At issue is a $5-billion-a-year program that covers about 6 million children whose parents earn too much to qualify for Medicaid, which helps the poor, but too little to afford private insurance. Known in California as Healthy Families, the program offers the states federal matching funds and flexibility to design their own programs.
Most have opted to cover children by enrolling them in private insurance plans.
The program was originally aimed at families making up to twice the federal poverty level, or about $40,000 today for a family of four.
But over the years, some states have taken advantage of the program's flexibility to cover children in families earning somewhat higher incomes, and others have even extended coverage to adults. Such changes have to be approved in Washington, and the Bush administration has signed off on the majority of them.
But now the administration is saying that's gone too far. Bush's advisors say the president strongly supports renewal of the program, but he wants it to return to its original intent of helping children -- not adults -- and confining it to those near the poverty line.
"We are ready to renew our commitment to low-income children today," said Health and Human Services Secretary Mike Leavitt. "But we cannot agree to a gradual government takeover of healthcare -- and neither will the American people."
Some state officials say the administration is not offering nearly enough money to meet current commitments, much less help more children.
"The funding that was provided in the first decade when most of us were building our programs is simply not sufficient to continue," said Lesley Cummings, an administrator of California's program.
A recent study estimated about 200,000 children could be dropped from coverage in California under the president's plan, she said.
The funding increase in the Senate bill, to be paid for by a hike in tobacco taxes, is about seven times greater than what Bush has proposed.
The legislation would also allow states to cover children in families up to three times the poverty level, about $60,000, as Gov. Arnold Schwarzenegger has proposed. And it would take adults, except for pregnant woman in some states, off the program.
In the House, where work has yet to begin on its version of the bill, Democrats are taking a more expansive approach than in the Senate, adding more money for children's coverage and making changes in Medicare as well. The program's Republican supporters in the Senate say that would be unacceptable.
