Financial problems lie not in inadequate federal funding but in New York's overly costly health care system, critics maintain.
The answer to the state's Medicaid problems lies in more federal money, several state legislators have argued.
But by any yardstick, New York already receives much more federal money for Medicaid than any other state.
With only 7 percent of the nation's population, the state gets almost 16 percent of the entire federal budget for the welfare-based health care program.
New York receives so much more, in part, because it spends more on Medicaid than any other state, even larger ones like California.
It spends more per patient and more per resident.
New York's program costs more than $2,300 per resident each year.
According to data provided by the Kaiser Family Foundation, annual per capita costs come to about $1,000 in California and $1,300 in Massachusetts.
All three states have progressive political heritages and traditions of generosity to the poor. The federal government reimburses all three for 50 percent of their Medicaid costs.
This year's state budget will increase Medicaid spending to $45 billion -- from $40 billion just two years ago.
But as spending increases, so do local taxes. A quarter of that increase will be paid by county taxpayers. The federal government pays 50 percent of the program's cost in New York. Counties must pay roughly half the nonfederal share.
If New York could get its per capita spending down to the level of Massachusetts, the state would save $16 billion a year in Medicaid costs, according to Bob Ward, a researcher for the State Business Council.
Ward and other health care experts cite an excess of hospitals and hospital beds as one cause of the state's soaring Medicaid outlays.
Despite a declining upstate population, shorter hospital stays and alternatives to hospitalization, the state, Ward says, is addicted to keeping its "big 50-year-old hospitals open."
New York maintains more than 50 percent more hospital beds per capita than California, which drains Medicaid funds.
According to the American Hospital Association, the state has 64,000 hospital beds, or 337 for every 100,000 residents, compared with 210 per 100,000 in California and 249 in Massachusetts. The national average is 280, according to the Kaiser Foundation data.
Many of these excess beds are in the Erie-Niagara County area, which lost an eighth of its population in the last four decades, independent experts said.
Kaleida Health Systems, which operates several nonsectarian hospitals in the region, is doing its job of cutting back unneeded capacity, according to William McGuire, its chief executive officer.
McGuire said Kaleida has recently eliminated 600 beds, leaving the system with a capacity of 2,000. That reduction equals the biggest single hospital in the state, McGuire said.
But Bruce Boissonnault, executive director of Niagara Health Quality Coalition, contends that removing hospital beds from use while leaving the building open does not save money or improve quality of health care.
"Closing entire adult acute-care hospitals is the only way to save real money," Boissonnault said. "There are too many acute-care hospitals in the Buffalo corridor."
"Anybody who thinks you can't save by decertifying hospital beds has never turned around a billion-dollar operation," McGuire said.
These moves and others have reversed Kaleida's financial outlook, McGuire said, noting that Kaleida's onetime operating deficit of $127 million has been turned into a $7.5 million surplus.
Independent health care auditors say Kaleida and other systems can do more, but are held back by hospital associations and the unmatched political clout of the state branch of the Service Employees International Union.
Ward contends that the Healthcare Association of New York State, a lobby for upstate hospitals, has been "resistant to change."
The union represents 237,000 hospital employees in the state. Its huge membership and the $700,000 it spends on state campaigns have won the alliance of leaders of both parties, including Gov. George E. Pataki, a Republican, and Sen. Hillary Rodham Clinton, a Democrat.
Another big cost driver is the long-term care segment of Medicaid, which provides shopping, cleaning and other services for homebound elderly and disabled. This costs $16.7 billion a year -- a third more than California's long-term care program.
Ward said Medicaid spending on nursing homes averages $371 a year for every New York resident, 58 percent higher than the average in Massachusetts.
Several health care experts, speaking confidentially, cite the close working relationship between Kaleida's McGuire and Dennis Rivera, state head of the Service Employees International Union, as one reason for the reluctance to shut down entire hospitals in Western New York.
In response, McGuire praised Rivera as a "strategic thinker" and said the union leader wants hospital restructuring as much as the business community. Rivera understands his union needs a strong stable health system if members want job security, McGuire said.
The hospital workers union realizes the Medicaid program needs changes and has proposed its own 10-point program, said Michelle Marto, union spokeswoman.
The union's plan, co-sponsored by the Greater New York Hospital Association, includes the option of closing entire hospitals.
Pataki has said he wants a commission to reform the Medicaid system. The Bush administration offered the state $1.5 billion over three years to pay for changes, including shutting down unneeded hospitals.
But resistance by leaders of the State Legislature has forced Pataki to set aside reform plans, at least for now.
Washington Bureau assistant Patti Truant contributed to this article.