(ALEX BRANDON ~ Associated Press)
Speaker Nancy Pelosi hailed the agreement as a "giant step forward" for the bill that Obama has made a test of his leadership. Advocates said it eventually would turn Medicare toward a program that rewards quality, rather than volume, as well as alter a system that pays doctors and other providers more in some regions of the country than others.
Yet the leadership all but abandoned a pledge to approve legislation before lawmakers are scheduled to begin a monthlong vacation next Friday.
"We have every intention of passing it by the fall," said Rep. Steny Hoyer of Maryland, the majority leader.
Separately, talks between the leadership and rebellious conservative and moderate Democrats demanding changes in the bill remained deadlocked, so much so that they briefly collapsed during the day before being revived.
The maneuvering in Congress came as Obama met at the White House with Senate Majority Leader Harry Reid, D-Nev., and Sen. Max Baucus, D-Mont., the chairman of the Finance Committee, who has been trying for months to produce a bipartisan agreement.
"I said to him [Obama] what I say to everybody. We are ready when we are ready," Baucus later said.
Obama has worked energetically in public appearances, interviews, meetings with lawmakers and a prime-time news conference this week to advance legislation he wants to expand coverage to millions without insurance at the same time it restraints the growth of health care generally.
"I'm fully committed to making that happen," Obama said of health care Friday.
Despite his efforts, Republicans have grown more emboldened as efforts in Congress stall, and some have suggested that defeat of the drive to remake health care could cripple his presidency, now in its sixth month.
Reid said Thursday that he was abandoning his timetable of passing legislation in the Senate before lawmakers begin their vacation, saying Republicans involved in the bipartisan negotiations had asked for more time. He said he expects Baucus to produce a bill within the next two weeks, though, and that the Finance Committee will vote on it in early August.
Across the Capitol, Pelosi virtually ordered a small group of Democrats from rural and urban areas to thrash out their differences Thursday night on Medicare issues that sound arcane, but matter enormously to individual lawmakers and likely will also lead to cuts in spending growth.
"This is just one piece of the puzzle, but we think it's an important piece," said Rep. Xavier Becerra, a Californian who played a key role in the discussions.
Lawmakers said the agreement would lead to changes in Medicare to try and reward doctors, hospitals and other providers for high-quality care. Critics argue the current system simply pays by volume -- compensating providers regardless of whether additional medical procedures contribute to better health care.
Under the agreement, the Institute of Medicine would complete a study by September 2011 recommending changes in the current structure for determining reimbursement. The administration would have 45 days to submit the report to Congress, and it would go into effect unless Congress blocked it by the end of February 2012.
Separately, lawmakers agreed to call for a second study by the Institute of Medicine to investigate regional differences in payments to Medicare providers, to be implemented in 2014.
In general, rural providers are paid somewhat less under Medicare than their counterparts treating patients in urban areas, even though studies show there is no better-quality care delivered as a result. At the same time, lawmakers from sparsely populated areas wanted assurances that fees would be driven even lower for doctors in their communities as part of an adjustment.
Officials said the two steps combined were designed to control the steady increase in Medicare costs, although they said they did not have an estimate from the Congressional Budget Office.
Democrats suggested the agreement could allow Pelosi and the leadership to split a group of so-called Blue Dog moderate and conservative Democrats whose rebellion has stalled progress of the legislation this week. Many in the group represent rural districts, and greater cost-cutting has been one of the changes they wanted to have made in the legislation.
Rep. Mike Ross, D-Ark., said attempts by so-called Blue Dogs to win changes had ended in stalemate. "It pretty much fell apart this afternoon," he said at one point.
A few hours later, though, he said, "Talks are back on."
The group has enough votes on the Energy and Commerce Committee to prevent the bill's passage there, and the chairman, Rep. Henry Waxman, D-Calif., raised the possibility of simply bypassing the panel and taking the legislation directly to the floor.
"We've got to get moving on this legislation," he said. "I hope we don't come to that conclusion."
He said that while negotiations with Democratic critics are continuing, "we're not going to let them empower the Republicans to control the committee." No House Republican has yet expressed support for the health bill that the White House is seeking.
As lawmakers continued to haggle, the White House said Obama will keep working on health care in August even if Congress goes home.
"Nobody in planning meetings decided we should just take August off," said White House press secretary Robert Gibbs. "For a long time we planned to continue the discussion of the issues that are important, be it the economy, health care ... education. That had always in many ways been priced into the scenario."
Obama envisions legislation that would, for the first time, require all Americans to be insured. A new government insurance program would compete with private insurers, and insurance companies would be barred from excluding people with pre-existing conditions. The goals are to hold down costs and extend coverage to most of the 50 million uninsured. The price tag: $1 trillion-plus over a decade.