The dispute threatens to derail Democratic and Republican hopes of reaching an election-year compromise on the legislation, which would let patients sue their health maintenance organizations and insurers over treatment decisions that result in injury or death.
"I still hope an agreement is possible that would allow us to move forward on a real patients bill of rights," said Sen. Edward M. Kennedy, D-Mass. "But after months of talks with the White House, we've reached the 11th hour with little sign of progress from the administration. We need to find a way to put patient protections before the interests of the HMOs."
White House spokesman Scott McClellan said, "we have made tremendous progress and the president is continuing to reach out" to Democrats on the issue. Bush "wants to pass legislation with strong patient protections this year," the spokesman said. "We're closer now than we've been at any time over the last five years."
The House and Senate passed differing versions of the legislation last year, and normally, that would have led to the appointment of a group of senior lawmakers from each chamber to negotiate a compromise.
In this case, though, Bush, Senate Majority Leader Tom Daschle, D-S.D., and House Speaker Dennis Hastert, R-Ill., blessed private talks involving Kennedy as well as Sens. John Edwards, D-N.C., and John McCain, R-Ariz., on one side, and top presidential aides Josh Bolton and Nicholas Calio on the other.
Kennedy, Bolton and Calio have met several times, sometimes joined by one or both of the other senators. In addition, Kennedy and White House chief of staff Andrew Card have talked on the phone in hopes of furthering an agreement.
But Daschle signaled earlier in the week he was ready to give up hope that the talks could produce a compromise. In an interview, he said it was likely that "sometime real soon" he would formally appoint a larger group of senators to negotiate with the House.
Democrats and Republicans alike say that would merely set the stage for political finger-pointing by the two parties.
Nancy Ives, a spokeswoman for McCain, said the Arizona Republican had urged Daschle to delay his plans for several more days, to allow more time for a compromise.
In addition, Hastert's spokesman, John Feehery, said the speaker wants to keep the talks alive. "Progress has been made toward a compromise that could produce legislation," he added.
Ironically, the House and Senate bills are virtually identical in terms of the patient protections designed to combat HMO horror stories, including coverage for emergency room care, treatment by medical specialists and access to government-sponsored clinical trials.
But the issue of lawsuits has bedeviled the negotiators from the start.
In general, Kennedy and the Democrats, backed by their political allies the trial lawyers, favor a more robust ability to sue, with uncapped damages for pain and suffering. They argue that without a strong right to sue, the patient protections found elsewhere in the legislation are of limited value.
Republicans, who receive campaign support from the HMOs, generally favor capped damages. They argue that if insurance companies are exposed to frivolous lawsuits and unlimited damages, the cost of coverage will skyrocket. They want a cap of $1.5 million on punitive and non-economic compensatory damages.
The issue of damage awards for pain and suffering has been particularly hard to resolve, officials said. At one point in the talks, the two sides discussed a two-tiered approach to caps under which some patients would be limited to a smaller amount of damages, and others could win a larger, but still limited amount. Nothing came of it.
In addition, Democrats strongly object to a provision in the House bill that they say would greatly strengthen the hand of HMOs in court in cases in which they had prevailed in disputes with patients that were brought to an outside review panel.
The importance of these issues has given Edwards - a presidential hopeful in 2004 - a key role in the talks. A former trial lawyer with only four years experience in Congress, the North Carolina Democrat figured prominently in the Senate debate over the measure.
A final compromise would give Edwards a high-profile achievement at a time when he is embarking on a national campaign. At the same time, he has relied heavily on campaign donations from trial lawyers, who are resisting major concessions on the lawsuit issue.
"We've been negotiating with the White House for months. We've made a number of proposals. I still haven't given up," Edwards said.
The patients' rights bill is of particular symbolic importance to Daschle, who made it the Democrats' first order of business last summer after they gained control of the Senate in a midyear switch in power. The measure cleared on June 29.
The Republican-controlled House passed a different version of the measure Aug. 2.