"I support this effort, especially since it's aimed at increasing choice and competition and lowering costs," the president said. He spoke with the Senate at a critical juncture in the second week of debate on a sweeping health overhaul bill. Majority Leader Harry Reid, D-Nev., is hoping that the deal announced Tuesday night can hold together a fragile 60-vote coalition and clear the way for passage of the legislation before Christmas.
There were some positive signs Wednesday. A much-courted moderate -- Connecticut independent Sen. Joe Lieberman -- signaled he might be able to live with the compromise, and liberal Democrats also spoke out in favor of the idea.
"I am encouraged by the progress toward a consensus," Lieberman said in a statement that also underscored his opposition to any new government insurance plan that would compete with private carriers.
Meanwhile, former presidential candidate and one-time Vermont Gov. Howard Dean said the Medicare option for people age 55 to 64 was "a positive step forward."
Dean, a physician, has been one of the most vocal supporters of the idea that the government should get into the health insurance market. But as it became increasingly clear in recent weeks that a new government insurance plan did not command the necessary votes in the Senate, Dean contacted Reid and Sen. Charles Schumer, D-N.Y., to offer the Medicare expansion as a way forward.
"Using Medicare makes more sense than reinventing more bureaucracy," Dean said Wednesday on CBS' "The Early Show."
Rep. Anthony Weiner, a vocal New York liberal who has strongly supported a public insurance option, issued a statement calling the Medicare expansion "one idea I like a lot."
However, as the Senate continued to debate, the American Hospital Association and the American Medical Association -- both groups that have been generally supportive of Congress' health overhaul efforts thus far -- raised red flags. Both groups are concerned about adding more patients to Medicare, because the program pays providers significantly lower rates than private insurers do.
"The AMA has long-standing policy opposing the expansion of Medicare given the fiscal projections for the future," said the group's president, Dr. James Rohack. "We believe a health insurance exchange without an expansion of Medicare will provide more affordable choices and better access to care for Americans ages 55-64."
A powerful small business group also swung into opposition. The National Federation of Independent Business, which was instrumental in defeating then-President Bill Clinton's health care bill in the 1990s, said the Democratic bill would raise costs and make it harder to create jobs.
Nonetheless Reid, D-Nev., was upbeat.
"We've overcome a real problem that we had," Reid said in announcing what he called a "broad agreement" Tuesday night.
Officials said it included nonprofit national health plans administered by the Office of Personnel Management, which runs the popular federal employees' health plan, as well as the idea of opening Medicare to uninsured Americans beginning at age 55, effective in 2011.
Greater government involvement could kick in if private insurance companies declined to participate in the nationwide plan. If they didn't, one possibility was for the personnel office to set up a government-run plan, either national in scope or on a state-by-state basis.
Reid planned to describe the plan in greater detail after getting a cost analysis from the Congressional Budget Office. The compromise was negotiated over the past days by five moderate and five liberal Democrats.
The Senate's 10-year, nearly $1 trillion legislation would dramatically remake the U.S. health care system and extend coverage to millions of the uninsured, with a new requirement for nearly everyone to purchase insurance. New purchasing marketplaces called exchanges would make it easier for small businesses and people without government or employer coverage to shop for health insurance, and unpopular insurance company practices such as denying coverage to people with pre-existing medical conditions would be banned.
The deal reached Tuesday would put even more requirements on insurers by requiring that 90 percent of premium dollars be spent on medical benefits, as opposed to administrative costs, officials said. The officials who described the details of the closed-door negotiations did so on condition of anonymity, saying they were not authorized to discuss them publicly.
More challenges lie ahead. On Wednesday, senators began debating an amendment by Sen. Byron Dorgan, D-N.D., to legalize the importation of prescription drugs from Canada and several other countries as a way of holding down consumer costs. The idea enjoys widespread support but is opposed by the pharmaceutical industry, which has worked closely with the administration on health care and has spent millions of dollars on television advertisements in support of legislation.
The Food and Drug Administration issued a letter saying it would be "logistically challenging" to assure the safety of imported drugs, raising concerns without stating outright opposition.
Associated Press writers Ricardo Alonso-Zaldivar and David Espo in Washington and Carla Johnson in Chicago contributed to this report.