Leavitt Won't Rule Out Medicaid Budget Cuts
January 20, 2005

By Ceci Connolly
Washington Post Staff Writer

President Bush's choice to take over the Department of Health and Human Services steadfastly refused yesterday to rule out budget cuts for Medicaid, the state-federal health program for the poor.

In two otherwise cordial confirmation hearings, Mike Leavitt, the current administrator of the Environmental Protection Agency, argued that Medicaid is "inefficient" and could serve more people with better management and some ingenuity.

"We can expand the number of people we serve with the available resources," he said.

Lawmakers of both parties warned against any approach that would limit federal spending on Medicaid, noting that a sluggish economy has pushed millions more Americans into the program in recent years.

"I hope we don't see any proposals that go in that direction," Sen. Olympia J. Snowe (R-Maine) said. "It would be a mistake to go down that road."

Virtually every state takes advantage of an option under the Medicaid law to collect extra federal matching funds in return for extending coverage to more low-income Americans. Today, about two-thirds of the 40 million people enrolled in Medicaid are in "optional" categories.

Leavitt pledged only to oppose any change in eligibility or benefits for the remaining "mandatory" beneficiaries.

"I believe Medicaid is a vital program. I believe it is a remarkably important means by which we serve the poor in this country," he said. "But it is not meeting its potential to do good in the lives of the poor that it can."

At a time when the per-capita costs of private health insurance rose by 12.6 percent and the Medicare program for seniors increased by 7.1 percent, Medicaid rose by 4.5 percent, Sen. Jeff Bingaman (D-N.M.) said. "That does not mean to me it is inefficient," he said.

The problem, Bingaman said, is not mismanagement but a growing number of people in need of coverage and a large number of low-income seniors moving into nursing homes.

Leavitt said the "bias" he holds is that "the entire system of health care in our country is inefficient" and that "fussing around the edges" will not solve fundamental problems of cost, quality and access.

Despite the tensions over Medicaid, senators predicted Leavitt, the former Republican governor of Utah, will be confirmed quickly, perhaps as early as today. He would take over a department that has a $550 billion budget and oversees more than 300 programs, including Medicare and Medicaid.

"You've got the juice," said Sen. Max Baucus, ranking Democrat on the Finance Committee.

On several hot-button topics, Leavitt deferred to the White House, prompting expressions of exasperation from lawmakers.

Pressed on Tuesday to say when the administration will nominate a permanent commissioner of the Food and Drug Administration -- described by Sen. Judd Gregg (R-N.H.) as "an agency in crisis" -- Leavitt said he expects a decision soon.

He also avoided answering questions about proposals to allow Americans to import lower-priced prescription drugs from other countries, such as Canada.

"If they're not affordable, they cannot be effective," said Snowe, a leading advocate of importation legislation. "It's hard to understand the resistance, the intransigence on this issue."

In many respects, the hearings were an opportunity for senators to put on the record the gripes, fears and questions they have relating to the sprawling department, which includes the FDA, the National Institutes of Health and the Centers for Disease Control and Prevention.

Implementing the new Medicare prescription drug benefit will be "the main event at HHS in 2005," Leavitt told a few senators on the Health, Education, Labor, and Pensions Committee on Tuesday.

Gregg asked if Leavitt will hold the new drug program to the administration's 10-year, $400 billion cost projection, or allow it to rise to the more recent estimates of $555 billion.

"I am aware of the controversy, aware the cost estimates changed," Leavitt replied. "It has been my practice as a manager to operate within my budget."

Said Gregg: "That would be great."

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