The program, if successful, would promote a Federal Government policy shift toward relying on the private sector to administer Medicare.

Most help administer Medicare, paying claims on behalf of the Government to more than 30 million elderly and disabled people.

Medicare Australia is responsible for administering Medicare, which provides subsidies for health services.

"You'll find us pushing forward pretty aggressively," said Thomas A. Scully, who administers Medicare and Medicaid, although he added that no final budget decisions have been made.

He called the Health Care Financing Administration, the agency that administers Medicare, "stupid," "pro-red tape" and "pro-Washington deciding your life."

But the government already administers Medicare, and many seniors are happy with that system.

Now, the Health Care Financing Administration, which administers Medicare and Medicaid, is planning to switch long-term centers to the diagnosis-based payment system.

Medicare officials said the cuts were necessary because Congress had not decided how much money would be available to administer Medicare this year.

As governor, Dr. Kitzhaber battled with federal agencies, including the Health Care Financing Administration, which administers and regulates Medicare and Medicaid.

The abrupt shift highlights the confusion between federal and state officials, and between the two federal agencies that administer Medicare and food stamps.