Nov. 19 (Bloomberg) -- Tom Daschle has accepted President- elect Barack Obama's offer to become Health and Human Services secretary and lead the effort to revamp the U.S. health-care system, a Democratic official familiar with the matter said.

The former South Dakota senator was an adviser to Obama during the presidential campaign and is leading his transition team's health-care policy review.

Separately, Peter Orszag, the head of the Congressional Budget Office, has been offered and likely will accept a job in the Obama administration as head of the White House Office of Management and Budget, according to a congressional aide and a party official.

Obama made health care a top domestic priority during his campaign for the presidency. He proposed expanding government health programs, giving subsidies to low-income families and requiring that insurers cover everyone, regardless of their medical condition.

``It's just great to have someone so knowledgeable about Congress because that will assure that things get done,'' Alissa Fox, vice president of legislative policy for the Blue Cross and Blue Shield Association, said of Daschle in an interview today.

Daschle didn't immediately respond to requests for comment. The officials spoke on condition of anonymity because the formal announcements haven't been made.

Cabinet Posts

Secretary of Health and Human Services is a Cabinet post and is subject to confirmation by the Senate. For other Cabinet positions, New York Senator Hillary Clinton, Obama's primary election rival, is a leading candidate for secretary of state, and former Deputy Attorney General Eric Holder is the top contender to head the Justice Department, according to Democrats familiar with the transition.

Daschle, 60, was involved in health-care issues while in the Senate and after he lost his bid for re-election in 2004. His book, ``Critical: What We Can Do About the Health Care Crisis,'' calls for an independent agency similar to the Federal Reserve Board to oversee the U.S. health system.

The book jacket includes a quote from Obama saying that Daschle ``brings fresh thinking to this problem, and his Federal Reserve for Health concept holds great promise for bridging this intellectual chasm and, at long last, giving this nation the health care it deserves.''

Reaction

Advocacy groups that favor broadening health-insurance coverage reacted positively to news of Daschle's selection.

``His new leadership position confirms that the incoming Obama administration has made health care reform a top and early priority for action in 2009,'' said Ron Pollack, executive director of Families USA.

The Republican National Committee was critical.

``For voters hoping to see new faces and fewer lobbyist connections in government, Daschle's nomination will be another disappointment,'' Alex Conant, a spokesman for the Republican National Committee, said in a statement.

However, some congressional Republicans said they would welcome Daschle's presence at the department, including Senators Orrin Hatch of Utah, Michael Enzi of Wyoming and Charles Grassley of Iowa, all of whom are involved in Senate committee meetings to write health-care legislation.

Knows the Senate

``Senator Daschle knows the Senate and knows senators and that's important,'' said Grassley after a bipartisan meeting on health care convened by Democratic Senator Edward Kennedy of Massachusetts. ``I received it very favorably.''

Hatch said in an interview that Daschle was a ``great choice'' and someone who can work with both parties.

Daschle was the Senate Democratic leader from 1994 to 2004. Since 2007, he has been an adviser to the law firm of Alston & Bird LLP. Though Daschle is not a registered lobbyist, his firm was paid $5.8 million between January and September to represent companies and associations before Congress and the executive branch, with 60 percent of that money coming from the health industry.

Alston's clients include HealthSouth Corp., CVS Caremark Corp. and the Alliance for Quality Nursing Home Care, a coalition of nursing homes.

In selecting his budget director, Obama is turning to a man who analysts said is highly regarded for knowledge of government policy, particularly regarding health care, Social Security and fiscal matters.

Budget Analyst

Orszag has ``solid analytical capabilities; there are few people who can walk into the job'' and master the $3 trillion federal budget, though Orszag can, said Stan Collender, a former House and Senate Budget Committee analyst.

The White House budget office oversees the drafting and spending of the 2009 federal budget that may have a deficit topping $1 trillion.

Obama will be contending with a recession and the cost of a $700 billion financial rescue package and a promised economic stimulus package.

Orszag has said that rising deficits threaten Obama's campaign promises, such as middle-class tax cuts and an overhaul of health-care policy.

``I'd call him a budget realist,'' Collender said. His agency's ability to forecast income and spending ``is as good or better'' than the past six CBO directors. Still, the job at the congressional budget agency is different than the White House budget office.

`Hot Seat'

``Your job is to protect the president's behind, and his political skills have never been tested,'' Collender said. ``He's going to be in the biggest hot seat in town.''

Orszag, writing in his CBO director's blog on Oct. 13, said that problems in financial markets and the risks to the economy ``may displace health care reform on the policy agenda -- and that may well be the case for some period of time.''

Obama's transition team also announced the leaders of policy working groups charged with developing high-priority proposals for the administration.

Along with Daschle, they include four people who served in former President Bill Clinton's administration: Carol Browner for energy and environment; James Steinberg and Susan Rice for national security and Daniel Tarullo for economic policy.

The education policy group is led by Linda Darling-Hammond, a professor of education at Stanford University. T. Alexander Aleinikoff, dean of the Georgetown University Law Center, is head of the immigration group along with Mariano-Florentino Cuellar, a professor at Stanford Law School.

Three people are heading the technology, innovation and government reform review: Blair Levin, an analyst and managing director at Stifel Nicolaus & Co. in Washington; Sonal Shah, head of Google.org's global development initiatives, and Julius Genachowski, managing director of Rock Creek Ventures, a Washington firm that invests in online companies.

To contact the reporters on this story: Edwin Chen in Washington at Echen32@bloomberg.net; Julianna Goldman in Chicago at Jgoldman6@bloomberg.net

Last Updated: November 19, 2008 15:54 EST