In a trend that has gained little notice outside state and federal budget offices, the growth rate in Medicaid expenditures across the country has slowed to subinflation levels that were last seen in the 1990s. It’s even happening in New York — home to what is by far the nation’s most costly Medicaid program.

Governor Pataki’s final executive budget assumed an underlying Medicaid growth rate of roughly 7% a year over the next three years, reflecting the state’s experience during the first half of this decade. But in a pre-election briefing at Albany’s Rockefeller Institute, John Cape, the state’s budget director, revealed the annual increase in Medicaid costs had slowed to 3.8%.

The common denominator in the nationwide Medicaid spending slowdown is a shift in prescription coverage for the elderly from Medicaid to the Medicare Part D program. Mr. Cape said New York State’s budget was also benefiting from lower-than-projected enrollment in the Medicaid-subsidized Family Health Plus program, which covers households with incomes up to 150% of poverty, and from an increase in the number of disabled Medicaid recipients opting for the kind of managed care coverage that is required of many recipients with less severe illnesses.

This all translates into at least $388 million in New York State budget savings in the current fiscal year — which, in turn, has reduced the shortfall that Eliot Spitzer must address in his first budget plan, due February 1, 2007. From the next governor’s standpoint, slower Medicaid growth is doubly good news, because the state government has begun to cap the share of non-federal Medicaid expenses financed by New York City and county governments. If the current trend persists, although it is by no means clear that it will, the budgetary baseline could drop more than $1 billion below previous projections for the next gubernatorial term.

But impressive as this may sound, Medicaid costs in the Empire State are still running well ahead of national trends. A recent Kaiser Family Foundation survey found that the average Medicaid increase in all states was just 2.8% during the fiscal year ending last June 30. Even smaller numbers are anticipated for 2007. For example, federal officials report that California’s Medicaid growth rate, which was nearly 12% in 2003, is projected at less than 2% for the current year.

In fact, according to the federal Centers for Medicaid and Medicare Services, 16 states actually spent less on Medicaid in fiscal 2006 than in 2005. Medicaid reductions have occurred in “a mixture of large, medium, and small states,” including Georgia, Maryland, Michigan, New Hampshire, Nevada, South Carolina, South Dakota, Texas, and Wisconsin, a CMS fact sheet noted.

New York’s conspicuous absence from that list should be troubling to Mr. Spitzer. After all, as things now stand, the state’s Medicaid spending per recipient is nearly twice the average for other states. Its total Medicaid budget of $45 billion exceeds the amount spent by Texas and Florida combined.

A greater slowdown in Medicaid spending elsewhere will only increase the relative disparity between New York and other states. And by relieving the fiscal pressure for change in the short run, the trend could lead to bigger increases in the long run. This has happened at least once before.

After Medicaid expenditures flattened out during his first five years in office, Mr. Pataki initiated the program’s biggest expansion since the Rockefeller era. Governors and legislators in many other states followed similar courses at roughly the same time. Their timing turned out to be terrible: Medicaid spending began to rev up again just as state tax revenues were tanking between 2001 and 2003.

So far, aside from pledging stronger fraud prevention efforts, Mr. Spitzer’s only firm proposal in this area is to expand Medicaid by signing up hundreds of thousands of uninsured children to the program, which could easily cost another $500 million a year.

Supporters of the idea fail to note that while 18 states have lower rates of uninsured children compared to New York, only one of these 18 has a significantly larger share of children on Medicaid. The same is true when it comes to adults. Other states have fewer uninsured because they have done a better job of promoting access to affordable private health insurance.

The new governor shouldn’t allow politically powerful health care unions and providers, or their friends in the legislature, to seize on the slower Medicaid growth rate as an excuse to avoid fundamental reform of the program. As other states are showing, New York can and should do better. Mr. Spitzer can achieve greater savings by:

• Requiring all Medicaid recipients with access to employer-provided coverage to go on their employer’s plan when their share of the premium is less than the cost to taxpayers.

• Expanding the availability of affordable private insurance options now either barred or unduly restricted by New York law, such as high-deductible plans linked to Health Savings Accounts and the Blue Cross “Tonik” plans, aimed at young adults, now available in states such as California, Texas, and Illinois.

• Taking advantage of increased flexibility under federal law to make the Medicaid program look more like private insurance, with co-pays and premiums required for non-elderly, non-disabled enrollees.

New York State is still a long way from reducing its health care costs to a number close to the national norm. Strengthening market forces and making it easier for more New Yorkers to find affordable private coverage would be a giant first step in the right direction.