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HealthBiz: Another governor tapped for HHS

By ELLEN BECK

WASHINGTON, Dec. 14 (UPI) -- President Bush has nominated another governor to head the Department of Health and Human Services -- another governor who is bullish on states having the flexibility to make innovations and changes to their Medicaid programs without a lot of federal hassle.

Republicans and the White House like that idea because it's one way to save money on healthcare. If you're a Democrat, however, it's a double-edge sword.

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Outgoing HHS Secretary Tommy Thompson, a former governor of Wisconsin, made a name for himself in Washington with his reform of the Badger state's welfare and Medicaid programs -- forcing more people to work and limiting benefits. One of his biggest gripes was that the federal half of Medicaid, which must give its approval of such changes in the form of waivers, dragged its feet and created unnecessary roadblocks to innovation.

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Under Thompson's tutelage, Medicaid made progress toward speeding up its waiver approval process.

Newly nominated Mike Leavitt, 53, comes from that same cut of cloth -- but the former governor of Utah appears to be more of a team player and less outspoken than Thompson. Thompson used his resignation speech to point out how vulnerable the nation's food supply is to bioterrorism, taking another critical jab at an administration that had already raised its eyebrows more than once over Thompson's plain-speaking.

Leavitt is more of a known entity to the White House, having served, albeit briefly, as head of the Environmental Protection Agency. He served well, however, and was reportedly under consideration for more than one Cabinet appointment in Bush 2.

As Utah's governor from 1993 to 2003, he, like his colleague Thompson, dealt with rapidly rising Medicaid costs -- in some states the Medicaid bill is the second-largest budget item behind education.

In testimony before the House Subcommittee on Health and the Environment in 1995, Leavitt said: "As Congress looks toward limiting the federal funds available to the Medicaid program, it is vital the states be given the tools necessary to craft a program that is not only efficient, but which continues to provide at-risk populations good quality medical care. In my opinion, the most important tool the states must have to accomplish this is flexibility."

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Well, as HHS head he's going to be on the other end of the table -- using that "flexibility" as a way to rein in Medicaid spending on the federal level -- a long-held goal of Republicans and the White House.

Even before the Medicare Modernization Act of 2003 came to fruition, Hill staffers were told they'd barely have time to draw breath after passage before they were to launch into reforming Medicaid -- now serving more than 50 million people, costing more than $304 billion a year and, for the first time in 2004, bigger than sister Medicare. Medicaid is, in fact, the largest healthcare entitlement program on the books. Somehow, that reform has yet to materialize.

Medicaid is funded by a federal match of state spending, anywhere from 50 percent to 77 percent, with each state's match rate varying based on a complex formula. There is no limit to the match dollars drawn out of the federal treasury -- only limits to state Medicaid spending imposed by tight state budgets.

There has been little political stomach for the fight in Congress that would ensue over changing the basic structure of Medicaid from the match program to a limited federal contribution program -- the so-called Block Grant proposal. The Centers for Medicare and Medicaid Services instead has been getting creative with states over Medicaid waivers -- those federal permission slips the states need signed before they can change their Medicaid programs.

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The goal has been to use the waiver process to encourage states to make changes that save the federal government money. For example, the government likes states that propose community-based or homecare programs that keep people out of nursing homes -- the cost of which eat up $60 billion in Medicaid spending.

These waivers in a round-about way limit federal funding because of the requirement of budget neutrality. Normally when healthcare costs go up, the federal government and states share the costs. When states ask for waivers, however, included is a provision that no matter what happens -- the federal government will not incur additional costs as a result of the policy. The waivers come with limits on federal spending for the life of the waiver -- making states take all the financial risk in whatever innovation they come up with.

Leavitt has experience with that idea. As Utah's governor, in 2002 he oversaw development of a waiver to that state's Medicaid program to allow a reduction in benefits to some in the program so existing money could be reallocated.

The money was moved to provide about 25,000 low-income workers with a basic, limited healthcare benefit to give them access to primary care services. It was criticized by opponents as robbing Peter to pay Paul.

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Leavitt, a Utah native, also brings to HHS a lot of insurance reform work -- in the private sector he ran a regional insurance company.

Karen Ignagni, president of America's Health Insurance Plans said Leavitt "promoted innovative public-private programs" as governor.

That will serve him as he oversees the rollout of MMA in 2006, which will include a new managed care option and drug-only insurance plans.

CMS Administrator Dr. Mark McClellan, on just about everyone's list to replace Thompson, was left at the helm of the MMA implementation instead. Bush's decision not to rock the boat -- McClellan is a physician and economist with drug experience at the helm of the Food and Drug Administration -- makes sense for CMS, which has undergone a lot of structural change itself in the past year as it gears up for MMA.

"Mark is doing a remarkable job of implementing the Medicare Modernization Act so that seniors can fully benefit from new coverage for prescription drugs and preventive services. And he is implementing important improvements to Medicaid to better help Americans in need. It is essential to have a leader of Mark's caliber in the critical position of CMS administrator," Thompson said.

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With McClellan handling Medicare and Leavitt working on Medicaid -- Republicans with their added muscle on the Hill might just have a happy New Year in 2005.

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