Transcript: HHS Secretary Kathleen Sebelius and Mitt Romney

If the goal, however, is to create competition in the system, in some ways, whether or not you have the public option is not the most important question, whether or not you're going to have payments on...

STEPHANOPOULOS: Let me stop you right there. Because that may be your analysis, and I don't -- I don't dispute the analysis. But it's not where the politics are, right now, particularly in the House of Representatives. Speaker Pelosi saying it is an absolute. It must be that.

BROWNSTEIN: It will be a very difficult issue to resolve in the end. But George, I was at an event on Friday with a group of health-care executives for health-care reform, health-care CEOs for health-care reform.

There's a guy there named Scott Armstrong who runs the big co-op in the Seattle area that Kent Conrad talks about as the model for what he wants to do. And he said at the end of the day, it isn't important -- isn't as important who is writing the check, whether it's a private plan or a private insurance company, or for that matter, the government and Medicare. But what they're writing the check for. Are they going to continue to have kind of fee for service medicine that incentivizes more activity, you know, kind of churning (ph). Or are we going to have more integrated care, bundling, paying for results.

In a way, in a sense, the best argument for the public plan is that it can be alloyed with Medicare and other government efforts to try to encourage this kind of payment reform. But the payment reform is probably more important in the long run than whether or not you have the public plan.

STRASSEL: I'm not sure where anyone gets the idea that you can have payment reform and reduce costs. We have had Medicare now for how many decades? It has run at 3 percent higher than growth of the economy the entire time.

Every effort to reform payment growth has failed. So this is just -- it is a matter of fact that a government program grows fast. Costs grow exponentially.

And as George was saying earlier, one of the only ways you fundamentally make this public option attractive to people is by keeping the costs lower than you have in the private industry. And you do that by cutting down on service providers or cutting down on services.

BROWNSTEIN: The problem I with the advocacy (ph) I have is, the version of the public plan that would do that, that would set -- that would use Medicare pricing, is almost -- it's almost impossible to imagine passing that.

So as George was saying before, what you could pass probably would have less impact on the market than the advocates want. And in a way, that argues again for not allowing this to become the center piece of the debate. I mean, there are -- I think there are -- look, the nature of Washington is to focus on the point of conflict. And you do have the left digging in, and you do have this becoming a red line for Republicans. But, you know, it doesn't -- it doesn't have to be that way.

STEPHANOPOULOS: But I think that means the question would depend on whether or not -- I think Kent Conrad can actually build some support for this co-op deal, which could split the difference.

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