By Ceci Connolly
Washington Post Staff Writer
Friday, December 12, 2008; 12:03 AM

President-elect Barack Obama and Democratic leaders in Congress are devising plans to significantly expand the health provisions in next month's economic recovery legislation, arguing that pouring billions of dollars into an array of health programs will not only boost the economy but also make a down payment on promises of broader health-care reform.

In a stimulus bill that could exceed $500 billion, Obama has already pledged to increase federal Medicaid spending -- perhaps by more than $40 billion over two years -- and to make a large investment in health information technology. Talks are underway about also adding money to retrain medical workers, extending the State Children's Health Insurance Program, and expanding the law that allows unemployed people to purchase health insurance through a previous employer's plan, known as COBRA.

At a Chicago news conference yesterday to introduce Thomas A. Daschle as his choice for health and human services secretary, Obama said major reform of the health-care system "has to be intimately woven into our overall economic recovery plan."

"It's not something that we can sort of put off because we're in an emergency," he said. "This is part of the emergency."

Daschle, a former Senate majority leader, said that "addressing our health-care challenges" offers the best hope for reducing personal bankruptcies, improving American competitiveness and helping "pull our economy out of its current tailspin."

Their comments came just hours after the government announced that the number of Americans filing for unemployment benefits for the week ending Dec. 6 was 570,000, the highest in 26 years.

"It's hard to overstate the urgency of this work," Obama said.

Part of the political rationale for adding more health-care projects to the recovery package is to "get a running start" on the larger goal of broad health reform, said Nancy LeaMond, an executive vice president at the seniors' lobby AARP. "This builds momentum."

Additionally, including health-care reform measures in the context of the economic recovery bill would keep Congress from having to deal with those debates and expenditures in the later, larger discussion, said Senate Finance Committee Chairman Max Baucus (D-Mont.).

"We're going to be very busy here in Congress," he said in an interview. Baucus aims to begin marking up a stimulus bill the first week of January in hopes that it can be ready by Inauguration Day. He is pressing to include provisions that would steer money into health technology, such as adoption of electronic medical records, and reauthorization of the SCHIP program for two to three years.

"It's very important that health IT be part of the economic recovery," he said. "It represents the beginning of health-care reform."

During the campaign, Obama spoke of spending $50 billion on modernizing the health-care system by helping doctors and hospitals install and use computers. Sources involved in preparing the stimulus package said it might include $10 billion of that as a down payment.

"Investing in the health of the American people is a crucial part of the nation's economic recovery," said Sen. Edward M. Kennedy (D-Mass.), chairman of the Health, Education, Labor and Pensions Committee. "Modernizing our health-care system through better use of information technology is the key to easing the heavy burden of health-care costs."

Physicians have consistently complained that moving to electronic medical records or electronic prescribing involves spending money to purchase equipment and train workers. Several Democrats yesterday said the money could help defray the cost of those capital expenditures, pay for training programs or fund ongoing research on developing standards.

Rep. Pete Stark (D-Calif.), chairman of the House Ways and Means health subcommittee, is lobbying to expand COBRA insurance and provide subsidies to people who cannot afford the premiums. Currently, unemployed people can purchase health coverage through their previous employer, but it expires after 18 months and the individual must pay the full price plus an administrative fee.

"When people lose their jobs, they lose their health insurance," he said. "Not having health care is right up there with food and shelter."

In addition to his Cabinet post, Daschle will be head of the new White House Office of Health Reform. His deputy will be Jeanne Lambrew, a veteran of the Clinton administration who co-wrote a book with Daschle on health-care reform.

In making the announcement, Obama described his friend Daschle as "the original no-drama guy."