Skip Navigation

United States Department of Health & Human Services

Print Print    Download Reader PDF


Mike Leavitt, Secretary of Health and Human Services


National Governor's Association, J.W. Marriott Hotel, Washington, D.C.


Tuesday, March 1, 2005

"Medicaid: A Time to Act"

Good morning. It's great to be among so many friends.

We've spent a lot of time together the past few days. In fact, I think I met personally with just about all of you.

[lists specific conversations with governors]

These conversations have been very enlightening. I've heard your concerns and your good ideas. And several common themes have emerged from our times together.

First, you are all feeling immense strains on your budgets, and on your Medicaid budgets in particular. For most of you, Medicaid takes up more than 20% of your state budgets. And this percentage continues to grow at an alarming rate. Clearly, Medicaid is not financially sustainable. And for the sake of the people we are trying to serve, we all agree that we must reform the system.

Second, you are concerned about the integrity of our funding partnership. We know we need to address the issues surrounding intergovernmental transfers, or IGTs. We all know this isn't about blame-it's a simple statement that these practices have to stop. We must restore a straightforward, transparent, and effective funding partnership.

Several shared values have guided our conversations. Most important, we share a fundamental commitment to sustain this vital program so we can care for our neediest neighbors. Medicaid is the spirit of American compassion in action and a vital part of our commitment to our most vulnerable citizens. We will uphold this commitment.

We also believe that health care should be within the reach of every American. And a functioning, sustainable Medicaid is essential to meeting this goal.

As I see it, our discussions have yielded significant common ground. And while we don't agree on all the details, broad consensus has emerged on many of the most important issues.

  1. If we don't take action to address the strains on Medicaid, people currently served will lose coverage. This is already happening in many states, and we must act quickly to prevent this from happening in more states.

  2. There should be no block grants for Medicaid. Rest assured, there will be no block grant system.

  3. We must stop overpaying for prescription drugs. Pharmacies buy drugs wholesale for a low price, and Medicare reimburses drugs at this lower price. But under Medicaid, state governments usually pay a much higher price. We must change the law so that states pay the same low rate. This will save the federal government $15 billion and state governments $11 billion over the next ten years.

  4. Medicaid must not become an inheritance protection plan. Right now, many older Americans take advantage of Medicaid loopholes by giving away assets to their children to become eligible for Medicaid. In fact, there is a whole industry that supports this practice of "spending down." We must close these loopholes so we can focus Medicaid's resources on helping those who really need it. Doing so will save $4.5 billion during the next decade.

  5. Governors and Medicaid administrators should have the same tools available to them as are available to any other manager of a large health system, such as co-pays for optional populations. This should be voluntary, but states should have the option of including co-pays.

  6. Governors need more flexibility so they can develop creative ways to cover more people. We've already proven a model to provide such flexibility. The State Children's Health Insurance Program, S-CHIP, has provided health insurance for 5.8 million children in low-income families who don't qualify for Medicaid. One of the key reasons S-CHIP has been such a resounding success is that it allows states to ask the question, "What is quality basic health coverage?"

    The same flexibility will help us improve care for Medicaid's "optional populations" and expand care for others who currently do not have health insurance. At the same time, we will continue to provide comprehensive coverage to what Medicaid defines as our "mandatory populations," including children in foster care, the poorest of our elderly, and our neighbors who have disabilities.

  7. We can improve home and community care. We must ensure that seniors and people with disabilities get long-term care where they want it. Home care and community care can allow many Americans with disabilities to continue to live at home, where they can enjoy family, neighbors, and the comfort of familiar surroundings. Medicaid should not force these people to live in institutions. And providing home care is less expensive than providing nursing home care. It frees up resources that can help us serve more people. The President's New Freedom Initiative points us in the right direction.

  8. Quality must be part of the conversation. We must insert more elements of pay for performance, so doctors and providers have an incentive to provide higher quality care.

  9. We all see the need for electronic health records. We can be a nation where American workers have a comparative advantage in the global economy because they are healthy and productive and because, through the power of technology, our health care system produces fewer mistakes, lower costs, and better health.

  10. Perhaps our deepest agreement-while the problem is real and bad, it could get worse. I'm sure many of you saw the news this week predicting that in 2014, health care will comprise 19% of our GDP.

There is a time in the life of every problem when it is big enough to see but small enough to solve. For Medicaid, that window of opportunity is upon us. Now is the time for us to act. Now is the time for us to build on our common ground and solve this problem.

This will only happen if all of you make your voices heard. You need to go to Congress and tell them that Medicaid is a priority.

The President has given me a clear charge: to help Americans live longer, healthier lives and to do it in a way that maintains our economic competitiveness as a Nation. Medicaid is a vital component of keeping that charge. And it will be a vital step toward health care transformation across the board.

An entrepreneur I respect once told me that in an atmosphere of change and transformation, there are three ways you can respond. You can fight it and die. You can accept it and survive. Or you can lead it and prosper.

Now is the time for us to lead. Thank you.

Last revised: March 1, 2005


HHS Home | Questions? | Contact HHS | Accessibility | Privacy Policy | FOIA | Disclaimers

The White House | | Helping America's Youth