March 20, 2010, 8:06 PM EDT

(Adds Van Hollen quote under No Separate Vote sub-headline. For more on the health-care debate, see {EXT2<GO>})

By Ryan Donmoyer and Catherine Dodge

March 20 (Bloomberg) — President Barack Obama rallied House Democrats to back health-care legislation that he called “the toughest insurance reforms in history” as party leaders said they would have the votes to pass the overhaul tomorrow.

“We have been debating health care for decades,” Obama told lawmakers today at the U.S. Capitol. “It is time to pass health-care reform for Americans, and I am confident you are going to do it.”

On the eve of the vote on the biggest revamp of U.S. health care in more than four decades, House Democrats abandoned plans to avoid a direct up-or-down ballot on Senate-passed legislation after days of accusations from Republicans that they were ducking a politically difficult vote.

House Majority Leader Steny Hoyer said “we believe we have the votes” as leaders resolved a dispute over Medicare payments to states and moved to defuse a row over abortion. He said Democrats dropped the idea of holding an indirect vote on the Senate bill and simply “deeming” it approved because “we determined we could do this, and it was a better process.”

The House will vote on both the Senate bill and compromise legislation that amends parts of the Senate measure that House Democrats don’t like. The compromise bill then goes back to the Senate, where Majority Leader Harry Reid said today he had the “commitment of a significant majority” of Democrats to approve it.

‘Quiet Crisis’

Obama, who has had more than 60 conversations with lawmakers since March 15 to help Speaker Nancy Pelosi round up the 216 House votes she needs, said today many Americans are living a “quiet crisis” because of health-care concerns.

“Now, we’re on the threshold of doing something about it,” said Obama, who has made the issue the centerpiece of his domestic legislative agenda. “We’re a day away.”

“Is this the single most important step that we have taken on health-care since Medicare? Absolutely,” Obama said of the 10-year, $940 billion measure.

Republicans universally oppose the legislation, arguing that Democrats are underestimating the cost and pushing though changes that polls show Americans don’t like.

“They do not want the federal government involved in their personal health care, and they do not want a bill that spends over $1 trillion,” Representative Dave Camp of Michigan told the Rules Committee today, which was meeting to set the rules for tomorrow’s floor debate.

‘Kill the Bill’

Outside the Capitol, more than 2,000 people gathered to protest the legislation, chanting “kill the bill.”

Kristie Greco, a spokeswoman for Representative James Clyburn of South Carolina, said demonstrators called Representative John Lewis of Georgia, who is black, a racial epithet and spat on another black lawmaker, Emanuel Cleaver, of Missouri.

“I heard people saying things today I have not heard since March 15, 1960, when I was marching to try to get off the back of the bus,” said Clyburn, who is black.

Democrats headed off the dispute in their ranks over Medicare payments by agreeing to ease geographic disparities in doctor and hospital payments.

Party leaders also said they were confident they can overcome complaints by some members that language restricting federal funding for abortion isn’t strong enough.

Hoyer said Democrats are considering asking the Obama administration to issue an executive order that would expressly say “there will be no use of public funds for abortion” to allay some lawmaker concerns.

No Separate Vote

Representative Bart Stupak of Michigan, a leading critic of the abortion language in the legislation, had asked for a separate floor vote to add a stricter ban on such funding. Pelosi ruled that out.

“We’re in the final stretch here,” said Representative Chris Van Hollen, a Maryland Democrat. Asked whether Democrats need to reach an agreement on an executive order or some other way of appeasing pro-life Democrats before a vote, he said “I’m not sure we do.”

The original House bill passed 220-215. Since then, Democrats lost four “yes” votes because of vacancies and a switch by the one Republican who backed the bill.

Democrats say the legislation will cover 32 million uninsured Americans and curb medical costs. The Congressional Budget Office said it would also reduce the federal deficit by $138 billion in the first 10 years.

Insurance Mandate

The legislation requires Americans to get insurance, offering government aid and new purchasing exchanges to help. Insurers such as Indianapolis-based WellPoint Inc. would get millions of new policyholders, while being required to accept all customers, even with pre-existing conditions.

All told, 37 sitting Democrats voted “no” on the original bill. Another 40 supported the measure while voting “yes” on an amendment calling for stricter controls on abortion funding that Stupak offered at the time.

Representative Dan Lipinski, an Illinois Democrat, said he’s switching his vote to “no” because of the abortion issue. New York Representative Michael Arcuri, who voted for the original House bill, said he’s now a “no” because the new measure doesn’t do enough to control costs. Massachusetts Representative Stephen Lynch is also switching to “no,” the Boston Herald reported.

‘Yes’ Votes

On the other side, Democrats John Boccieri of Ohio, Allen Boyd of Florida, Bart Gordon of Tennessee, Dennis Kucinich of Ohio, Suzanne Kosmas of Florida, Betsy Markey of Colorado and Scott Murphy of New York all now plan to vote “yes” after voting “no” in November, according to statements from the lawmakers or their offices.

Two more lawmakers said today they would back the bill.

Representative Harry Mitchell, an Arizona Democrat, issued a statement saying he will vote “yes,” as did another undecided lawmaker, Representative Adam Smith, a Washington Democrat.

–With assistance from Nicholas Johnston, Brian Faler, Kristin Jensen, James Rowley, Ryan J. Donmoyer, Laura Litvan, Jonathan D. Salant, Kate Andersen Brower, Julianna Goldman and Nicole Gaouette in Washington. Editors: Mark McQuillan, Jim Kirk.

To contact the reporter on this story: Catherine Dodge in Washington at cdodge1@bloomberg.net Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net;

To contact the editors responsible for this story: Jim Kirk at jirk12@bloomberg.net;