Daschle seemed like a shoe in for the HHS position from the start because of his close congressional ties and well-chiseled plan for getting the job done. He was also asked to oversee a new White House Office of Health Reform.

But with the recession getting deeper and a vacant HHS top spot, the outlook for change in 2009 is starting to look grim. According to a report released today by analysts at Miller Tabak, Daschle’s withdrawal “effectively terminates any chance of healthcare reform in 2009.”

“Given the time it will take to choose and vet a new HHS secretary it appears not likely that person will be able to impose meaningful change in the near-term,” the report said. “If we are correct in this view, to fix healthcare, the administration will have to pick a leader with strong congressional ties and a great deal of moral authority who knows healthcare in order to spearhead reform.”

The names floating around as replacements include former Gov. Howard Dean of Vermont, Govs. Kathleen Sebelius of Kansas, Edward Rendell of Pennsylvania, Jennifer Granholm of Michigan, and John Kitzhaber of Oregon, according to the New York Times. Governors are being considered because of their experience with running state Medicaid programs.

Without a strong-headed health reform leader in the executive branch—as Daschle was thought to be—the responsibility to produce change may fall on Congress’ shoulders. Senator Max Baucus of Montana, chairman of the Finance Committee, and Senator Ted Kennedy of Massachusetts, have been working on health reform plans since last November and plan to propose a bill later this year.

Although a congressional bill is likely to be introduced, analysts at Miller Tabak expect push-back from the executive branch: “Although it appeared that the administration was willing to let the congress lead a healthcare reform effort, in contrast to the Clinton effort, given the wrangling over the recent stimulus package the administration will most likely want more of a say in future large-scale legislation.”

Daschle’s familiarity with health policy issues is evident in the book he co-authored earlier this year: Critical: What We Can Do about the Health-Care Crisis. But with less administrative experience than the governors who preceded him, Daschle will need capable deputies to oversee key HHS agencies, including the Food and Drug Administration, the National Institutes of Health and Medicare and Medicaid.

The former Senator from South Dakota lost his seat in a hard-fought battle in 2004. He was criticized then as too much of a Washington insider, and his nomination provoked similar comments from some parties. But most observers regard the appointment as realistic assessment that consummate political skill is needed to reform the nation’s health care system.