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McClellan Announces He'll Leave Top CMS Post by Early October

By John Reichard, CQ HealthBeat Editor

September 5, 2006 -- Centers for Medicare and Medicaid Services Administrator Mark B. McClellan notified agency employees by e-mail Tuesday morning that he plans to step down from his post by early October, saying he wants to spend more time with his wife and children.

CMS "is the most exciting and rewarding place that anyone could work," McClellan said in the e-mail. "But I've been in government service for much longer than my family and I had ever expected or prepared for. . . . I'm looking forward to more dinners at home with Steph and our daughters."

Asked in an afternoon press briefing where he will go next, McClellan replied, "I haven't quite decided." He said he's thinking about affiliating at least temporarily with a Washington, D.C. –area think tank, but wouldn't confirm a published report that he'll take a position with the American Enterprise Institute. He also said there are a variety of respected think tanks in the Washington area and he would gladly talk to a number of them.

McClellan also hinted that his short-term plans include helping his mother, Texas Comptroller Carol Strayhorn, in her bid to become the next governor of the state. "There are definitely some things to do down there between now and Nov. 7," he said. Longer term, McClellan said he wants to be involved in implementing "big ideas" in health care, emphasizing that he wants a hands-on role. "I'm not an ivory tower kind of guy," he said. Whether that role might involve Stanford University is unclear. McClellan has been on leave from the economics faculty at the university since the late 1990s when he joined the U.S. Treasury Department as a policy analyst. "Stanford has been very kind and forgiving" in their leave policy, McClellan said, but he stopped short of saying he'd repay that kindness by rejoining the university.

McClellan's signature achievement at CMS was implementing the new Medicare prescription drug benefit. Although the startup of the benefit was marred by cutoffs in access to vital drugs for frail, low-income seniors—or so-called dual eligibles who were moved from Medicaid to Medicare for their drug coverage—McClellan worked to fix the problems.

For the most part, even his critics praise his administrative skills in implementing the many provisions of the Medicare overhaul law (PL 108-173), which established the benefit. But California House Democrat Pete Stark called McClellan "smart to step down before at least 7 million Medicare beneficiaries hit the prescription drug program's doughnut hole," the gap in coverage where beneficiaries pay all prescription costs. "Had he waited much longer, he would have found few employers willing to hire an ex-Bush administration official."

While the Bush administration has struggled with health policy in the face of rising health costs and numbers of uninsured Americans, McClellan's tenure has generally been a point of pride for the administration and for GOP lawmakers, even though he often frustrated members of Congress with his penchant for sidestepping questions to stay on message.

Department of Health and Human Services Secretary Michael O. Leavitt issued a statement after McClellan's announcement saying that "his energy and commitment have been vital to the accomplishments of this department and administration."

But McClellan's timetable for departure leaves the administration struggling with major issues in Medicare, including the staggering costs of preventing payment cuts to physicians and a strategy for funding Medicare benefits for the baby boom generation.

But McClellan's e-mail claimed progress on that front as well, referring to his efforts to create payment systems based on quality of care and improved coverage of preventive benefits to increase the value government gets for its health care dollar. "We are collaborating to move to paying for what we really want and what providers want to deliver: better care at a lower overall cost, not just more services," he said.

The continuing challenge of managing the drug benefit and complex changes in payments for hospital care suggest that a CMS insider is likely to replace McClellan on an acting basis. A number of agency watchers see one of two top CMS officials as likely to step in: Deputy CMS Administrator Leslie Norwalk or Herb Kuhn, head of the CMS Center for Medicare Management.

"The two bets would be either Leslie or Herb," a former top CMS official said. "Both have the administrative skill to do it. Herb is a little better known in Congress, but Leslie knows Part D much more," he said.

McClellan offered no hints about who might replace him but also named Abbey Block and Dennis Smith as part of a "very strong leadership team at CMS" that will ensure stability after he departs. Block is the director of the CMS Center for Beneficiary Choices and Smith is the director of the federal Medicaid program.

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