President Barack Obama said Kansas Governor Kathleen Sebelius, his nominee as health secretary, will try to forge a bipartisan consensus on revamping the U.S. health- care system, one of the nation’s “great challenges.”

The president also said that Nancy-Ann DeParle, the former chief of Medicare and Medicaid during the Clinton administration, will lead a new Office of Health Reform in the White House and work with Sebelius in shepherding the administration’s health- care initiatives through Congress.

“Health-care reform that reduces costs while expanding coverage is no longer just a dream we hope to achieve -- it’s a necessity we have to achieve,” Obama said at the White House, where he introduced Sebelius and DeParle.

The nomination of Sebelius, 60, comes as Obama puts health care on a parallel track with the economy as a top priority for his administration. The move also signals Obama’s attempt to build a bipartisan consensus in Congress. Sebelius, a Democrat, is in her second term as chief executive working with a Republican-dominated legislature in Kansas.

Obama last week proposed raising taxes on the wealthiest Americans and reducing government payments to drug companies and insurers to fund a $634 billion “down payment” toward overhauling the U.S. health-care system and expanding coverage.

‘Fiscal Imperative’

Even with the nation facing a deepening recession, Obama said in his address to Congress last week and again today that revamping health care can’t wait.

“We must realize that fixing what’s wrong with our health care system is no longer just a moral imperative but a fiscal imperative,” he said in his announcement.

Congressional Republicans already have signaled opposition to the tax increases and Obama has said he expects a fight over his budget plans.

Obama said that the health-care overhaul will require a bipartisan consensus that Sebelius, given her experience as a Democratic chief executive in a largely Republican state, has a chance to forge.

“I don’t think anybody has a silver bullet when it comes to health care,” Obama said. “But what I do know is this that people of good will collectively recognize that the path that we’re on is unsustainable.”

Fundamental Question

One of the biggest issues facing Obama is whether the government should directly provide health benefits by establishing a public health plan to compete with private insurers, said Dan Mendelson, president of Avalere Health LLC, a health consulting firm in Washington.

The health-care industry likely will argue that “you can’t have a level playing field” if it has to compete against the government for insurance business, Mendelson said. “That’s going to be a very important decision” to be made by the administration as it goes forward.

The administration also announced it is releasing $155 million from the economic stimulus package to fund 126 new health centers intended to help many of the 46 million Americans without health insurance. The money will come in the form of grants from the Department of Health and Human Services.

If approved by the Senate, Sebelius would take over a department whose jurisdiction includes Medicare health plans for the elderly and disabled and Medicaid health programs for the poor. The two programs account for $743 billion in spending, or about 21 percent of the federal budget.

Link to Economy

“This isn’t a partisan challenge, it’s an American challenge and one we can’t afford to ignore.” Sebelius said. “We can’t fix the economy without fixing health care.”

The nomination ended almost a month of uncertainty over who would assist Obama in developing and promoting his health plan. His previous nominee, former Senator Thomas A. Daschle, withdrew after questions were raised about his payment of back taxes.

Daschle was slated to take dual roles as health and human services secretary and head of the health reform office.

Obama plans an administration health-care summit on March 5, where doctors, hospital representatives, health-care advocates, business, labor and academicians will debate the course and pace of a revamped health-care system.

During his presidential election campaign, Obama promised to restructure insurance markets to provide more people coverage. He said at the time that he wants to give people more affordable options and bar insurers from denying people coverage because of their medical conditions.

Other Agencies

Sebelius would also oversee the Food and Drug Administration, which approves drugs and polices the U.S. food supply that’s under fire for tainted peanuts entering the food chain, and the National Institutes of Health, which holds responsibility for medical research. Obama hasn’t named people to head those agencies.

DeParle, 52, currently is a managing director of CCMP Capital Advisors LLC, a New York-based private equity firm with interests in health care. She sits on the boards of Medco Health Solutions Inc., a pharmacy benefit manager based in Franklin Lakes, New Jersey; heart-device maker Boston Scientific Corp., of Natick, Massachusetts, and health information technology company Cerner Corp., of Kansas City, Missouri.

DeParle also is a director of CareMore Holdings LLC, Novel Environment Power, and Legacy Hospital Partners, all private companies owned or managed by CCMP Capital Advisors, according to corporate filings.

White House Confidence

Obama’s press secretary, Robert Gibbs, said the administration doesn’t believe her board memberships will present a conflict of interest. “The White House has confidence in her and her abilities,” he said.

During President Bill Clinton’s administration, she led the two largest government health programs, Medicare and Medicaid. Before that she worked for Clinton as associate director for health and personnel of the Office of Management and Budget.

Until last year DeParle was a member of the Medicare Payment Advisory Commission, a panel appointed by Congress to provide independent opinions on payment and policy issues. She sits on the board of the Robert Wood Johnson Foundation and is an adjunct professor of health care systems at the Wharton School at the University of Pennsylvania.