Wednesday’s budget news is expected to be dismal for Georgia physicians and other medical providers treating Medicaid patients.

Gov. Nathan Deal’s financial blueprint for Medicaid and PeachCare, to be unveiled Wednesday, is expected to contain cuts in payments to health care providers.

Medicaid and PeachCare cover about 1.5 million Georgians, and most of the beneficiaries are children. But the $7 billion budget for the two programs faces a deficit for the next fiscal year that has been projected to surpass $500 million.

With states confronting budget crises, Deal and predecessor Sonny Perdue, who left office Monday, joined other Republican governors and governors-elect this month in asking the White House and Congress to ease federal requirements on eligibility rules for Medicaid.

Those requirements come from the economic stimulus legislation and the health care reform law. States that accepted the stimulus money aren’t allowed to raise the income limit for a person applying for Medicaid, the government health program for the poor and disabled. So under the current rules, states can’t cut costs by cutting enrollment in Medicaid. They have to look elsewhere.

The Jan. 7 letter from the governors said,  “The effect of the federal requirements is unconscionable; the federal requirements force governors to cut other critical state programs, such as education, in order to fund a ‘one-size-fits-all’ approach to Medicaid.’’

The letter cites the impact on states of the eligibility restrictions. In Georgia, the letter says, the federal requirements “will force reductions in provider reimbursement that will undoubtedly lead to challenges for Medicaid patients to access care. Further, changes to covered optional Medicaid services combined with increased member cost sharing will be necessary to balance the Medicaid program budget.’’

Georgia could target some Medicaid benefits that are optional for the state to cover. Those include prescription drug coverage.

But eliminating medications under Medicaid would raise overall costs, said Cindy Zeldin, executive director of Georgians for a Healthy Future, a consumer advocacy group. Without medications, she explained, more beneficiaries would be hospitalized, which is much more expensive to cover. “There may be some optional services around the edges’’ of the program that could be at risk of cuts, she added.

Georgia could also require Medicaid patients to pay new fees for certain services.

Despite the states’ concerns, the Obama administration is not likely to budge on the eligibility requirements. Health care reform, in fact, takes the opposite route: expanding government health coverage rather than reducing it.

Expect the Medicaid budget to be a tough battle throughout the 2011 General Assembly.