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Leavitt Sees $60 Billion in Medicaid Savings

By Ceci Connolly
Washington Post Staff Writer
Wednesday, February 2, 2005; Page A09

New Health and Human Services Secretary Mike Leavitt said yesterday that $60 billion can be saved over the next decade in the Medicaid health program for the poor by closing loopholes, prohibiting "accounting gimmicks" by states and eliminating wasteful spending on items such as overpriced prescription drugs.

In his first address as secretary, Leavitt sought to dispel fears that President Bush is poised to cap federal spending on Medicaid. Leavitt said the administration will not limit spending on "mandatory" beneficiaries -- the recipients who are guaranteed coverage under federal law.

But left unsaid was what the administration intends for Medicaid's optional patients and services, about two-thirds of all Medicaid spending.

Diane Rowland, executive vice president of the nonpartisan Henry J. Kaiser Family Foundation, said that because children are the largest group of mandatory beneficiaries, Leavitt's comments seemed to indicate "the potential goal here is to reduce spending on the aged and people with disabilities, who tend to be classified as optional and are the most expensive."

In a speech to the World Health Care Congress here, Leavitt said he will advocate home- and community-based health care for the elderly and disabled rather than the more expensive nursing home care. Cracking down on middle-class senior citizens who transfer assets to their children to qualify for Medicaid's long-term care would save $4.5 billion over a decade, he said.

Bush and the state governors are focused on Medicaid because it has grown rapidly at a time when the federal government faces record deficits and states are having trouble balancing their budgets.

"There is a time in the life of every problem when it is big enough to see but small enough to solve," Leavitt said. "For Medicaid, that window of opportunity is upon us. The time to act is now."

The federal-state health program gives states wide latitude in determining income eligibility levels and types of care to be covered by Medicaid. Under federal law, for example, prescription drugs are optional services, although virtually every state provides free or discounted medications to Medicaid beneficiaries.

Covering more people and more services costs a state more money, but also earns it more federal matching funds. The Medicaid rolls have swelled to 46 million people, and the program is projected to cost $324 billion this year.

"Medicaid is not meeting its potential," Leavitt said. "It is rigidly inflexible and inefficient. And, worst of all, it is not financially sustainable."

In Leavitt's confirmation hearing, however, Sen. Max Baucus (D-Mont.) noted that Medicaid costs have grown "mostly from an increase in enrollment," not waste, fraud and abuse.

Though he expressed sympathy with governors struggling to balance their budgets, Leavitt repeatedly pointed the finger at state leaders who he said have "resorted to a variety of loopholes and in some cases accounting gimmicks" to siphon off an extra $40 billion in federal money over 10 years.

Asked to name those states, Leavitt demurred, saying those types of "awkward conversations are best conducted one-on-one."

He promised aides would provide details on the $60 billion in savings. But a staff e-mail later said only: "The estimated savings numbers used in the speech are formal HHS estimates and can be attributed as such."

© 2005 The Washington Post Company


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