EPA Chief Leavitt Picked for Human Services

WASHINGTON — Shifting his Cabinet reorganization back into high gear, President Bush nominated EPA Administrator Mike Leavitt today to head the Health and Human Services Department, which faces a fiscal crunch over the massive medical costs for the elderly and the poor.

The morning announcement at the White House underscored Bush’s determination to move beyond this past weekend’s embarrassment over Homeland Security nominee Bernard Kerik, who withdrew after disclosing that a nanny he hired turned out to be an illegal immigrant, and that he had not paid her Social Security taxes.

Homeland Security remains the only unfilled post among 15 Cabinet positions, nine of which are changing hands.

Below the Cabinet level, Bush is also expected to quickly name a candidate for the new job of national intelligence director, created under reforms approved last week by Congress. He must also find a successor for Leavitt at the Environmental Protection Agency.

Leavitt, 53, is a former governor of Utah who served a little over a year in the environmental post, not long enough to leave a substantial legacy. A pragmatist who seeks to balance competing policy interests, Leavitt was criticized by environmental groups for falling short in efforts to reduce power plant emissions. But he instituted a new regulation to reduce pollution from diesel engines.

Addressing agency employees, Leavitt said that 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 EPA, Bush said that he had enforced high standards with “a spirit of cooperation, and with good common sense.”

The Senate is expected to easily confirm Leavitt. Sen. Edward Kennedy (D-Mass.), the liberal stalwart who sets his party’s tone on many social welfare issues, welcomed Leavitt’s nomination and said he looks forward to working with him.

As head of HHS, Leavitt would oversee a 67,000-employee agency with a $573-billion budget that is 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 and food, protecting the nation from naturally occurring epidemics as well as from bioterrorism, and sponsoring cutting-edge medical research.

Leavitt’s challenges will begin immediately. He will oversee the regulatory groundwork to set up a new Medicare outpatient prescription benefit in 2006, the biggest change to the program in 40 years.

While adding benefits on the one hand, congressional aides and independent policy experts say Leavitt may also have to simultaneously push for significant cuts in Medicaid and Medicare to fulfill Bush’s promise of cutting the deficit in half.

“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. We’ve been taking the easy steps all along, so what we have left is hard choices.”

In the past, the administration has proposed capping the federal share of Medicaid, currently about $180 billion a year. The federal-state program pays the medical bills of the poor, the nursing home costs of many elderly and provides health insurance for the children of low-income working parents. Medicare faces pressure to cut payments to hospitals and other providers.

If that weren’t enough on 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 he wants Leavitt to expand HHS funding for faith-based organizations. The department provided $568 million to faith-based groups in 2003, for community health programs, drug abuse treatment and other services.

John Kitzhaber, a former Democratic governor of Oregon who worked with Leavitt when both were state chief executives, offered a strong endorsement of his nomination.

“Mike is a very bright guy, a moderate Republican who is interested in finding solutions,” said Kitzhaber, who is a medical doctor. “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 press accounts.

He was an enthusiastic supporter of the Children’s Health Insurance Program, which is also financed through Medicaid.

Leavitt’s short tenure at EPA produced a mixed record. He faced intense criticism from congressional Democrats and environmental activists over a proposal to control mercury emissions from power plants, which the critics said fell far short of Clean Air Act requirements.

And he was unable to complete a plan to reduce emissions of nitrogen oxides and sulfur dioxide from power plants to help states meet new stiffer health-based air quality standards for ground-based ozone and fine particles, contaminants that can cause life-shortening illnesses.

Leavitt had promised to finalize the latter plan — the Clean Air Interstate Rule — by the end of this year.

Over the weekend, however, administration officials said the plan would not be released until March. That would give the new Congress a chance to act on another administration proposal known as Clear Skies, which gives the power industry relief from many regulatory requirements.

“Within the constraints imposed by the White House and the Clear Skies straitjacket, [Leavitt] was looking for ways to advance a positive public health agenda against air pollution,” said John Walke, a senior attorney for the Natural Resources Defense Council. “Just this weekend we saw how unsuccessful that was.”

Scott Segal, a lobbyist for coal-fired power plants lauded Leavitt, saying his “tenure at EPA was short but effective.”

The EPA job was not known to be open, and Leavitt’s departure touched off a new round of speculation among Washington insiders over his successor. Among those mentioned were James L. Connaughton, a lawyer who chairs the White House Council on Environmental Quality, and Idaho Gov. Dirk Kempthorne, who was considered a possible candidate for the job last year.

At HHS, Leavitt will replace Tommy Thompson, a former governor of Wisconsin. Thompson announced his resignation two weeks ago with a blast at what he said were loopholes in the government’s efforts to protect the country from terrorist attempts to contaminate the food supply.

Times staff writers Edwin Chen and Lisa Getter contributed to this report.