If this AP interview, HHS Secretary Sebelius, just signaled that Obama will not insist on a robust public health insurance option. Instead, he might accept Conrad’s toothless co-op proposal.

In an interview with The Associated Press, Sebelius said that President Barack Obama does not want to drive health insurers out of business, but make them more competitive by offering working families and small businesses the option of a public plan without the high overhead costs of marketing, administration and profits.

"I think there is a lot of understanding that the private market has really failed to provide affordable coverage to Americans," Sebelius said. The industry has had "a lot of opportunities" to get rid of coverage restrictions and other unpopular policies, Sebelius said, and really "hasn’t served Americans very well."

However, Sebelius stressed that Obama is open to compromise on the shape of the public plan, which doesn’t have to be run by the government. She spoke positively of a compromise idea that envisions consumer-owned nonprofit cooperatives, like rural electricity or agriculture co-ops. They would get started with seed money from taxpayers but then compete without government control. The plan by Sen. Kent Conrad, D-N.D., may end up in a health overhaul bill to be unveiled by the Senate Finance Committee this week.

In the end, the insurance industry will blink first in any showdown over a public plan, Sebelius predicted.

So let’s see. On Monday, in a highly publicized speech, the President tells the AMA that he wants a public option that "keeps the insurance companies honest." The leading expert on the public option, Prof. Jacob Hacker (and many others — e.g., here, here, and here), explain why Conrad’s co-op proposal is not a substitute for the public plan because it doesn’t achieve the President’s objectives.

But AP reports that Obama’s HHS Secretary, who had already tried to give away the store, says Obama is now willing to abandon the position he took the day before? And she says the industry will blink? Are these people serious?

Lets be clear. A robust, government-sponsored public option is an essential piece in any meaningful reform effort. It’s the lynchpin that (arguably) makes it tolerable to force individuals and companies to purchase insurance, and to provide subsidies for the less affluent to purchase private insurance from an industry that is otherwise bloated, inefficient, corrupt and non-competitive.

If there’s no robust public option, there’s no genuine competition, no model of compensation and other reforms, and no justification for forcing consumers to purchase insurance. And without a strong federal oversight presence, there is no mechanism to push cost efficiencies and containment. End of reform.

But if this is where the Administration is, then I’m voting with John McCain: pull the plug on this phony reform effort and start over, and this time, single payer goes in the middle of the table. Enough.

Update: There’s some skeptism whether AP got this right (or might have relied on her prior AP-reported statements before Obama’s speech), so we’ll have to see whether this report is confirmed/accurate. But it’s obviously troubling unless they refute it, soon.

More:
Digby, Cokie’s Law Is Still on the Books
Volsky/Wonk Room, The Big Dog says stay tough
Yglesias, Kennedy health reform bill won’t force you to lose insurance
mcjohn/DKos, Public Option alert and That pesky CBO report