The Senate approved President Barack Obama's landmark 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 features different approaches on taxes, abortion and a proposed new government-run insurance program.

With today's vote we are now incredibly close to making health insurance reform a reality in this country, Obama said after the Senate took a major step toward a goal that has eluded Democrats since former President Bill Clinton's failed attempt in 1994. Our challenge then is to finish the job.

Once House-Senate negotiators agree on a single bill, each chamber must approve it again before sending it to Obama to sign into law. Republicans promised to continue the battle.

This fight is long from over, Republican Senate leader Mitch McConnell said. My colleagues and I will work to stop this bill from becoming law.

The Christmas Eve Senate session -- the first since 1895 -- fulfilled a pledge by Senate Democratic leader Harry Reid to pass the bill before Christmas. Republican opponents delayed the final vote to the last day possible under Senate rules, but agreed to an early-morning vote to let people head home.

Senators called out their votes from their desk in a formal roll-call. Reid, who has been working around the clock during four weeks of Senate debate, mistakenly voted no when his name was first called before voting for the bill.

That prompted a roar of laughter in the chamber. Reid smiled and dropped his head on his desk in embarrassment.

This is for my friend Ted Kennedy, 92-year-old Democratic Senator Robert Byrd said as he voted yes. Kennedy, who championed healthcare reform during his long Senate career, died in August of brain cancer.

Obama called Kennedy's widow Vicki after the vote to congratulate her, the White House said. He also called a dozen senators to thank them, including Reid.

After the vote, the S&P Managed Health Care index of large U.S. health insurers closed 0.3 percent lower. Health insurer stocks have soared about 25 percent since the start of October.

BIGGEST CHANGES IN DECADES

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.

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.

Talks between House and Senate staff will begin next week, with negotiations between lawmakers beginning in earnest in January. The House does not return from the holiday break until January 12, with the Senate coming back a week later.

Advocates on both sides of the issue promised to push for changes in January's negotiations. Labor leaders oppose the Senate's tax on high-cost Cadillac health insurance plans, which Obama has endorsed, and business and insurance groups said they wanted fewer taxes and more cost controls.

While this vote closes one chapter of the legislative process, the hard work is not yet done, said James Rohack, president of the American Medical Association, the lobbying group for doctors and a backer of the bill.

Passage of the bill is 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 joined Obama at the White House afterward.

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