Republicans already are griping about being frozen out, saying that Kennedy wouldn't treat them that way.
"I've never worked a process on any bill with him that went like this, where there was absolutely no input taken from the other party," said Sen. Mike Enzi of Wyoming, the senior Republican on the Senate Health, Education Labor and Pensions Committee that Kennedy chairs.
"I do feel badly that Sen. Kennedy is not able be here," said Sen. Orrin Hatch, R-Utah, ticking off the major health care and other legislation the two have written together. "He is the only one who can say Orrin is right, and get the riffraff out of the room."
Democrats are doing a delicate dance around the prospect that Kennedy, who is being treated for brain cancer, won't be able to manage the legislation that represents his life's work, could affect every American and is President Barack Obama's most urgent domestic priority.
There is still a possibility that the Massachusetts Democrat could attend critical work sessions that begin next week, Democrats said. But for the first time, there is little doubt that Dodd, D-Conn., will now steer the legislation from the helm of the health committee, working with Finance Committee Chairman Max Baucus, D-Mont., to find a way to pay for it.
"Sen. Kennedy has asked (Dodd), that's his best friend in the Senate, to take over the work on health care," Senate Majority Leader Harry Reid, D-Nev., told reporters.
"I don't like to make it official. He's the chairman," Dodd said of Kennedy in a brief interview between appointments.
Dodd and Kennedy are in almost daily contact. Dodd also had dinner at the senator's famous family compound in Hyannis Port, Mass., on Sunday with Kennedy and his wife, Vicki.
"He looked pretty good to me," Dodd said. "He's up walking around, sitting at the dining room table, and out on the porch."
Still, Kennedy's absence has sparked a robust round of rumors among Washington dealmakers whose professional and personal fortunes often rise and fall with the shifting roles of senators.
Kennedy's decision puts Dodd in a lead role for the White House's two top domestic agenda items. Dodd also chairs the Senate Banking Committee, which oversees the housing and financial industries, whose troubles have plunged the nation into the worst economic crisis since the Great Depression.
Obama has argued that the nation's economic revival depends on a health care overhaul passing Congress this year.
Making Dodd the Senate's point man overhauling both health care and the government's regulation of financial companies could put him in a position to strengthen his hold on a Senate seat endangered by accusations that he's been too cozy with the very companies his committee is supposed to oversee.
Dodd has long been a favorite of the financial sector when it comes to campaign donations. The finance, insurance and real estate sectors gave him $13.2 million from 1989 through 2008, according to the Center for Responsive Politics, a nonpartisan watchdog group.
But those campaign gifts have also caused him some recent grief. He's the top recipient of campaign money from American International Group Inc., the insurance giant whose $182.5 billion government bailout and hundreds of millions of dollars in executive bonuses have made it the poster child of what's wrong on Wall Street.
After first denying it, Dodd acknowledged that he agreed to a request by Treasury Department officials to weaken a bonus restriction in the economic stimulus bill. His approval rating sank to a career-low 33 percent in a recent Quinnipiac University poll.
Dodd will remain in charge of the Banking Committee's business, according to his aides. However, at a news conference Tuesday, Dodd said Sen. Jack Reed, D-R.I., will take on a more visible role in overhauling financial regulations and chairing hearings on oversight of the Securities Exchange Commission.