Obama announced his decision before the National Governors Association in Washington on Monday, saying Vice President Joe Biden will help ensure the distribution of the money is not just swift, "but also efficient and effective."
"The fact that I'm asking my vice president to personally lead this effort shows how important it is for our country and future to get this right," he said.
Biden, in his new role, would meet regularly with key members of the Cabinet, governors and mayor to make sure their efforts are speedy and effective. He is expected to make regular reports to the president that will be posted online at www.recovery.gov.
With Biden at the helm, $15 billion from the recovery package will be freed up Wednesday for the health care programs, Obama said.
The administration projects the money will help states struggling with budget deficits and maintain Medicaid coverage for 20 million recipients.
Responding to some criticism of unemployment assistance in the stimulus from GOP governors, Obama also urged governors and lawmakers not to lose perspective on the package. He said the subject of debate composes just a "fraction" of the overall plan.
Obama also appointed Earl Devaney, the inspector general at the Interior department, to serve as watchdog for the distribution of the funding.
FOX News' Major Garrett and The Associated Press contributed to this report.