Transcript: HHS Secretary Kathleen Sebelius and Mitt Romney

STEPHANOPOULOS: Doesn't the public plan only make sense if it actually does pay lower rates than the private plans so that it's lower in cost?

SEBELIUS: I don't think you have to pay lower rates. I think what you have to do is, maybe, cut some of those overhead costs and have innovative strategies.

What consumers will have is choice. And in lots of places in the country, absent a public option, absent some kind of competitive option, people would have no choice.

There's one dominant company and that really doesn't drive innovation; it doesn't drive much in terms of quality care. And that's really the goal at the end of the day.

We know that higher cost doesn't translate into higher quality. And what we want to do is have highest-quality, lower-cost care for all Americans.

STEPHANOPOULOS: The political problem with the public option is that, right now, at least, Republicans don't seem eager to sign on. All but one Republican member of the Senate Finance Committee has said public option. And to bridge that gap, Senator Kent Conrad, Democrat of North Dakota, is proposing a different kind of a system, co-ops, like -- that would be similar to rural electric co-ops, rural telephone co-ops.

These people could band together, create their own health insurance cooperative. And he says that could be the alternative, the compromise, instead of having a full-blown public plan. Is that something the president is open to?

SEBELIUS: Well, I think that the details of exactly what that looks like are still being developed, but I think Senator Conrad has come forward with a creative idea, recognizing that choice and competition are good in a marketplace. Health insurance marketplace where people have some choices and have competition to keep prices down is actually a wonderful strategy, and that's really what the health insurance exchange is about: stabilize what we have but also create a system where Americans can have affordable coverage. You share the risk and you move forward.

STEPHANOPOULOS: Yet, you got other Democrats like Speaker Pelosi who say that's not a public plan.

So, again, I'm not sure I'm going to get -- have any more luck on this. But I am trying to figure out, when the president looks at this, does he say, "I want a public plan, and it must be in the final bill," or "I'm open to other sorts of alternatives?"

SEBELIUS: Well, I think -- I think the discussions, right now, are serious ideas around the table from all sides. He has laid out pretty clearly and, I think, reinforced his support for a public option, to a letter to Finance Committee members. He talked about it in a radio address. He's, you know, continuing to do that.

I don't think it's a surprise that the president supports a public option. He thinks choice is good, thinks competition is good.

And, frankly, George it exists all over the country. State employee health plans in 30 states have private options side by side with public options. It works well. It provides some choice. It exists in children's health insurance programs.

So the notion that somehow this public plan can't work and it will drive the private insurance market out of business is just not very accurate.

STEPHANOPOULOS: And he's going to insist on it?

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