Leavitt faces a significant task ahead as HHS chief

He lists overseeing the pending Medicare drug benefit and addressing FDA problems as goals.

By Joel B. Finkelstein — Posted Feb. 7, 2005

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Washington -- Saying that Michael Leavitt has a tough job ahead of him as the man who is taking over the U.S. Dept. of Health and Human Services might be something of an understatement.

The former Utah governor is considered an excellent manager by many. He is "a true consensus builder and negotiator," according to AMA President John C. Nelson, MD, MPH.

Leavitt also has gained invaluable experience serving since November 2003 as the Environmental Protection Agency's administrator. But HHS presents unique and daunting challenges, experts said.

For one thing, the agency is huge, with a budget of more than $583 billion, bigger than even the Defense Dept. The new secretary also will face a roiling debate over Medicaid, implementation of broad Medicare reforms and recent blows to the credibility of HHS' research and public health branches.

Leavitt was questioned on these issues and more late last month during two days of Senate committee confirmation hearings, at which he indicated that he was ready to take on big challenges. The full Senate voted to confirm Leavitt on Jan. 26.

"We are moving toward what I would characterize as a large-scale discussion on the health care system in this country. And I welcome the discussion. It needs to be rigorous. We cannot be timid. We need to be bold and transformational," he said.

Medicaid reform on the table

His first job likely will be defending President Bush's budget proposal, due out later this month. The plan is expected to contain some difficult cuts to Medicaid, experts said.

Repeatedly questioned on whether he would oppose or support proposals to cap Medicaid spending, Leavitt said he would have to defer to White House policy on the issue.

Neither did he offer much detail on what he hoped to do to rein in growing federal costs in the $188 billion program, except to say that Medicaid could run more efficiently.

He is expected to carry forward current agency policies on flexibility waivers, which are generally designed to allow states to reduce benefits for some populations to provide coverage to others. The administration also has targeted Medicaid waste, fraud and abuse. But that approach is unlikely to produce savings on the order that the Bush administration is proposing.

According to Centers for Medicare & Medicaid data, fraud costs Medicaid about $119 million, said Sen. Max Baucus (D, Mont.), ranking Democrat on the Senate Finance Committee, which confirmed Leavitt's nomination on Jan. 25.

That wouldn't even put a dent in the $20 billion cut that the administration unsuccessfully requested in its 2005 budget, Baucus said.

"If forced to make cuts in Medicaid this year, we should all realize that it is unrealistic and misleading to say that we are simply cutting fraud and closing loopholes," he said.

Medicare tweaking ahead

While Medicaid is expected to bear the brunt of budget cuts, money will be very much at issue as the department -- the Centers for Medicare & Medicaid Services in particular -- works toward implementing the Medicare drug benefit, which begins in 2006.

Experts said Leavitt is likely to rely heavily on CMS Administrator Mark McClellan, MD, PhD, for this task. But during his testimony, Leavitt said he wanted to become personally involved with the rollout.

Leavitt is a team player and can be expected to follow the administration's lead when it comes to the law, said Stuart Altman, PhD, professor of national health policy at Brandies University, Waltham, Mass. But he also will face competing pressures from outside the White House.

Physician and patient groups will push for drug formularies that do not limit medication options too much. Meanwhile, Congress will keep an eye on the benefit to make sure it does not become too costly.

Lawmakers are also expected to introduce legislation this year to revisit proposals that did not make it into the 2003 Medicare reform law.

Several senators said they would still like HHS to be able to negotiate Medicare drug prices. And growing support for reimportation means there likely will be new legislation again this year. The measures are expected to address concerns raised by the department's task force.

Leavitt said those issues were worth discussion, but he voiced reservations about implementing such measures.

Another issue Leavitt is likely to face is Medicare physician payment. Several lawmakers already are promising to push for a fix to the sustainable growth rate formula, which will force the agency to cut physician reimbursement 5.2% next year if Congress doesn't act.

"Something needs to be done," said Sen. Orrin Hatch (R, Utah). "We in Congress, many of us on the Senate Finance Committee, have made this matter a high priority and would appreciate working with you in resolving this issue once and for all."

Legislation to permanently repair the formula is a top priority for the AMA. The Association is also pursuing regulatory changes to reduce the effect of the proposed cuts on physicians.

Restoring trust

Leavitt will have much work ahead in rebuilding credibility that has been lost in recent months at the department's research and public health agencies, namely the Food and Drug Administration, the Centers for Disease Control and Prevention, and the National Institutes of Health.

"Those are three names of trust in this country," Leavitt said. "In the middle of the night when we get up to administer medicine to our child or to take it ourselves, we do so knowing ... we are administering something we can count on."

The first step will be to name a permanent head to the Food and Drug Administration, which one expert described as "rudderless."

The FDA came under fire when a popular COX-2 inhibitor had to be recalled after years on the market. The White House will have to nominate someone to the FDA post, but Leavitt can play a crucial role in making that happen.

NIH has had to answer its own critics over research's financial ties to the drug industry. HHS officials also will need to reassure the public that it can be relied on to address public health issues after the flu vaccine shortage that hit last year.

Physicians and lawmakers are also eager to see the department lead the way on health information technology. Outgoing HHS Secretary Tommy Thompson has been very supportive of such efforts, but if anyone could be even more so, it would be Leavitt, said David Brailer, MD, PhD, national coordinator for health information technology, at a recent briefing.

"We began speaking on this before his nomination was announced. He ... wants to see something happening," Dr. Brailer said.

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