By Steve Schifferes BBC News Online, Washington

For the first time in a generation the US has expanded a major social benefit and corrected a serious shortcoming in its health care system.

The passage by the two houses of Congress of bills on Medicare reform is a victory above all for the elderly, who have been lobbying for nearly a decade for help with the soaring cost of medicines.

US senior citizens have something to smile about

If the two houses can resolve their differences quickly, Mr Bush intends to sign the bill on Independence Day, 4 July.

But the new bills leave unresolved the broader question of how to reform the US health care system, which is facing both rising costs and serious gaps in coverage.

Unlike most other major industrial countries, the US does not provide a general health care benefit for its working-age citizens, who must ensure privately, through their employers.

But 41 million elderly people receive federal help with their health costs through Medicare.

Up until now, that has covered the costs of doctors and hospital bills, but not prescription drugs.

The growing cost of these medicines has forced some older people to travel to Canada to buy cheaper drugs or do without.

Now the elderly will be able to afford to take advantage of the advances of medicine, which has shifted the pattern of treatment from hospital visits to drugs.

Broader issues

However, neither the House nor the Senate versions will cover the full cost of prescription drugs, despite the $400bn price tag over 10 years.

The complex and differing plans will each cover around one-third of the $110bn each year spent on drugs.

US HEALTH CARE PLANS Fee-for-service: patient can choose any doctor, cost paid by Medicare on a fixed scale PPO (preferred provider organisation): patient chooses doctor from a list of participants in health insurance scheme who agree to be directly reimbursed HMO (health maintenance organisation): patient can only get care from specific doctors after authorisation from HMO insurance provider

Some people will find that they are not much better off, and the House version also has a means test that would restrict higher drug benefits for those on high incomes.

The two houses are also divided on how much private insurance companies should be involved in providing the new drug benefit, or whether it should be paid directly to recipients.

Originally, President Bush wanted to offer full drug benefits only to those who also enrolled in a broad, limited-enrolment health-care plan known as PPPs - but was forced to accept a universal benefit for all.

Mr Bush's approach was intended to help limit the soaring cost of Medicare, which could eventually run out of money when the 75 million baby boomers retire over the next 25 years.

Many Democrats are concerned that such a proposal could lead to the privatisation of Medicare, with the elderly eventually forced into plans partly paid for by the government, but run by private companies.

So far, relatively few old people have opted for such plans, which are commonplace among those of working age - but which limit coverage.

Health care for the elderly is expensive

In the long run Democrats fear that Mr Bush's real target could be social security - the generous government-funded pension system.

Mr Bush has postponed his ambitious plans to partly privatise that system, allowing younger people to invest some of their social security contributions in a stock market fund. But he may reintroduce the scheme if re-elected.

The Medicare bill faced opposition from both left and right in the House of Representatives where it passed there only by a single vote.

"Senior citizens will long remember if you voted for them today, but they will never forget if you voted against them," said House Speaker Dennis Hastert, who lobbied for a compromise.

Political debate

If, as expected, health care reform is signed into law by President Bush, he will have gained a big political victory that will help his chances to secure re-election in 2004.

The elderly are a very important and organised group in the US. They are much more likely to come out and vote than the average citizen.

Bush is planning more health care reforms

And it will mean Mr Bush has delivered on most of his key 2000 election promises, including tax cuts, education and health reform, in record time.

Democrats have been divided in their approach to Medicare reform. Some, like New York Senator Hillary Rodham Clinton opposed it as not offering enough help.

Senate minority leader Tom Daschle called it a "tentative and shaky first step".

But President Bush won an important ally in Massachusetts Senator Ted Kennedy, the elder statesman of the Democratic Party who was instrumental in setting up the Medicare programme in the 1970s.

He said that the plan was a "once in a lifetime" opportunity to improve the system - which many Democrats would like expanded to improve coverage of younger citizens.

Nearly 40 million Americans lack any health insurance, and many of the democratic candidates for president have proposed health care plans for dealing with it.

The most ambitious plan, that of Congressman Richard Gephardt, would expand health care coverage to all through subsidised insurance at work, paid for by repealing Mr Bush's tax cuts.

But there lies the Democrats' dilemma. Further reform of the health system is bound to be expensive, and the growing budget deficit makes it difficult to find the money without raising taxes - never popular in an election year.

So the bigger battle over health care may be yet to come.