Congressional Republicans unveiled a revamped Medicaid reform proposal last week that would reduce projected spending by $72 billion over six years.
But the plan still contains a number of measures opposed by provider groups. In addition, Democratic leaders on Capitol Hill vowed a fight over the legislation.
The plan is a variation on the proposal prepared earlier this year by the National Governors' Association. That plan would effectively eliminate the federal entitlement to Medicaid, replacing it with a series of state coverage guarantees.
Like the governors' plan, states would be given an annual base-year funding level pegged to the number of expected beneficiaries and local costs.
Both plans include $3.5 billion in funding over six years for states that have a high population of illegal aliens and an unlimited umbrella fund that states could tap when there are unexpected increases in the number of beneficiaries.
According to Congressional Budget Office estimates, the umbrella fund in the GOP plan could cost as much as $26 billion over six years from 1997 to 2002.
The CBO did not make a cost estimate for the fund established in the governors' plan.
The CBO has estimated that without any changes in current spending formulas, federal Medicaid outlays will rise from $96 billion this year to $167 billion in 2002.
The GOP plan also retains a number of provisions from the governors' plan opposed by provider groups, including the elimination of the Boren amendment.
Named after its sponsor, former Oklahoma Sen. David Boren, the measure requires states to cover all reasonable provider costs for Medicaid patients.
States argue that it has led to a rash of provider lawsuits and increased Medicaid costs.
Providers say, however, that without some legal protections, states will reduce provider payments as a way to save Medicaid funds.
Like the governors' plan, the Republican bill would eliminate the 1990 and 1993 tax and donation reforms that were put in place to curb abuses in which states taxed providers to put money in Medicaid coffers and attract more federal matching funds.
Thomas Scully, president of the Federation of American Health Systems, who worked in the Bush administration when the tax and donation restrictions were enacted, said eliminating them would give states what amounts to a free pass. He said a repeal of the reforms would allow states to "effectively eliminate" their portion of Medicaid funding.
Both the GOP and governors' plans would reduce the current state Medicaid matching rate from one state dollar for every federal dollar to 80 cents of state money for every federal dollar.
American Hospital Association President Richard Davidson also criticized the plan for eliminating the federal Medicaid entitlement.
"This could leave millions of our most vulnerable citizens...without their present level of coverage," Davidson said.
House Democratic leader Richard Gephardt of Missouri called the GOP plan "a disaster." He predicted President Clinton would veto the measure if it reached his desk.