"I've come to know Mike as a fine executive and as a man of great compassion," Bush said Monday in introducing Leavitt to succeed Tommy Thompson as secretary of Health and Human Services (HHS). "He is an ideal choice to lead one of the largest departments of the United States government."

Leavitt, 53, will lead a government bureau with 67,000 employees, 300 programs and a $540 billion annual budget. It is better known by its more high-profile agencies such as the Food and Drug Administration, Centers for Disease Control and Prevention, and U.S. Centers for Medicare and Medicaid Services.

Leavitt could be presiding over a painful, cost-cutting period for the programs serving the poor, elderly and disabled. Four-fifths of the HHS budget goes to support Medicare and Medicaid, and Leavitt will have to find ways to rein in spending while still serving the growing number of Americans who depend on the programs.

"His legacy that he just left behind at EPA is for historic budget cuts that have never been experienced in the past," said Shelley Hearne, director of the Trust for America's Health. "Is he going to be a budget slasher or is he going to be a rebuilder of our health defenses?"

Besides leading a significantly larger agency than EPA, Leavitt, at the Department of Health and Human Services, would hold a Cabinet-level post. As EPA chief, Leavitt attends Cabinet meetings but is not a formal member.

Bush said Leavitt's priorities upon Senate confirmation as HHS secretary would include launching the new Medicare prescription drug-care benefit, expanding federal programs with faith-based groups, balancing new medical research with "vigor and moral integrity" and protecting the U.S. food supply from terrorist attack.

"Mike Leavitt is the right leader to lead HHS in meeting all these vital commitments," Bush said in introducing Leavitt in the Roosevelt Room of the White House. Former Utah first lady Jacalyn Leavitt and the youngest of the couple's five children, Westin, attended the news conference.

In a brief acceptance speech, Leavitt called the new job "an enormous challenge" but said he appreciated Bush's confidence.

He recalled a letter he had received as Utah's governor from the parent of a son who had passed the critical five-year survival point after a life-saving operation funded by Medicaid, the nation's largest health care program for the poor.

"I felt a sense of gratitude for living in a country where the cares and values of people matter, and where we care for their help," Leavitt said. "And it's gratitude, Mr. President, that I'm feeling today, for the privilege to be able to serve in your Cabinet, and, should I be confirmed in the Senate, to have this opportunity to contribute."

Bush's decision to send Leavitt to HHS was a surprise to many Washington political operatives and pundits, who expected Medicare/Medicaid Administrator Mark McClelland, brother of White House press secretary Scott McClelland, to get the nomination. Thompson himself had promoted McClelland as his successor, but said Monday that Leavitt would be a "terrific" secretary because he "knows how to make government work for the benefit of our citizens in a way that is responsible to taxpayers."

Leavitt frequently had been mentioned for a possible switch in the Cabinet reorganization Bush undertook after his election last month, but his name had been linked primarily to the opening at the Department of Homeland Security. Speculation that he would get that post surfaced anew last weekend when Bush's nominee, Bernard Kerik, suddenly withdrew after acknowledging hiring an undocumented immigrant as a housekeeper.

"Frankly, I had heard that Mike was a candidate for Homeland Security secretary," said Sen. Bob Bennett, R-Utah. "But given his performance in Utah reforming Medicare and Medicaid, this is a better fit."

Before he was tapped to head EPA, Leavitt had advised the Bush administration how to tweak federal Medicaid payments to help states better deal with deficits. Although Thompson and the Bush administration praised Leavitt's reforms as an example of innovation, some groups representing low-income people criticized the change as hurting the poor. Democrats probably will focus on the criticism during his confirmation hearing early next year before the Senate Health, Education, Labor and Pensions Committee.

"I always appreciate it when the president picks a nominee who understands the Western perspective," said Wyoming Republican Sen. Mike Enzi, who is expected to be chairman of the committee. "I anticipate a positive and informative confirmation hearing."

Before confirmation, Leavitt may have to restructure his personal investment portfolio to avoid any potential conflict of interest with companies subject to regulatory action by agencies under his control. Leavitt has ownership valued between $1 million and $5 million in Smith Leavitt Co. LLC, which holds stock in companies that develop pharmaceuticals and health care products.

According to 2003 executive branch financial disclosures, Smith Leavitt has shares valued between $4,000 and $60,000 in Johnson & Johnson, Medtronic Inc., Merck & Co. and Agilent Technology.

Leavitt also has a $5 million-to-$25 million stake in his family's Leavitt Group Enterprises, which owns approximately 100 independent insurance agencies in the United States. Many of those agencies market insurance for health care, long-term care, and business liability. Leavitt's share of corporate earnings in the 2003 reporting period was $1.1 million.

Another potential conflict could stem from Leavitt's pledge Monday to address medical malpractice reform. Dane Leavitt, president of the Leavitt Group, said at least two of the offices - in South Dakota and Colorado - sell medical malpractice insurance.

"But it's not a major part of what we do," Dane Leavitt said, estimating that those clients represent about 1 percent of the company's business. A former president of the company, Mike Leavitt has not been directly involved in its operations since 1992, when he was elected governor.

Sen. Orrin Hatch, R-Utah, said Leavitt would face tough questions during the process but anticipated he would be confirmed by the Senate.

"Mike is a policy wonk of high magnitude, he's very smart, and this is the ultimate policy department, so he'll be great," said Hatch. "It's a much better job [than EPA administrator] because you don't have the extreme left controlling everything like you do at EPA."

Carol Tucker Foreman of the Consumer Federation of America said he hopes Leavitt will follow Thompson's lead in calling attention to the national epidemic of obesity, the vulnerability of the nation's food system to a bioterrorist attack, and the ethical implications of allowing meat and milk from cloned animals to be sold to consumers.

"His predecessor raised the issues, Mr. Leavitt should act on them," Foreman said.

Industry organizations generally applauded Bush's choice of Leavitt, with Hunt Shipman of the National Food Processors Association calling him "a strong and effective leader" at EPA whose "extensive background in government will serve him well" at HHS.

If confirmed, Leavitt's biggest challenge at HHS could be to make sure the GOP-sponsored prescription-drug benefit program starts as planned in 2006. The program has been beset by higher-than-anticipated costs and lower-than-expected enrollment.

"I've had some experts in the field say when you passed that and said you've got roughly two years to get everything in place for it to take effect, you didn't give the government enough time to do all the preparatory work you need to do," said Bennett. "That will hit Mike Leavitt."

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Salt Lake Tribune Reporters Robert Gehrke and Kirsten Stewart contributed to this story.