Obama Will Consider A Business-Run U.S. Health Care System

And, she said, the administration will continue to seek cuts in the current costs of the Medicare Advantage program to bring those costs in line with the fee-for-service option provided by the regular Medicare.

Currently, Medicare Advantage plans cost between 12- and 14 percent more than fee-for-service under Medicare, and the estimated $177 billion savings over 10 years the administration hopes to extract is a down payment on the universal health care program it is pursuing.

The administration believes it can cut the cost of Medicare Advantage by "moving to a more competitive system" and creating benchmarks against which the private plans will bid "based on their projections as to what it will cost to treat patients."

Other means of ensuring a lower-cost, more competitive system for Medicare Advantage is by providing "more incentives for hospitals to prevent readmissions," she said.

That is also part of the plan to reduce Medicare payments, and, as a result, extend the solvency of the system an additional two years.

The administration wants to do this by designating a health care professional to coordinate the outpatient care of a fee-for-service patient once they leave the hospital, she said.

Further, she said, the administration also hopes that funds for creating electronic records for all patients' wellness services and comparative effectiveness studies, all included in the stimulus package, will help cut the cost of care for the elderly.

Her comments about the "public" option insurer proposal, that the administration insists be included in health care reform legislation, were made as part of her effort to make clear the administration wants a health care reform bill this year–and that based on the administration's interaction with Congress, such legislation can be enacted.

The administration also wants a bipartisan approach to any health care reform proposal and is prepared to bridge partisan gaps, as long as Republicans discuss options as policy and not philosophical divides, she said.

After being asked if she was aware that inclusion of a public option, seen as a certainty in any House bill, is regarded as a deal breaker by Republicans, Ms. DeParle said the administration would consider accepting a bill without a public option.

She acknowledged that the health care industry is very concerned about a December study by John Sheils, an actuary at the Lewin Group, a health care consulting practice, that suggested premiums would be 30 percent or more less than premiums for comparable private coverage due to low payment levels and administrative costs.

"Consequently, there would be a mass shift of enrollment from private coverage to the public plan," the Lewin study predicted. "We estimate that about 119 million people would shift from their current coverage to the public plan, which is a two-thirds reduction in the number of people with private coverage (currently 170 million people)."

But Ms. DeParle discounted the study, saying the industry concerns were overblown.

"That is where we are and that is what we are working with Congress on," she said. "If there are other ways of doing that, he [the president] is open to talking about them."

"There are ways to get around policy concerns," she said. "That is why we think we can reach agreement."

Asked her definition of a "public plan," she said it would be a plan sponsored by the government with very low administration, paying no commissions to brokers and profits to insurers.

She said it could be a public plan administered by private insurers, as exist in more than 30 states. "It depends on how you price the public plan; you don't have to use Medicare rates," she said.

She noted that there are "various ways of working at it," and that public plans are "often operated by private plans."

"There are different breeds of public plans that could be part of this," Ms. DeParle noted.