Washington  - US President Barack Obama nominated Kansas Governor Kathleen Sebelius as health secretary on Monday, his second choice for what will be a critical post in the new administration.

Sebelius, who was once considered a possibility for vice president, will take the job after Obama's first pick Thomas Daschle was forced to withdraw amid a tax scandal.

Obama also tapped Nancy Ann DeParle, who served in former president Bill Clinton's administration, to lead a new White House office for health reform. With Sebelius and DeParle, Obama chose to divide a job that would have been held exclusively by the well- connected Daschle.

Obama has vowed to reform the US health care system, one of the costliest in the world, during his first term. The challenge has frustrated previous administrations due to sharp ideological differences over how to tackle the problem.

Sebelius, 60, was elected governor of the Midwestern state of Kansas in 2003 and re-elected in 2006. She previously headed the state agency that regulates insurance companies and is considered a centrist Democrat - her key to success in a state that is majority Republican.

"The work won't be easy, but bringing about real change rarely is," Sebelius said in accepting the nomination.

The choice of Sebelius to head the Health and Human Services Department fills Obama's last remaining cabinet post. She must still be approved by the US Senate.

Daschle, a former Senate majority leader and close friend of Obama's, chose to withdraw his nomination after it emerged that he had failed to pay more than 100,000 dollars in taxes on a private car and driver.

More than 40 million people in the United States do not have health insurance and health care spending amounted to more than 16 per cent of US gross domestic product in 2008. Obama has warned that bringing down costs is the only way to reduce a spiralling federal deficit in the long term.

"Our current economic crisis has only heightened the urgency of our health care challenge," Obama said at the White House. "Fixing what's wrong with our health care system is no longer just a moral imperative, but a fiscal imperative."

During the 2008 election campaign, Obama pushed for a public- private system. He suggested creating a government-run insurance option to compete alongside private insurers, in order to expand access and pull down costs.

Republicans have already signalled strong opposition, fearing the idea will eventually lead to a government-dominated health care system similar to those in Britain or France.

Obama plans to hold a health care "forum" on Thursday, inviting politicians and industry leaders to the White House to begin tackling the issue.

The administration already allocated more than 600 billion dollars to health investments over the next 10 years in a federal budget outline released last week.