WASHINGTON (Reuters) - The government-run health insurance option favored by President Barack Obama is not essential to a healthcare overhaul as long as the final measure boosts competition, a top U.S. health official said on Sunday.

Ernest Sass, 52, (L) winces as he is attended to by Girish Bobby Kapur, M.D. (R) in a room used to see patients who don't require treatment for trauma inside the emergency room at Ben Taub General Hospital in Houston, Texas July 27, 2009. REUTERS/Jessica Rinaldi

Health and Human Services Secretary Kathleen Sebelius said a public insurance option was “not the essential element” of any overhaul, and non-profit cooperatives being considered by a Senate panel could also fulfill the White House goal of creating more competition on insurance.

“I think what’s important is choice and competition, and I’m convinced that at the end of the day the plan will have both of those -- but that is not the essential element,” she said of the government-run insurance option on CNN’s “State of the Union” show.

“The president is just continuing to say let’s not have this be the only focus of the conversation,” Sebelius said.

Democratic proposals in Congress for a government-run insurance option have sparked intense opposition from Republicans who argue it would unfairly compete with private plans and would cripple the insurance industry.

The government option has become a key focus of opposition charges that the overhaul, Obama’s top domestic priority, would amount to a government takeover of healthcare.

Six members of the Senate Finance Committee -- three from each party -- have been negotiating a reform package that would feature member-controlled non-profit cooperatives instead of the government-run plan.

“I think there will be a competitor to private insurers,” Sebelius said. “That’s really the essential part, is you don’t turn over the whole new marketplace to private insurance companies and trust them to do the right thing.”

‘BOTTOM LINE’ CONCERNS

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White House spokesman Robert Gibbs avoided a direct response when asked if the exclusion of a government-run option would be a deal-breaker for Obama.

“The president believes the option of a government plan is the best way to provide competition,” he said on CBS’s “Face the Nation,” but he added the White House looked forward to the Finance Committee’s ideas.

“The bottom line again is do individuals looking for health insurance in the private market have choice and competition?” Gibbs said. “If we have that the president will be satisfied.”

Obama has pushed a healthcare overhaul that he says would rein in costs, improve care and extend coverage to most of the 46 million uninsured Americans, but the measure has run into stiff opposition from Republican and conservative groups and some elements of the healthcare industry.

Lawmakers at home for the August recess have faced vocal and sometimes disruptive critics at healthcare information sessions. The controversy has driven down Obama’s approval ratings and possibly jeopardized passage of the healthcare legislation when Congress returns in September.

Obama has intensified his public lobbying for the measure, and held three public “town hall” meetings on healthcare last week to counter the criticism.

In a New York Times opinion piece on Sunday, Obama said “for all the scare tactics out there, what’s truly scary -- truly risky -- is the prospect of doing nothing.”

Republican Senator Richard Shelby, a sharp critic of the administration’s healthcare reform effort, said a public cooperative option would be “a step in the right direction.”

“I think the Democratic administration -- President Obama and his Cabinet -- have read the tea leaves of America right now,” he said on “Fox News Sunday.”

Democratic Senator Kent Conrad, a member of the so-called “Gang of Six” negotiators on the Finance Committee, said the cooperative model could attract Republican support.

Conrad has argued Democrats do not have enough votes to pass a healthcare overhaul without Republican support, even though Democrats control Congress.

“Co-ops are very prevalent in our society. They have been a very successful business model,” Conrad said. “It is the only plan that has bipartisan support in the United States Senate.”