WHERE IT MAY REALLY HURT

For months Bill Clinton waffled on the details. So it was a surprise to hear exactly where the President drew the line last week when he vetoed the Republican balanced-budget bill and unveiled a new plan of his own. Topping the list of things on which Clinton took a stand was Medicaid, the jointly funded, federal-state health program that serves 36 million Americans. The Administration renewed its call for a plan that would save $54 billion from the program over seven years, only one-third of the savings Republicans seek. But Clinton went further, saying if the G.O.P. kept insisting that the Federal Government retreat from the Medicaid business, the Republicans could forget about a budget agreement. "That would violate our values,'' Clinton declared. Steaming Republicans countered that Clinton's intransigence could "blow up'' the talks. All of which raised one question: With Clinton's attacks on the G.O.P.'s Medicare plan lifting the President's poll numbers, and a hundred other fights to pick with Republican spending priorities, how on earth had Medicaid suddenly become the ultimate deal breaker?

The answer is that the Administration, along with the American Medical Association and even some Republican Governors, believes the G.O.P.'s Medicaid proposals pose real risks to the most vulnerable Americans. By affirming that some sensible Medicaid savings could be achieved, but no more than that, the Administration may have marked a decisive turning point in the fiscal debate that will dominate the Capitol at least through Christmas. To many Americans, the battles over Medicare and Medicaid quickly dissolve into a confusing blur of federal health programs whose names sound virtually identical. But Medicaid demands special attention. Going too far for the sake of savings could worsen many of the problems that already afflict America's increasingly divided society.

Commonly thought of as health care for the poor, Medicaid is actually several programs in one. It provides basic health coverage for 26 million poor children and adults, but they account for just a quarter of the program's $156 billion annual tab. The big costs come from providing long-term care for 10 million elderly and disabled Americans. All told, Medicaid covers 1 in 4 American children, pays for 1 in 3 births, and finances more than half the nursing-home care in the country. For the time being, Medicaid is also an "entitlement," like Social Security and Medicare. This means that those who meet certain criteria--qualifying for welfare or disability benefits--automatically get coverage.

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