WASHINGTON (AP) — House Democrats announced agreement
Friday on far-reaching measures designed to rein in the relentless
growth of Medicare, part of a drive to counter the impression that
President Barack Obama’s health care legislation is in deep trouble.

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
talks between the leadership and rebellious conservative and moderate
Democrats demanding changes in the bill appeared deadlocked, and the
second-ranking House Democrat said there was only a small possibility
that the legislation would come to a vote before lawmakers’ vacation
scheduled to begin in a week. Rep. Steny Hoyer, D-Md., the majority
leader, raise the possibility that the rank-and-file would be held in
session into the first few days of August to vote.

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
told The Associated Press in an interview.

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.

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
announced on 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.

Yet 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.

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.