A U.S. Senate panel considering a sweeping healthcare overhaul upheld a requirement on Thursday that individuals purchase health insurance and rejected a proposal that could have scuttled an $80 billion White House deal with drugmakers.

On their third day of debate, members of the Senate Finance Committee made slow progress on hundreds of amendments to the healthcare bill, the last of five measures pending in Congress on PresidentBarack Obama's top domestic priority.

The Democratic-controlled panel defeated on a largely party-line vote a Republican proposal to let individuals opt out of the bill's requirement that everyone have health insurance. The plan would offer subsidies on a sliding scale to help people buy it.

Republicans said the issue was a matter of personal freedom and questioned the constitutionality of forcing people to purchase insurance.

The individual mandate in this bill is un-American. It may even be unconstitutional, said Republican Senator Jim Bunning, the amendment's sponsor.

Democrats said the requirement was vital to the success of the overhaul, which aims for a dramatic reduction in the number of uninsured people living in the United States. The system won't work if this passes, Baucus said of the amendment.

The panel's bill, which committee staff said would cost about $900 billion over 10 years, mirrors Obama's proposals to rein in costs, increase insurance competition and regulation and expand coverage to the uninsured.

PUBLIC OPTION VOTES PLANNED

The Baucus proposal does not include a government-run insurance plan -- the public option -- that is included in the other four bills in Congress, and two Democratic senators said they would seek votes on the issue on Friday.

Democratic Senators John Rockefeller and Charles Schumer said they would bring up public option amendments in order to kick off a discussion on the approach, which is backed by President Barack Obama as a way to create competition but opposed by critics who fear it will hurt the private insurance industry.

This is the starting point, Schumer told reporters about the debate on a public option, which was included in the four other bills in Congress.

He said the public option would have a hard time passing the more conservative Senate Finance Committee but had strong support in the full Senate and House of Representatives.

In one of the few votes this week that was not mostly party-line, the panel backed an agreement the White House and Baucus struck with drugmakers earlier this year that required the industry to contribute $80 billion to the overhaul.

An amendment by Democratic Senator Bill Nelson would have cost the industry an extra $106 billion by forcing drugmakers to pay the government a rebate on prescriptions for low-income people who are eligible for both the Medicaid insurance program for the poor and the Medicare program for the elderly.

The additional money raised under the amendment would have been used in part to close a gap in prescription drug coverage for some Medicare recipients.

Did the pharmaceutical company come to the table in the agreement with the White House with enough? There are a number of us who feel that is not the case, Nelson said.

Baucus and two other Democratic senators -- Tom Carper and Robert Menendez -- joined committee Republicans in voting against the amendment.

This may well undermine our ability to pass comprehensive healthcare reform through this committee and in this Congress, Carper said.

Democrats on the panel also defeated two Republican amendments that would have blocked the bill's cuts in Medicare Advantage, which augments the government's Medicare insurance program for the elderly with private insurance.

The reform bill would cut $123 billion in government subsidies to the Advantage plan, which Republicans say could force insurance companies out of the market and change or eliminate the benefits for many of the program's 10 million participants.

Democrats say the changes to Medicare would increase benefits and participation over 10 years and shore up Medicare's trust fund.

The debate has focused heavily so far on Medicare and other programs for the elderly, who as a group are more likely to vote and who polls show are among the most concerned about Obama's healthcare plans.

Barack obama