* Obama says reform will help reduce long-term deficits
* Overhaul sought of costly, inefficient system
* Challenge has defeated earlier presidents
* Recession seen making reform more imperative
(Adds Obama prepared remarks)
By David Alexander
WASHINGTON, March 5 (Reuters) - President Barack Obama takes on healthcare reform at a White House forum on Thursday, seeking to design an overhaul of a costly and inefficient system he believes is threatening the U.S. economy.
Obama, who has nominated Kansas Governor Kathleen Sebelius as his health secretary, will gather about 120 people representing everyone from doctors and patients to health insurers and lawmakers to discuss how to fix U.S. healthcare.
It’s a challenge that has defeated earlier presidents. But officials say the current U.S. economic crisis only makes it more imperative.
"If we want to create jobs and rebuild our economy, then we must address the crushing cost of healthcare this year, in this administration," Obama said in remarks prepared for the opening of the event.
"Making investments in reform now, investments that will dramatically lower costs, won’t add to our budget deficits in the long-term — rather, it is one of the best ways to reduce them," he said.
The United States spends approximately $2.5 trillion annually on healthcare but leaves some 46 million people uninsured and consistently ranks lower than other Western countries on indicators like infant mortality rates.
Obama pledged during his election campaign that he would expand health insurance coverage to virtually all people and find a way to control costs, which businesses complain are making their products less competitive in the global markets.
"Our healthcare costs are exploding our economy," said Melody Barnes, Obama’s senior domestic policy adviser. "When he talks about getting spending under control ... one of the primary things he is focusing on is bringing our healthcare costs under control."
The president has not presented a specific reform plan to Congress, seeking to avoid the problems that killed President Bill Clinton’s healthcare effort in the 1990s when his administration presented a long, detailed plan to lawmakers.
"He isn’t sending a bill up to the Hill," said Barnes. "He’s articulated some of the principles that are important to him, but I think he also strongly believes that to get this done he’s going to have to ... be open, pragmatic and listen and engage with Congress to get a bill done."
Kenneth Thorpe, director of the Partnership to Fight Chronic Disease, said healthcare legislation in Congress would likely take the shape of a white paper issued last year by Max Baucus, chairman of the Senate Finance Committee.
"That really is the starting point," he said. "It largely reflects candidate Obama’s healthcare reform proposals."
The Baucus plan would require health insurance for all, going a step further than Obama proposed. But the plan envisions many of the principles outlined by Obama, including better management of chronic illnesses, steps to encourage preventive care, insurance reform and improving healthcare delivery.
Baucus promised this week to "do all I can to make meaningful comprehensive health reform pass this year."
He said Obama and Congress had already taken important steps to advance healthcare reform by extending insurance to children of low-income families and approving an economic stimulus that included $19 billion for healthcare information technology.
Baucus said Obama’s decision to set aside $634 billion for healthcare reform in his 2010 budget showed the president’s "very strong commitment."
Battle lines already are being drawn, with some Republicans opposing any move to let the government act as an insurer of last resort in competition with private insurers.
"If the government is one of the competitors, eventually there are no competitors left," Representative Roy Blunt, who is leading Republican healthcare efforts, said this week.
Edmund Haislmaier, a health policy expert for the conservative Heritage Foundation, said Obama’s decision to put $634 billion for healthcare reform on the table was an error.
"He just told every interest group that ‘I’m not really going to reform, I’m just going to expand,’" Haislmaier said. (Editing by Chris Wilson and Eric Beech)