Washington - President Barack Obama challenged US lawmakers to end a vicious dispute over health care and approve an overhaul of the system before it is too late.

Looking to regain momentum on his top domestic issue after a tumultuous summer, Obama warned in a major speech Wednesday night to a joint session of Congress that the world's costliest health care system had reached a "breaking point" and must be reformed by the end of the year.

Obama's rare speech at the US Capitol came two days after Congress returned from a month-long summer recess, during which many legislators were shouted down on the issue by angry opponents at townhall meetings in their home states.

"Our collective failure to meet this challenge - year after year, decade after decade - has led us to a breaking point," Obama said, noting that reforms have been discussed off-and-on since president Teddy Roosevelt more than a century ago.

"I'm not the first president to take up this cause, but I am determined to be the last," Obama said.

The debate has been hugely divisive so far, and there was some unusual heckling by legislators during the president's speech. One congressman, reportedly Republican Joe Wilson, shouted "you lie" when Obama insisted his proposal would not cover illegal immigrants.

Conservatives fiercely oppose more government involvement in health care and argue that an expanded health role will raise an already skyrocketing budget deficit. Left-leaning lawmakers have insisted on creating a state-run insurance option to compete with private insurance companies.

Republican Congressman Charles Boustany, delivering his centre- right party's response to Obama's speech, called on Democrats to "start over" on the legislation. He warned that "replacing your family's current health care with government-run health care is not the answer."

Hopes for a compromise lie largely with a bipartisan group of six lawmakers on the Senate Finance Committee who have been haggling for weeks. The committee's chairman, Max Baucus, said Wednesday that they will present their proposals next week. Four other congressional committees have also offered plans.

"The time for bickering is over. The time for games has passed. Now is the season for action," Obama said.

Obama delivered a series of more concrete proposals during the address. Until now, Obama had left lawmakers largely to their own devices, and he had drawn criticism for not getting more involved in the legislative process.

He broke a presidential campaign pledge not to require people to have health insurance, arguing that the system can no longer allow younger, healthier individuals to "game the system." Everyone would have to "carry basic health insurance."

Obama stood by the creation of a government-sponsored insurance option that has been central to conservative opposition. He insisted such a scheme would not receive taxpayer subsidies and was necessary as a counterbalance to private insurance companies.

But Obama also suggested the public option was simply a "means to an end." He said Democrats should "remain open to other ideas that accomplish our ultimate goal," including government-backed health insurance co-operatives being considered by the Senate Finance Committee.

That was not enough for Republicans: the Republican Boustany, himself a physician turn politician, said that Obama "had a chance tonight to take government-run health care off the table, but unfortunately he didn't do it."

Obama insisted that about 80 per cent of the reform plans could already be agreed on by both sides. That includes barring insurance companies from dropping consumers with pre-existing health conditions and creating a "national health exchange" that would broaden consumers' access to a variety of insurance plans.

He said the 900-billion-dollar plan would be paid for by reducing waste, curbing inefficiencies and taxing health insurance companies on their most expensive coverage plans. Republicans remain doubtful that the plan is deficit neutral.

Obama said he remained open to proposals from both parties, but cautioned: "I will not waste time with those who have made the calculation that it's better politics to kill this plan than improve it."

Obama has an uphill battle in overhauling health care coverage in the US, which has the costliest system in the industrialized world and leaves about 46 million people uninsured. There have been few major reforms approved in four decades.

In a stark portrayal of the pitfalls, Obama asserted that more people would die, more families would go bankrupt and the federal budget deficit would become unsustainable if major reforms were not passed. Losing insurance coverage, because of a lost job or a preexisting health condition, "can happen to anyone," he warned.

In an emotional moment, Obama read portions of a letter from senator Edward Kennedy, who died last month. Kennedy wrote the letter in May and instructed it to be delivered to Obama after his death.

Kennedy, who made health care his top priority during nearly five decades in the Senate, called reform "the great unfinished business of our society."

"What we face is above all a moral issue," Kennedy wrote, "that at stake are not just the details of policy, but fundamental principles of social justice and the character of our country." (dpa)