The Senate voted Wednesday to block the government from offering prescription drug coverage for older people in competition with private insurance companies, rejecting the first in a string of attempts by Democrats to leave their stamp on the most far-reaching Medicare (search) legislation in decades.

The defeat of the proposal by a 58-37 vote came as Majority Leader Bill Frist, R-Tenn., predicted the measure would pass the Senate this month with as many as 80 votes. ushed their own Medicare bill toward passage over the objections of Democrats.

Sen. Rick Santorum, R-Pa., said Bush stressed that he wants legislation that costs no more than the $400 billion over the next decade, and a bill that gives older people maximum health care choices.

Both the House and Senate legislation would establish a prescription drug benefit (search), the most significant expansion of the government-run health care program since its creation in 1965.

At the same time, the proposals provide for a managed care option for overall health care -- preferred provider organizations. It is a step the Bush administration says would help modernize Medicare and shore up its long-term finances.

After years of gridlock on the issue, there was a growing sentiment that some plan would reach Bush's desk as soon as this summer. Already there were signs of jockeying for position in the final compromise negotiations.

At the same time, Senate Democrats embarked on a strategy of seeking changes, partly to remake important sections more to their liking and partly to highlight their differences with Republicans.

"Legislation before us tries to expand health care choices for people on Medicare. Regrettably, it does not provide the full range of choices for seniors," said Sen. Debbie Stabenow (search), D-Mich., arguing in favor of a federal role in the new drug benefit.

Allowing the government to offer the drug coverage will "foster competition among the different plans and allow our seniors to make the best choice for themselves," she said. It would put "all of the plans on the same footing and does not favor one over another."

But Sen. Charles Grassley (search), R-Iowa, dismissed the proposal as a blueprint for price controls, a "government-controlled regime for dispensing drugs in this country."

Approval of Stabenow's proposal, he added, would put the government "back in the very command and control mentality of health plans that we ought to try and get away from."

The amendment drew the support of 37 Democrats, but no Republicans. All 51 GOP senators voted against, joined by six Democrats and one independent.

While that suggested that the bill could withstand challenges from the left, officials signaled some changes would be acceptable. One was a proposal by Sens. Mike Enzi, R-Wyo., and Jack Reed, D-R.I., to allow local pharmacies to fill 90-day prescriptions for Medicare patients. Currently, the bill allows only mail-order companies to do so.

The Senate moved through the first test vote on its legislation as majority Republicans pushed a companion bill toward approval in the House Energy and Commerce Committee.

The committee defeated a Democratic alternative that offered more generous benefits across the board and gave the federal government a much stronger role in managing the drug benefit. It also turned back a separate proposal to close a gap in coverage.

Democrats have attacked the House bill, claiming that unlike the Senate measure, it contains a provision that eventually would privatize the entire Medicare program.

Republicans claim they have the votes to prevail. But the administration has expressed misgivings about the provision, and House aides said it was possible it would be removed before the full House debates the bill next week.

The "premium support" provision would end the 38-year-old practice of pegging government Medicare subsidies to the cost of the benefit to be delivered. Instead, beginning in 2010, the legislation would set the federal subsidy for Medicare in part on bids submitted by private insurance companies seeking to offer competing coverage.

With passage of legislation likely in both houses, Democrats as well as Republicans were looking ahead to negotiations over a final compromise.

Sen. Edward M. Kennedy, D-Mass., a prominent liberal who intends to support the Senate bill, said that "bipartisan cooperation would not have been possible" if it included the provision written into the House bill by the GOP.

"I share your view that this bill opens the door to privatization and should be opposed," he wrote to Rep. John Dingell, D-Mich.