WASHINGTON – The worst seems to be over, President Barack Obama's budget director said Sunday. But he also warned against taking signs of economic recovery as a reason to celebrate or delay changes in health care policy.

Peter Orszag said the nation's economy appears to have bottomed out, even as the White House prepared to revise its budget projections to reflect higher-than-expected unemployment. He said an improving economy and changes to how the United States provides health care would help narrow federal deficits.

"I think what happened is the free-fall in the economy seems to have stopped and we're — I guess the analogy (is) there are some glimmers of sun shining through the trees, but we're not out of the woods yet," said Orszag, the director of the Office of Management and Budget. "We do have more work ahead."

Work, Orszag said on CNN's "State of the Union," that would include passing this year Obama's health care plans despite the economic crisis.

"Let's be very clear. We've always said health care reform has to be deficit neutral over a five- or 10-year window and much better than that over the long term," said Orszag, whose knowledge of health policy has strengthened his Cabinet-level position. "So we are committed to making sure health care reform is self-financing and also brings down costs over time, both for families and for the federal government."

The administration, however, faces serious challenges. Some 1.3 million jobs have been lost since February and the auto and financial industries are in precarious positions.

Obama's Democratic allies have been reluctant to endorse the White House's health proposals while Republicans have vowed to stop them; Republican National Committee chairman Michael Steele told NBC's "Meet the Press" that he doesn't think health care will pass this year.

Meanwhile, Orszag said the administration would update its budget numbers in the coming months.

"You have to remember the deficit is very sensitive to the state of the economy," said Orszag, noting that officials always planned to revise those figures. "As the economy starts to recover the deficit comes down quickly."