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With Congressional passage of a Medicare drug benefit still far from certain, about half the states are at least considering joining a Bush administration program that will provide federal matching money to extend drug coverage to elderly people whose incomes are modest but too high for Medicaid.

Some states are shunning the program, however, warning of financial risks for their Medicaid budgets and the low-income people they already serve. In addition, said Ray Hanley, chairman of the National Association of State Medicaid Directors, many states simply cannot afford to spend more on health care, even with federal help, at a time of economic sluggishness and squeezed budgets.

Medicaid already accounts for 20 percent of most state budgets, and Joan Henneberry, a health policy expert with the National Governors' Association, said that to maintain services in the year ended June 30, states used up reserves they had amassed in previous years, and dipped into money from tobacco settlements as well.

Despite the reluctance of some states, others are going ahead with participation in the new program. In fact, Tommy G. Thompson, the secretary of health and human services, returned to Wisconsin this week to inaugurate the participation of his home state.

Wisconsin officials said 176,400 people with annual incomes up to $21,265 for an individual or $28,657 for a couple — 240 percent of the official poverty level — would be eligible when the program starts in September. In Illinois, the only other state that has so far received federal approval to join the program, 147,000 people signed up last month.

In addition to those two states, formal applications have been filed by Connecticut, Florida, New Jersey and South Carolina, all of which are awaiting approval, and 18 states, including New York, have either submitted tentative applications or expressed interest, according to the federal Centers for Medicare and Medicaid Services.

Pressured by advocacy groups for the elderly, at least 34 states have already adopted their own drug subsidy programs for low-income people. To this point, these programs have been financed entirely from state budgets, without federal help. "Now it's very tempting for a state to bring in some federal dollars to meet a great need and respond to the elderly, a strong political force," said Cindy Mann, a Medicaid expert at the Kaiser Family Foundation.

So why are some states concerned? Because under the new federal program, which will provide each participating state a waiver from Medicaid law, there will be a federal subsidy ceiling that will rise no higher, over the five-year span of the waiver, than the total federal contribution for Medicaid that a state received before the new drug program.

In other words, from Washington's perspective the new program will be "budget neutral": for each dollar that a state receives under the program, it must find a dollar of savings elsewhere in the government's contribution to Medicaid.

That means particular risk because drug benefits are the fastest-growing cost for Medicaid, and because the elderly use most of the drugs, Ms. Mann said. "The states," she said, "are being asked to gamble with the most volatile group in the program in terms of their costs."

"The waivers put all the risks onto the states and the beneficiaries," rather than having the federal government share the risk, she added. "That is a fundamental change in the way the Medicaid program is normally financed," a 50-50 federal-state split in most states.

But officials in Wisconsin and Illinois, the two states already approved, said they expected savings from the program, which, they said, will help to buy drugs for low-income people who might otherwise end up on the regular Medicaid program after spending heavily for medicine, other health care expenses and, ultimately, nursing homes.

Under the Wisconsin program, said Pris Boroniec, deputy administrator of health care financing for the state, couples with incomes below $19,104, or 160 percent of the official poverty level, will pay, for each prescription, $15 toward the cost of brand-name drugs and $5 for generic drugs. Those with incomes from 160 percent to 240 percent of the poverty level will pay all of the first $500 of their annual drug costs before being eligible for those co-pays.

People with very heavy drug expenses can join the Wisconsin program when drug costs reduce their gross income to 240 percent of the poverty level. All participants will pay a $20 application fee.

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