New Health and Human Services Secretary Mike Leavitt on Tuesday called for changes in the Medicaid program for the poor, including an end to overpayment for some prescription drugs.

Leavitt said Medicaid, a joint federal-state health program for more than 50 million poor Americans including many women and children, is not “financially sustainable.” States by law must cover certain “mandatory” groups but have more flexibility in offering benefits and services to other “optional” groups.

Leavitt said he would not advocate “block grants,” lump-sum federal payments, to the mandatory portion of the state program but he suggested other changes that he said could save billions over 10 years.

Critics, including many Democrats, some Republican governors and health advocacy groups, worry millions could lose coverage under block grants because states would get a capped amount of federal money. Now, the federal government provides matching funds for any patients who meet certain income and other requirements, regardless of how many there are.

More than a dozen women’s groups, including the National Women’s Law Center and Planned Parenthood, joined together to lobby Congress to fight an overhaul or significant cuts to the public health safety net.

“Some have predicted that our reform would inevitably break down our commitment as a nation to the most needy and most vulnerable citizens…this simply is not true. These mandatory populations must continue to receive the comprehensive coverage they receive now,” Leavitt told the World Health Care Congress, a gathering of 1,400 industry executives.

He said he wanted to “create flexibility” for states to continue or expand that coverage to optional groups.

Leavitt also urged Congress to revise the drug payment system so Medicaid can “stop overpaying for prescription drugs.” Changes could save the federal government $15 billion over 10 years, and $11 billion over the decade for states, he said. At least one congressional panel already has started hearings on Medicaid overpayments for drugs, particularly generic versions.

Leavitt also said Medicaid should not be “an inheritance protection plan.” Some elderly people shift assets to relatives so they can qualify for Medicaid coverage of nursing homes. Stopping that could save $4.5 billion over the next decade, Leavitt said.

He also said it was time for “an uncomfortable but necessary conversation” with state governments about “accounting gimmicks” that shift costs to other states.

“If we don’t close these loopholes, we project that over the next 10 years (states) will shift $40 billion through various means,” he said.

President George W. Bush will make additional proposals for Medicaid changes when his administration releases its fiscal 2006 budget plan next week, Leavitt said.

Senate Budget Committee Chairman Judd Gregg, a New Hampshire Republican, said he expects the White House budget to have “substantive” proposals on Medicaid. Gregg said he would like to slow down spending, which has been rising sharply, and give flexibilities to “let the governors be creative.”