July 15 (Bloomberg) -- The Senate health committee approved legislation to overhaul the health-care system, the first Congressional panel to do so as President Barack Obama urged lawmakers to speed their work on his highest domestic priority.

The bill in the Senate Health, Education, Labor and Pensions committee, headed by Massachusetts Democrat Edward M. Kennedy, passed 13-10 today on a party-line vote. The measure, which would set a 12-year period of exclusivity for biologic drugs, will be merged with a bill that the Senate Finance Committee is struggling to complete.

Obama praised the panel’s bill and again asked the House and Senate to finish their separate legislation to overhaul the U.S. health-care system by the August recess. The president is seeking a bill that would cover the country’s estimated 46 million uninsured and control medical costs. Efforts have slowed while Congress tries to pay for the plan and lawmakers call for more time for debate.

“We’re now closer to the goal of health reform than we have ever been,” Obama said today at the White House. “We are going to be continually talking about this for the next two to three weeks, until we’ve got a bill off the Senate and we’ve got a bill out of the House. Then we’ll deserve a few weeks rest before we come back and finally get a bill done so we can sign it right here in the Rose Garden.”

Obama said the health committee’s bill, when combined with the finance committee legislation, would cover 97 percent of Americans. It would create a public insurance plan, which Obama said is essential to keep private insurers “honest.”

House Plan

Three House committees with jurisdiction over health proposed a similar bill yesterday that includes a public insurance program.

Senator Christopher Dodd, a Connecticut Democrat who led the health committee while Kennedy received treatment for brain cancer, said much work remains to pass a bill and send it to Obama’s desk for his signature. He said he spoke with Kennedy today by telephone.

“He wishes he could be here,” Dodd said, noting Kennedy’s career-long focus on health. “This is the bill we’ve been waiting for and fighting for, for years, and it is fitting that it should happen in the committee led by Ted Kennedy, who has fought for this for decades.”

The ranking Republican on the committee, Senator Michael Enzi of Wyoming, headed his party’s argument that a public plan would squeeze private insurers out of business because the buying power of U.S. government would undercut private businesses.

Republican Criticism

The bill, as written, “allows Washington bureaucrats to ration care,” Enzi said today before the panel’s vote. Enzi said his party backed Obama’s goals of reducing health-care costs, providing insurance to all Americans and allowing those with coverage to keep it if they are satisfied.

“Republicans strongly support those goals,” he said. Unfortunately this bill does not meet them.”

The health committee’s bill will be merged with legislation produced by the finance committee. Senator Max Baucus, the committee chairman and a Montana Democrat, said he had been considering a tax on employer-provided health benefits to help pay the estimated $1 trillion cost.

After Democratic leaders pushed him to drop the idea, he has been working to find ways to generate revenue that will also draw Republican support.

Dodd expressed confidence Baucus would get a bill out of his committee and expects it to adopt many parts of the health committee’s bill.

Estimated Cost

The Congressional Budget Office issued a preliminary estimate of the health committee bill, saying it would cost $611 billion over 10 years. That estimate did not include a provision to expand Medicaid, the U.S. government program for the poor, to those earning 133 percent of the federal poverty rate.

The national standard would replace the current system in which states set their own thresholds for Medicaid eligibility. The budget office said the health committee plan may still leave 15 million to 20 million people uninsured.

The health committee bill would create “gateways” where small business employees and individuals can compare insurance plans. The gateways would be Web sites that operate much like those for purchasing airline tickets or renting a car, according to committee documents.

Standard Benefits

Participating insurers would have to meet certain standards for quality and offer a standard set of benefits, such as well- baby checkups and outpatient hospital care.

The gateways would include a new public insurance program, backed by the federal government, an option Republicans tried and failed to remove from the bill.

Senator Judd Gregg, a New Hampshire Republican who offered several rejected amendments to cut costs in the bill, said the committee’s plan would expand the federal government and force future generations to pay “trillions” of dollars.

“It fails to cover all who are uninsured -- leaving an estimated 34 million without care; causes millions who like the insurance they have through their employers to lose it, and fails to implement effective practices or needed controls in how we pay for health care to reduce the growth in health-care spending,” Gregg said in a statement.

Republican efforts to significantly change the bill failed. Enzi offered amendments to allow Medicaid patients to opt out of the program and use subsidies to enroll in qualified health plans. Another of his amendments would have curbed medical liability lawsuits. Both were defeated on party line votes.

Opponents’ Input

Dodd said the committee’s proposal wasn’t solely a product of the Democrats who control the panel, noting 160 of 200 Republican amendments were accepted.

“They made it a better bill, and that’s the way it’s supposed to be,” Dodd said. “But I will not sacrifice a good bill for that. The people we’re working for are not our colleagues.”

As an example of Republican influence, Dodd pointed to Enzi’s amendment, passed on a 16-7 vote, to allow the first copies of costly biologic drugs derived from living cells.

The proposal would authorize generic-drug companies to sell cheaper versions of biologic medicines to treat cancer and rheumatoid arthritis after the drugs’ patents expire and they have been on the market for a minimum of 12 years, five more years of protection than sought by the Obama administration.

Too Generous

Makers of generic drugs, consumer groups such as AARP and their supporters objected to the proposal and a provision in it that may extend exclusivity another 12 years for each new version of an existing product.

“Drug companies should be able to recoup their research and development costs, but they are not entitled to open-ended monopolies and unlimited, windfall profits,” Senator Sherrod Brown, an Ohio Democrat who voted against the amendment, told reporters yesterday on a conference call.

The panel’s decision may stick because the House didn’t include biologics in their version of health-care legislation unveiled yesterday and the finance committee hasn’t said whether they will address the issue.

The committee’s legislation would also bar insurance companies such as UnitedHealth Group Inc. from refusing customers because of pre-existing conditions. Writing policies based on health status, medical condition or gender also would be forbidden.

The bill would create an inter-agency working group to examine “islands of excellence” in medical care to determine how to spread those practices to the rest of the country.

It would also seek to bolster the number of primary care physicians by providing scholarships and low-interest loans to students and mid-career health providers who committed to work in medically underserved areas or in primary care.

To contact the reporters on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net; Catherine Larkin in Washington at clarkin4@bloomberg.net.

Last Updated: July 15, 2009 14:42 EDT