"This isn't about big government," said Sen. William Roth, R-Del. "It's about getting government out of the way."
The vote was 99-0.
The Senate put off finding a way to pay for the measure.The bill is stalled in the House over a dispute over how to fund it.
Fear of losing Medicare and Medicaid is the No. 1 reason that less than one-half of 1 percent of Americans receiving disability benefits ever return to work, advocates say. People with disabilities usually have serious medical problems and often have trouble getting private health coverage.
"This is a crazy system we have allowed to develop," President Clinton said Tuesday, joining senators in praising the legislation as offering a life-changing option for millions of Americans.
Sen. James Jeffords, R-Vt., said the legislation has moved forward because of its bipartisan support.
"We are taking the first step on the final path to open the door and allow people with disabilities to reach that dream of a fuller life," he said.
The legislation has 77 co-sponsors in the Senate but was snagged last month on Texas Republican Sen. Phil Gramm's objections to the obscure corporate tax change used to pay for the bill, which would cost $800 million over five years.
Backers agreed to drop the tax change. The legislation now directs that its cost be paid with unspecified spending cuts.
In the House, similar legislation has cleared the Commerce Committee but must move through the Ways and Means Committee. It has considerable support in the House, but there is no agreement about how to pay for it and no vote has been scheduled.
The legislation would affect about 9 million adults who collect federal disability benefits.
Those who use the Social Security Disability Insurance program could keep their Medicare benefits after returning to work. States would get the option to extend Medicaid to those in the Supplemental Security Income program for low-income people, allowing them to buy into the program and pay premiums that would rise as their income grows.
The legislation would also inject competition among those who train the disabled to work. The disabled could choose to continue getting services from government rehabilitation programs, or they could go to privately run programs.
Additionally, the bill would give the trainers an extra incentive to get people to work - the trainers would get some of the money saved because of decreased government disability benefits.
The legislation was headed to the Senate floor until Gramm objected to the way the bill was funded. It would have increased tax revenues by changing the rules for U.S. companies operating abroad. Specifically, it would have made it more difficult for those companies to claim tax credit on taxes they pay to other countries.
Now, the bill directs an eventual House-Senate conference committee to find spending cuts to pay for it.
Only Sen. Tom Harkin, D-Iowa, did not vote on the bill Wednesday.
Written By Laura Meckler