But Democrats say the Bush plan is “far too radical.”

“It’s safe to say that that proposition is going to face strong opposition from Senate Democrats,” said Jim Manley, spokesman for Massachusetts Sen. Ted Kennedy, the top Democrat on the Senate Health, Education, Labor and Pensions Committee.

Bush has proposed giving states more control over Medicaid programs and $12.7 billion. Connecticut Gov. John Rowland and other members of the National Governors Association have formed a task force whose goal is to reform Medicaid; they have not said whether it will incorporate the Bush plan.

“Rising health care costs and rising caseloads, coupled with declining state revenues have made the program unsustainable for many states,” said a National Governors Association news release earlier this year.

According to Melanie Nathanson and other experts at the Center on Budget and Policy Priorities, a liberal research organization that analyses issues dealing with low-income families, “Medicaid reform” is politically loaded terminology that implies the program isn’t working.

“Things aren’t broken with Medicaid,” said Nathanson. “What’s broken are state economies.” Medicaid, as the largest or second largest program on most state budgets, makes an easy target for legislators trying to compensate for a “structural mismatch in [their] states’ ability and willingness to raise revenue,” she said.

Rowland said recently that Medicaid makes up about 20 percent of the Connecticut’s total budget.

“From the perspective of probably every state governor, what they see is an enormous sea of red ink,” said Joseph Antos, an analyst for the conservative American Enterprise Institute.

The Bush administration has offered what Antos calls a $12.7 billion bailout of state Medicaid plans. But the offer does not come without strings.

Medicaid is one of the few government programs that operates under a cost-sharing arrangement between the state and federal governments, with the state administering the program and payouts subject to strict federal guidelines. In Connecticut, the “match rate” is 50/50 between state and federal funds.

The arrangement puts no cap on Medicaid spending because anyone who meets eligibility requirements must be served.

Now, Bush is proposing that states be given more flexibility in how they use the Medicaid funds by replacing the current financial partnership with an annual federal allotment to each state projected from 2002 funding levels.

Analysts like Nathanson are quick to point out that the allotment plan would reduce the state’s ability to respond to major events, such as economic downturns, that swell the number of people on Medicaid or new treatments that introduce unexpected costs. “It’s difficult, in the realm of health care, to really predict spending,” Nathanson said.

Kennedy spokesman Manley added: “It’s safe to say that that proposal’s going to face strong opposition from Senate Democrats.”

The $12.7 billion would have to be paid back, through cuts to the block grant program starting in 2011. The success of the bailout plan rests on the idea that the extra money now could pay for a Medicaid restructuring that would create savings in the long run. Rowland has compared it to the federal welfare reforms made in the mid-90’s, but some experts were dubious.

“It’s a false promise,” said Manley.

“It will be very difficult,” agreed the conservative Antos.

He pointed out that “states have always had flexibility to expand eligibility for the [Medicaid] program” and during the boom times of the late 90’s they did just that, expanding coverage to individuals and services that are “optional” under the laws that govern Medicaid. Restructuring, he said, would essentially mean cutting some of those benefits, which would provoke “a storm of protest” at the state level.

Of course, the entire concept of restructuring for savings is flawed if, like Nathanson, you don’t believe there is a problem with Medicaid at all. While every program, public or private, has waste and abuse problems, Nathanson said, waste in Medicaid is “pretty minimal.”

Connecticut has already instituted cuts in “optional” coverage that could, according to Nathanson and other experts, result in about 30,000 people losing coverage.

Other options for easing the pressure of Medicaid funding on state budgets remain nebulous. In March, the Senate expressed support for the idea of assisting state governments by raising the federal match rate for Medicaid. However actual legislation to do that has yet to be introduced.

“The other alternative is just to defeat the proposal,” said Manley. Senate Democrats, he said, do not believe that the current Medicaid program is unsustainable. “Members are willing to look at some reforms,” he said, “but these are far too radical.”

The other major focus of efforts to reduce Medicaid expenses involves people called “dual-eligibles” -- seniors or persons with disabilities who are also eligible for Medicare. Nationally, payments to dual-eligibles make up 35 percent of all Medicaid payments, said a spokeswoman for the Centers for Medicare and Medicaid Services, a branch of the Department of Health and Human Services.

Unlike Medicaid, Medicare is completely funded by the federal government. But Medicare does not pay for some services, like nursing home care and prescription drugs, that many dual-eligibles rely on heavily from Medicaid.

According to a Center on Budget and Policy Priorities report, the discovery of new drugs and techniques has, over time, “reduced the length of time that people are hospitalized and increased the use of ambulatory care and prescription drugs.”

A 2002 report from the U.S. Department of Health and Human services also emphasized the importance of pharmaceuticals in improved longevity and quality of life. “Half the drugs prescribed or administered in office visits in 1999,” it said, “were not prescribed or administered at all in 1985.”

In other words, the costs of health care have shifted towards greater spending on prescription drugs -- which are only covered by Medicaid -- and in turn, shifted much of the cost of people with dual eligibility away from Medicare and into Medicaid, increasing the proportion of total health care costs paid by states.

Rowland is hoping that the federal government will agree to help the states by financing all the health care needs of those dual-eligibles. However, details about the his task force’s plan are scarce.