WASHINGTON - Democrats pushing for a drastic overhaul of the $2.5 trillion U.S. healthcare system prepared for fresh battles on Thursday after President Barack Obama set out new details on his top policy priority.

Obama was scheduled to meet with his cabinet following his Wednesday address to Congress, which sought to overcome rising public skepticism over his ability to bring about healthcare changes that have eluded Democratic lawmakers for generations.

He has righted the ship of the Democratic caucus, said freshman Democratic Representative Gerald Connolly, adding that he believed Obama made a cogent case for why moderate Republicans and others committed to trying to fix the broken healthcare system ought to rally to his cause.

Republican reaction was far cooler, however, while the reaction of Wall Street would become clear when the stock market opens on Thursday.

Senate Finance Committee negotiators resume talks on Thursday in a last ditch bid to forge a bipartisan agreement to expand health insurance coverage, although committee chair Senator Max Baucus indicated on Wednesday he was ready to go forward without any Republican support.

The Census Bureau intends to release on Thursday its new estimate on the number of Americans without health insurance. The most recent data, in 2007, put the number at 46 million but any rise could give fresh ammunition to Democrats urging basic changes in the U.S. insurance system.

Obama hoped his speech would reclaim control of a debate that has bogged down in Congress amid a flood of criticism and dispute even as his own public approval numbers dropped.

He said the overhaul would cut costs, improve care and regulate insurers to help protect consumers while expanding coverage. He repeated his pledge that the proposal, which would cost $900 billion over 10 years, would not increase the budget deficit.

MEDICAL MALPRACTICE ISSUE

As promised, he spelled out the concepts he wanted in any final bill passed by Congress, including affordable coverage for all Americans and creation of an insurance exchange where individuals and small businesses could shop for policies.

He reiterated his support for a government-run insurance plan -- the so-called public option -- that has drawn strong opposition from critics who say it would harm insurance companies and amount to a government takeover of the industry. But he was clear that the lack of a public option in any final bill would not be a deal-breaker.

Three committees in the House of Representatives and one other Senate panel have completed work on a healthcare bill, leaving the Senate Finance Committee as the final hurdle before each chamber takes up the issue.

In a bid to win Republican support, Obama proposed a series of state demonstration projects on medical malpractice reform, a long-sought goal of Republicans. He also endorsed a proposal from his Republican foe in the 2008 presidential race, Senator John McCain, for a insurance pool for high-risk consumers.

He said millions of uninsured Americans were living one illness away from bankruptcy, and others could not get insurance because of pre-existing conditions. He promised tax credits for individuals who cannot afford coverage.

We are the only advanced democracy on Earth -- the only wealthy nation -- that allows such hardships for millions of its people, he said.

(Editing by Andrew Quinn and Jackie Frank)

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