand by some Democrats for the government to offer insurance in competition with private companies. Republicans strongly oppose the idea. Possible compromises include creation of a nonprofit cooperative to compete with insurance companies, rather than empowering the government to do it.

Democrats and Republicans also would have to agree on what, if any, requirement the legislation would impose on individuals to purchase insurance, and on large employers to subsidize it for their workers.

A second Senate committee is aiming to complete work on its version of health care legislation this week, but a bipartisan deal in the Health, Education, Labor and Pensions Committee looked next to impossible as the panel resumed work Tuesday.

"I know we're not there yet but that doesn't mean that we can't achieve that," Sen. Chris Dodd, D-Conn., said of a bill with GOP backing. Dodd is leading the committee in the absence of Kennedy, who has brain cancer.

"This bill still spends too much, taxes too much and does too little to reduce health care costs," countered Wyoming Sen. Mike Enzi, the top committee Republican.


A major unresolved issue involves sophisticated biotech drugs used to treat cancer and other ailments. These costly medications don't face generic competition because the Food and Drug Administration doesn't have the power to approve copies, and Congress has been arguing for years about changing that.

Kennedy had agreed previously to a 12-year exclusivity period before generics can be introduced. But the Obama administration is pushing for seven years, and the powerful AARP lobby has declared it won't support the overall bill if the monopoly period is more than double digits.

Committee Democrats appear to be nearing agreement on a lower number, angering the biotech industry and some Republicans who thought they had a deal with Kennedy.

Separately, Democrats in the House hope to unveil a revised bill of their own this week.

Associated Press writers Erica Werner and Alan Fram contributed to this report.