WASHINGTON (Reuters) - Democrats broke a logjam in President Barack Obama’s drive to revamp the costly U.S. healthcare system on Wednesday when a group of party conservatives accepted a compromise that allowed an overhaul bill to advance in the House of Representatives.

Congressman Mike Ross, L, (D-AL) speaks to reporters after he and a group of fellow Democratic Congressmen met with U.S. President Barack Obama about overhauling the healthcare system at the White House in Washington July 21, 2009. REUTERS/Kevin Lamarque

The agreement with four conservative congressmen from Obama’s Democratic Party sparked immediate grumbling from liberals, Republicans and others even as the breakthrough allowed a key House committee to take up the bill.

Obama, whose chief of staff, Rahm Emanuel, worked with members of Congress to craft the compromise, said he was grateful that lawmakers “are working so hard to find common ground.”

“Those efforts are extraordinarily constructive in strengthening this legislation and bringing down its cost,” Obama said.

Since taking office six months ago, Obama has made an overhaul of healthcare, which accounts for one-sixth of the U.S. economy, his top legislative priority.

He insists it is crucial to a broader economic recovery and has pushed lawmakers -- due to recess for a month soon -- to forge a deal quickly to rein in healthcare costs, improve care and cover most of the 46 million uninsured Americans.

Representative Mike Ross, a leader of the conservative Democrats known as the “Blue Dogs,” told reporters the agreement, which followed lengthy negotiations with party leaders and the White House, would shave $100 billion off the bill’s price tag of at least $1 trillion, making it more palatable to fiscal conservatives in both parties.

The Blue Dogs had put the brakes on the bill in the Energy and Commerce Committee, the last of three House committees to vote on it, over concerns about costs and other issues.

With the agreement, the bill was to move through that committee by Friday, even if House leaders later change it before the full House votes in September.

But Democratic Representative Eliot Engel said House leaders had left liberals on the panel with little choice but to vote for it as it stands or stall its progress.

“In a way, a number of us feel we’ve been held hostage,” Engel said.

While the bill still includes a government-run insurance program, liberals said a requirement that Washington negotiate prices with doctors and hospitals -- putting the public plan on the same footing as private insurers -- would make coverage unaffordable for many.

The compromise would exempt 86 percent of small businesses from being required to contribute to health insurance for their workers. It would also allow states to set up insurance cooperatives alongside a national government health insurance plan.

Democrats on the Energy and Commerce Committee met in closed session to go over the details before a full panel meeting and votes on Thursday, and probably on Friday.

SENATE EDGING CLOSER

In the Senate, Republicans and Democrats negotiating a healthcare reform deal also got a boost from congressional budget analysts who priced their bill at less than $900 billion over 10 years -- below some cost estimates of $1 trillion or more.

Senate Finance Committee Chairman Max Baucus said the Congressional Budget Office reported the plan would reduce the federal deficit, spur employer-provided health coverage and provide insurance coverage to 95 percent of Americans.

Three Democrats and three Republicans on the Senate Finance panel have edged closer to a deal this week that could form the heart of an eventual Senate healthcare plan.

“I am confident they will get a bill ... a bipartisan bill will come out of that committee,” Senate Democratic Leader Harry Reid told reporters.

Senator Charles Grassley, one of the panel’s three Republicans involved in the talks, said in a Reuters interview the negotiators were making great progress but tough issues remained on financing and cost containment.

Senate Finance negotiations focused on a plan that would use nonprofit cooperatives to compete with private insurers to drive down costs, not the government option plan favored by Obama and many other Democrats.

The Senate panel also is likely to back a tax on high-cost insurance policies to raise revenue and keep costs down. [nN29176517]

Dick Durbin, the Senate’s second-ranked Democrat, said the lack of a public insurance option in the Finance Committee bill was not what he and many other Democrats wanted, but he was encouraging senators to stay patient.

Obama had asked both the Senate and House to come up with initial draft bills before the August recess, but that deadline is dead in the Senate and nearly impossible in the House. When they return, they will negotiate a joint bill that Obama hopes to sign into law this year.

Healthcare industry officials welcomed the efforts.

“We applaud the efforts of Baucus and Grassley to try to make it a bipartisan approach because we think that will be thoroughly vetted and one where I think we’re going to get more sustainable solutions coming out of it,” Angela Braly, chief executive of health insurer WellPoint Inc, said in an interview with Reuters.

A New York Times/CBS News poll showed 69 percent of Americans were concerned their care would suffer if there were on a government-run plan. But 49 percent said they backed fundamental changes and 66 percent feared losing their insurance if the government does not act.

The poll had a margin of error of 3 percentage points.

Obama traveled to North Carolina and Virginia on Wednesday for campaign-style events to tell Americans why insurance reform meant more security and stability for them and their families.