WASHINGTON — Shifting his Cabinet reorganization back into high gear, President Bush on Monday nominated Environmental Protection Agency Administrator Mike Leavitt to head the Department of Health and Human Services, which faces a fiscal crunch over the massive medical costs of the elderly and the poor.
The morning announcement at the White House underscored Bush's determination to move beyond the withdrawal Friday of Department of Homeland Security nominee Bernard Kerik amid disclosures that a nanny he had hired may have been an illegal immigrant and that he had not paid all her Social Security taxes.
Homeland Security remains the only unfilled post of the 15 Cabinet positions, nine of which are changing hands.
Leavitt, 53, is a former governor of Utah who served a little more than a year at the EPA -- not long enough to leave a substantial legacy. A pragmatist who sought to balance competing policy interests, he was criticized by environmental groups for falling short in efforts to reduce power plant emissions, although he did institute a regulation to reduce diesel pollution.
Addressing EPA employees Monday, Leavitt said the president had called him Sunday evening to ask that he take a new job.
"This happened fairly suddenly," he said.
"EPA and HHS, in large measure, share a mission of protecting human health," Leavitt added.
Praising Leavitt's work at the EPA, Bush said Leavitt had enforced high standards with "a spirit of cooperation and with good common sense."
The Senate is expected to easily confirm Leavitt. Sen. Edward M. Kennedy (D-Mass.), who sets his party's tone on many social welfare issues, welcomed Leavitt's nomination and said he was looking forward to working with him.
As head of HHS, Leavitt would oversee an agency with 67,000 employees and a $573-billion budget -- bigger than the Pentagon's.
Its wide-ranging missions include paying the healthcare bills of the elderly under Medicare and the poor under Medicaid, assuring the safety of prescription drugs, protecting the nation from naturally occurring epidemics as well as from bioterrorism, and sponsoring cutting-edge medical research.
If confirmed, Leavitt's challenges would begin immediately. He would oversee the regulatory groundwork to set up a new Medicare outpatient prescription benefit in 2006, the biggest change for the program in 40 years and one that its 40 million beneficiaries have clamored for.
Congressional aides and independent policy experts say that to fulfill Bush's pledge to halve the deficit, Leavitt also may have to push for significant cuts in Medicaid and Medicare, which account for almost $475 billion of the agency's 2005 budget.
"If you look at the numbers, something big is going to have to happen if we are going to try to cut the deficit in half," said Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured. "If we see a budget [reduction] bill this year, both Medicare and Medicaid are largely the places they are going to have to turn to try to get savings."
Medicaid, which covers more than 50 million people, is a federal-state program that pays the medical bills of the poor and the nursing home costs of many elderly. It also provides health insurance for the children of low-income working parents. In the past, the administration has proposed capping the federal contribution for medical costs of the poor, currently about $100 billion a year, while giving states greater flexibility on how to use the funds.
Medicare faces pressure to cut payments to hospitals and other providers.
Also related to the healthcare agenda, Bush is battling for a national limit on jury awards in medical malpractice cases and for an expansion of a new type of insurance based on tax-free individual savings accounts.
The president also said Monday that he wanted Leavitt to expand funding for faith-based organizations. In 2003, the department provided $568 million in funding to faith-based groups for community health programs, drug abuse treatment and other services.
A former Democratic governor of Oregon who worked with Leavitt when both were state chief executives offered a strong endorsement.
"Mike is a very bright guy, a moderate Republican who is interested in finding solutions," said Gov. John Kitzhaber, who is a physician. "I also think there's a real value to having a governor in the Cabinet. If they in fact are going to whack the money in [health] programs, Mike is certain to be in the position of dealing with other governors, who undoubtedly will come unglued when that happens."
As governor of Utah, Leavitt undertook a modest experiment with healthcare reform. With federal approval, he shifted some Medicaid funds to provide low-income workers with the choice of either preventive benefits or a partial subsidy to buy health insurance through their employers. Of the 250,000 adults in Utah without health coverage, about 16,000 enrolled in the programs, according to news accounts.