Attempts to limit spending in the Medicaid program (search) are a near certainty on Capitol Hill this year.

Federally ordered caps on benefits or the program's budget, however, appear unlikely to be part of the changes, key congressional aides say.

Congress is likely to pursue tax credits designed to help lower-income families buy private health insurance. They are also likely to face a fight on embryonic stem-cell research (search).

President Bush is expected to propose Medicaid cuts in his federal budget, due out next week. Bush pledged in his State of the Union speech Wednesday night to introduce a budget that limits spending in an effort to lower the federal deficit.

Lawmakers are waiting to see the White House's proposals before they introduce any cuts to Medicaid, which serves 48 million low-income Americans and is expected to grow at 7 percent per year over the next decade.

But the option of freezing Medicaid spending, floated in the past few weeks as a way to curb the program, is unlikely to pass in Congress, a senior Senate Republican aide on health issues says.

"I don't think there's an appetite, at least in the Senate, to pass a draconian cap on the programs that just shifts costs to the states," the aide says, speaking at the National Healthcare Policy Conference (search) in Washington.

Instead, lawmakers are likely to turn to a proposal outlined by Michael O. Leavitt (search) in his first public remarks as Secretary of Health and Human Services (search) earlier this week. Leavitt said that Medicaid could save $60 billion over the next decade by tackling fraud and abuse and limiting the way the program pays for nursing home care.

Leavitt has also called for new laws to increase the ability of states to choose which benefits they will cover for low-income residents. A former governor of Utah, Leavitt is known for policies that pared benefits in order to spread basic health coverage to thousands of uninsured people in the state.

One GOP aide calculates that $60 billion is just 2 percent of Medicaid's projected $2.8 trillion 10-year budget and that the program can save the money through areas other than benefit cuts.

But Democrats chafe at eliminating the money because of fears that doing so could undermine a safety net that is already dwindling as many states struggle to meet Medicaid budgets. They also warn that basic benefits like those tried in Utah often left patients with no coverage for hospital visits or specialist care.

"It's unlikely that you can cut $60 billion from a program and not affect real people," a Senate Democratic aide says.

The staffers spoke at the conference under the condition that reporters not identify them by name.

Bush Agenda Favored

Republican lawmakers are also likely to back key parts of Bush's health agenda, including a proposal to allow small businesses to buy group health insurance and another offering tax credits to help low-income families buy health coverage on the private insurance market.

Both Republicans and Democrats have voiced support for the credits, though the parties have so far failed to agree on who should qualify to receive them and how large the credits must be in order to cover the rapidly rising cost of private health coverage.

One senior Republican staffer says that Republican leaders are also ready to support a renewed push for expanded health savings accounts that force patients to spend more of their own money on some health care but give them more control over health decisions.

The aide adds that senior Republicans also want to address racial and ethnic gaps in medical care but did not offer details.

Congress is also likely to see a renewed fight on the issue of embryonic stem-cell research. President Bush on Wednesday said that he wanted to "agree on some clear standards" for conducting stem cell studies.

But at the same time, he showed no sign of backing off of a long-held position that embryo cloning for the purposes of creating new stem cells for research was tantamount to "[taking] advantage of some lives for the benefit of others."

Bush ordered a policy in August 2001 that limited federally funded stem-cell research to approximately 70 cell lines. Nearly all of the lines have since proved unsuitable for research or contaminated in a way that disqualifies them as a source for potential new disease cures.

Sen. Dianne Feinstein (search), D-Calif., said in a statement Thursday that she is "disappointed" that Bush did not propose to expand his 2001 policy. Feinstein is co-author of a bill along with Sen. Orrin G. Hatch (search), R-Utah, that would allow human cloning for tightly controlled embryonic stem-cell research.

By Todd Zwillich, reviewed by Brunilda Nazario, MD

SOURCES: Senior Senate Republican aide. Senate Democratic aide. President George W. Bush. Sen. Dianne Feinstein, D-Calif.