GOVERNORS RESIST MEDICAID PLAN : BIPARTISAN GROUP FEARS CLINTON PROPOSAL WILL SHIFT COST TO STATES.

Byline: Robert Pear The New York Times

The National Governors Association has decided to oppose President Clinton's plan to set firm limits on federal Medicaid spending, contending that it would saddle states with more of the cost of providing health care to poor people, state officials said on Thursday.

Clinton says such limits are needed to impose fiscal discipline on the Medicaid program, which finances care for 37 million people.

But in a confidential draft of their new policy, the governors said: ``Any unilateral federal cap on the Medicaid program will shift costs to state and local governments that they simply cannot afford. The governors adamantly oppose a cap on federal Medicaid spending in any form.''

The governors' views are significant because state and local governments pay 42 percent of all Medicaid costs: $67 billion of $159 billion last year.

The bipartisan opposition to a federal cap represents a political setback for Clinton's Medicaid proposal, a major element of his plan to balance the federal budget by 2002. But Republicans on Capitol Hill said they would seriously consider the proposal because it is one of the few sure ways for the federal government to achieve substantial Medicaid savings.

The governors open their winter meeting here on Saturday, and debates over Medicaid and welfare are expected to dominate the four-day session.

Leaders of the association sent a copy of their Medicaid recommendations to the White House on Thursday, in the hope of influencing Clinton's budget, which will be made public next week.

The Medicaid policy was developed by a panel of six governors including Bob Miller of Nevada, a Democrat who is chairman of the National Governors Association, and George Voinovich of Ohio, a Republican who is vice chairman. ``It is our expectation that our recommendations will be formally adopted as NGA policy,'' they said in letters sent on Thursday to Clinton and congressional leaders.

The governors have drafted a new policy urging Congress to restore some of the benefits taken away from legal immigrants by the new welfare law. But Republican congressional leaders have repeatedly said that they do not intend to make major changes in the law this year.

Clinton's proposal for a cap on federal Medicaid spending is opposed not only by the governors, but also by a wide range of consumer groups and advocates, including the AIDS Action Council, the Alzheimer's Association, Catholic Charities USA, the Children's Defense Fund, Consumers Union and Families USA.

Half of Medicaid recipients are children, but more than two-thirds of Medicaid outlays are for people who are elderly or disabled.

Since its creation in 1965, Medicaid has been an open-ended program, providing health insurance to poor people who meet eligibility criteria set by federal and state laws. While preserving the entitlement, Clinton would, for the first time, impose a firm limit on federal Medicaid spending, to guarantee that per capita Medicaid costs rise no faster than the nation's per capita economic output.

Clinton's proposal would limit the financial obligations of the federal government, but not of the states. State officials worry that they will have to pick up many costs now covered by the federal government. Advocates for children, the elderly and the disabled worry that states will cut services, reduce coverage of fast-growing benefits like prescription drugs or use cheap, low-quality nursing homes and health maintenance organizations.

As they arrive in Washington, the governors also bring a new perspective to the debate over Medicare, the federal health insurance program for people who are elderly or disabled. They express concern that Congress and the administration will solve Medicare's fiscal problems, too, by shifting costs to the states.

Medicare and Medicaid are usually viewed as separate programs. But the governors point out that the programs are intertwined, so that when the federal government cuts Medicare payments to hospitals and health maintenance organizations or increases premiums for Medicare beneficiaries, states incur new costs.