WASHINGTON--Congress has approved a budget plan that calls for slashing Medicaid by $10 billion over five years.

The $2.6 trillion budget, which passed Thursday by a vote of 214-211 in the House and 52-47 in the Senate, calls for the first cuts to the state-federal health program for the poor and other entitlement programs since 1997.

An earlier version of the budget included $20 billion in Medicaid savings over five years, but a compromise was reached by Senate and House negotiators just hours before the vote. A number of lawmakers, led by Sen. Gordon Smith, R-Ore.--who fought to take the program completely off the chopping block--had threatened to vote against the entire budget if Medicaid cuts were too deep. Earlier this year, Smith sponsored an amendment to the Senate's budget proposal to delay any Medicaid cuts by a year and create a commission to study long-term reforms to the program. The original budget proposal in the House left Medicaid cuts intact.

In talks to resolve budget differences, negotiators agreed to form the commission, which is expected to suggest wholesale changes that are needed to produce Medicaid savings and put the program on sustainable financial footing. The panel will recommend its first round of changes by Sept. 1. With the commission's study, Medicaid funding reductions would not take effect until 2007, allowing the commission more time to work with state governors, many of whom have already been trimming the program in their own budgets.

The Congressional Budget Office has estimated that without any cuts, the federal government would spend $191 billion on Medicaid next year and more than $1.1 trillion for the five years covered by the budget.