Subject: Re: Medicaid
Since I have 2 brain cells to rub together, I can infer that Leavitt knew that it wasn't an obvious reading of the order. That what OMB actually said was so broad that it did include Medicaid, and that it's beyond the job of a Press Secretary (or any other junior federal employee) to countermand what OMB actually wrote on the paper without checking with them first.

The far more likely explanation is that her WTF gear spun up in her head.