Democrats warned Tuesday that the federal government's plan to cut billions in Medicaid funding next year could cost Colorado's public hospitals $128 million, hurting their operations and the state's budget.

The cuts could affect 24 hospitals statewide, with the hardest- hit being Denver Health Medical Center and University of Colorado Hospital.

Both would be forced to drastically scale back care to the poor and some 780,000 uninsured Coloradans, lawmakers and hospital officials said Tuesday.

The burden would fall to the state to make up the shortfall.

"It's a huge hit," said Sen. Moe Keller, D-Wheat Ridge, a member of the Joint Budget Committee. "We can't make up the shortfall."

Her comments came as Senate Democrats and Republicans caucused on state government's $17.8-billion spending plan for the 2007-2008 fiscal year.

The Senate will debate the budget bill today on the floor, where Republicans have planned at least 35 amendments.

During discussions Tuesday, Democrats blasted the Bush administration's push to shift Medicaid costs to the state.

The administration has proposed a rule change that would eliminate about $75 million in Denver Health revenues, about 16 percent of its operating budget, and $35 million from CU medical center, said Peg Burnett, chief financial officer for Denver Health.

Some 22 other hospitals across the state would see about $18 million dry up.

The new federal rule, scheduled to take effect Sept. 1, changes the definition of a public or government hospital, specifically requiring such hospitals to become their own taxing authorities to draw Medicaid payments.

Although Denver Health and CU medical center are political subdivisions of Colorado, under the new federal rule they would not be considered public, Burnett said.

"It's a very grave situation," she said. "The funding is core to our operations."

The rule change is being fought by congressional representatives in several states, including Colorado, and a bill was recently introduced in the U.S. House to block the rule change, Keller said.

The potential hit to the state is just the tip of the iceberg, said JBC chairman Sen. Abel Tapia, D-Pueblo.

Cuts in federal funding next year touch every state agency. That includes a $17 million shortfall in anticipated homeland security funding and an $11.7 million cutback in public safety grants for local law enforcement needs.

303-954-5086 or washingtonam@RockyMountainNews.com