Transcript: HHS Secretary Kathleen Sebelius and Mitt Romney

SEBELIUS: Well, again, I wasn't in the specific conversations. I think what's happening now is exactly what needs to happen, as they engage in writing the bill that will mean health reform this year, and that's putting some details together. And that dialogue will go on, about how to pay for it.

The president has proposed a payment of savings and, as you say, shaving the deductions off the wealthiest Americans. He still feels that that's a better alternative than some other...

STEPHANOPOULOS: But he's not going to get...


STEPHANOPOULOS: I mean, there's just no evidence that he's going to get that. All the major leaders on the Finance Committees and the Ways and Means Committee have said that's not the way they want to go; they want something else.

SEBELIUS: Well, I think, then, you know, that discussion will continue in the House and the Senate. But, again, what we don't want to do is have, at the end of the day, a tax on benefits that actually says to employers it's better to dump the benefits that you have; it's better to put those employees in the private market without employer-based coverage. That's a bad direction to move.

STEPHANOPOULOS: Is there a way to reform the treatment of those health benefits, the tax treatment of the health benefits without eliminating the complete deduction?

SEBELIUS: Well, I think that's what the Senate and House members are looking at: Is there a level above which you could tax; is there some kind of breaking point where it might be acceptable policy?

But, at this point, the president feels strongly that there are some other alternatives to pay for this.

What's unacceptable is the status quo. And there are lots of people on Capitol Hill who feel, if we just don't do anything, it will be OK. It will not be OK.


SEBELIUS: ... business and families and government.

STEPHANOPOULOS: Probably the biggest flash point, right now, is this whole notion of whether or not to have a public health insurance plan to compete with the private insurance.


STEPHANOPOULOS: And that is drawing the most fire from Republican senators. Take a look.


(UNKNOWN): The American people are starting to connect the dots and see these as, sort of, gateway drugs to the government takeover of health care. It's like putting an elephant in a room with some mice and say, "OK, fellows, compete."

After a while, the elephant has taken over the room and the only choice is the elephant.


STEPHANOPOULOS: To back that up, we'll look at a study from the Loewen (ph) Group, a respected health care group that says that if this public insurance option paid Medicare rates, 70 percent of those now getting private insurance would migrate into the public plan, and that would be -- basically, it would swallow up the private plans.

SEBELIUS: I think there's a lot of dispute about the numbers that Loewen (ph) Group used. And also, there hasn't been any decision about what rates would be paid.

What the president's said all along is, we want a level playing field. But having some competition and having some choice for consumers is a good thing. I don't think it's any surprise that insurance companies would rather have a system where everybody must buy coverage and there are no competitors.

So, you know...


SEBELIUS: ... new customers.

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