As expected, the Democratic-led Senate rejected a measure passed by the Republican-led House to work a delay of the health plan into a temporary spending bill needed to keep the government running.
The 54-46 Senate vote came less than 10 hours before a midnight deadline to approve the funding legislation. It is now up to the House to accept a bill that doesn't delay the health initiative - which it has refused to do - or find an alternative acceptable to the Senate.
White House budget director ordered federal agencies to begin closing down
If it fails to do either of those options, the government faces closures that would force 800,000 federal workers off the job without pay and rattle the shaky US economic recovery. "We're at the brink," said Senator Barbara Mikulski, a Democrat, as House Republican leaders calculated their next move.
Some critical services would continue during a shutdown, such as patrolling the borders and controlling air traffic. The State Department would continue processing foreign applications for visas, and embassies and consulates overseas would continue to provide services to American citizens.
Despite no signs of a compromise, Obama insisted he is "not at all resigned to a shutdown" and he expected to speak to congressional leaders throughout the day to address the impasse. The president has vowed not to allow Republicans to use the spending bill to derail his most important domestic policy achievement.
"There's a pretty straightforward solution to this," Obama said at the White House. That's for "everybody to act responsibly and do what's right for the American people." The prospect of a shutdown contributed to a decline in stock markets around the world.
US stocks sank as Wall Street worried the budget fight could lead to something much worse for the economy - a failure to raise the nation's borrowing limit.
The White House budget director ordered federal agencies to begin closing down on Tuesday after Congress failed to pass a budget to avert a government shutdown.
"Agencies should now execute plans for an orderly shutdown due to the absence of appropriations," said Sylvia Mathews Burwell, director of the White House Office of Management and Budget in a memo.
The order was issued 10 minutes before the US government officially ran out of money after a day of angry brinkmanship between the Republican-controlled House of Representatives and the Senate, where Democrats have the majority.
Burwell urged Congress to pass a temporary operating budget as soon as possible to allow departments to reopen.
"We urge Congress to act quickly to pass a Continuing Resolution to provide a short-term bridge that ensures sufficient time to pass a budget for the remainder of the fiscal year, and to restore the operation of critical public services and programs that will be impacted by a lapse in appropriations."
With PTI inputs