The U.S. Senate approved President Barack Obama's healthcare overhaul on Thursday, backing sweeping changes in the medical insurance market and new coverage for tens of millions of uninsured Americans.

On a party-line 60-39 vote, Senate Democrats supported the most dramatic shifts in health policy in four decades. The early-morning Christmas Eve vote followed months of political wrangling that consumed the U.S. Congress and put a dent in Obama's public approval ratings.

The vote clears the way for tough negotiations in January with the House of Representatives, which approved its own version on November 7 that includes different approaches on taxes, abortion and a proposed new government-run insurance program.

Once House-Senate negotiators agree on a single bill, each chamber must approve it again before sending it to Obama to sign into law. Democrats hope to finish work before Obama's State of the Union address in late January.

The rare Christmas Eve Senate session fulfilled a pledge by Reid to pass the bill before Christmas. Republican opponents had delayed the final vote to the last day possible under Senate rules, but agreed to an early-morning vote to allow people to head home for the holidays.

The overhaul, Obama's top legislative priority, would lead to the biggest changes in the $2.5 trillion U.S. healthcare system since the 1965 creation of the government-run Medicare health program for the elderly and disabled.

94 PERCENT COVERAGE

The bill would extend health coverage to more than 30 million uninsured, covering 94 percent of all Americans, and halt industry practices such as refusing insurance to people with pre-existing medical conditions.

It also would require most Americans to have insurance, give subsidies to help some pay for coverage and create state-based exchanges where the uninsured can compare and shop for plans.

Major provisions such as the exchanges would not kick in until 2014 but many of the insurance reforms like barring companies from dropping coverage for the sick will begin in the first year.

Republican critics say the bill is an expensive and heavy-handed intrusion in the healthcare sector that will drive up costs, increase the budget deficit and reduce patients' choices.

The nonpartisan Congressional Budget Office estimated the Senate bill will cut the federal deficit by $132 billion over 10 years but critics argue the expected revenue increases and cost savings may never materialize.

Passage of the bill was critical for Obama, whose political standing and legislative agenda could hinge on its success. Obama's public approval ratings have dipped to about 50 percent in many polls as the acrimonious debate has dragged on.

Vice President Joe Biden, a former senator, presided over the vote and was to join Obama at the White House afterward for a victory statement.
Obama then will leave on his Hawaiian vacation, which he delayed until final Senate passage.

(Editing by Alan Elsner)

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