WASHINGTON - Democratic hopes for passing a broad healthcare overhaul in the Senate took a hit on Thursday when a crucial party holdout, Ben Nelson, rejected a compromise on abortion funding aimed at winning his vote.

Senate Democratic leaders, racing the clock to finish work on the bill before leaving for the holidays, struggled to line up the 60 votes they need to overcome Republican procedural hurdles.

Democrats have no margin of error -- they control exactly 60 votes and face so far unified Republican opposition.

The bill, President Barack Obama's top legislative priority, faced new criticism from two of the biggest U.S. labor organizations as Republicans explored new tactics to delay a final vote beyond Christmas.

Nelson, an abortion rights opponent, said compromise language designed to strengthen a ban on using federal funds for abortions was not good enough to meet his concerns.

As it is, without further modifications, the language concerning abortion isn't sufficient, Nelson said in a statement, adding he would not back Democrats on a series of upcoming procedural votes without more changes to the bill.

The compromise language had been developed with the help of Democratic Senator Robert Casey, another abortion rights opponent who backs the bill but has been seeking a solution.

Nelson is the potential 60th vote on the Senate healthcare plan, although several other Democrats remain publicly uncommitted and some are awaiting independent cost estimates.

The Senate bill would extend coverage to 30 million uninsured Americans, provide subsidies to help them pay for the coverage and halt industry practices like refusing insurance to people with pre-existing medical conditions.

Nelson and other abortion rights opponents fear the federal subsidies could be spent on plans covering abortion.

The legislation has been bogged down amid disputes among Democrats over costs, plans for a new government-run insurance program and Nelson's abortion concerns.

COLOSSAL BLUNDER

Former President Bill Clinton, who led a failed effort to revamp the healthcare system in 1994, urged Democrats to overcome their divisions and said failure would have dire consequences.

Take it from someone who knows -- these chances don't come around every day, Clinton said in a statement. Allowing this effort to fall short now would be a colossal blunder -- both politically for our party and, far more important, for the physical, fiscal and economic health of our country.

Senate Democratic leader Harry Reid already has accommodated moderates like Senator Joe Lieberman, an independent who caucuses with Democrats, by eliminating plans for a government-run insurance option and an expansion of the Medicare government health program for the elderly.

That has angered liberals in the Senate and the House of Representatives, which passed its own version of the bill on November 7. The two chambers will have to reconcile the bills and pass them again before sending them to Obama.

The leaders of the AFL-CIO and the Service Employees International Union said the Senate bill had been watered-down by the changes to appease party moderates.

Andrew Stern, president of the 2.2-million member SEIU, urged Obama to step in to improve it during final negotiations with the House. We don't like the bill. We think it has to be improved. But we have no belief that these senators are going to do anything better, he said.

ANTI-ABORTION LANGUAGE

The House version of the bill includes the stricter anti-abortion language favored by Nelson, but the Senate rejected an amendment incorporating the language last week. The amendment would have blocked people who receive federal subsidies from buying insurance plans that cover abortions.

Nelson said the proposed Senate compromise included new initiatives that he liked on teen pregnancies and tax credits to encourage adoptions, but he was not convinced the federal ban on public abortion funding would be upheld under the bill.

Reid hopes to file an amendment within the next few days making final adjustments to the bill that he hopes will win the 60 votes he needs, including a change in abortion language and the dropping of the government-run insurance option.

He would then file procedural motions bringing the debate to an end and setting up a series of final votes that could last until Christmas Eve.

We're going to finish this healthcare bill before we leave for the holidays, Reid said on Thursday.

White House senior adviser David Axelrod said he was still confident Democrats would get 60 votes. We are going to get this done, he told PBS's Newshour.

Obama has asked the Senate to finish work by the end of the year to prevent the issue from spilling into the campaign for November 2010 congressional elections. Opinion polls show the overhaul losing support among the public, with majorities now opposed to it.

Republicans have vowed to use every available parliamentary tool to slow or block the debate. They planned to vote against a motion to cut off debate on a defense spending bill early on Friday in hopes of creating more delay for the health bill.

Democratic Senator Russ Feingold had planned to join Republicans to send the motion to defeat. But he told party senators he would reverse his stance and join Democrats in cutting off debate in order to speed the process along.

Once the defense bill is passed on Saturday, the Senate will return to healthcare.

(Additional reporting by Donna Smith, Susan Heavey and David Morgan; Editing by David Storey)

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