HELENA -- The latest round of program cuts planned for the state health department should keep the agency from overspending its share of state money this biennium, a memo compiled by department staff shows.

As of Thursday, the Department of Public Health and Human Services expected to be just under half a million dollars ahead of schedule by the end of the 2003 fiscal year. Without the cuts, the agency could have overspent its general fund dollars by as much as $17 million.

But bringing spending in line with the budget approved by the 2001 Legislature has its downside, Director Gail Gray said Friday. The majority of program cuts were in mental health and Medicaid, both of which provide care for the poor and disabled.

"We don't like any of these cuts," Gray said. "Any cut has a negative impact on somebody."

So far, the department has come up with a total of $3.3 million in reductions for the Addictive and Mental Disorders Division and $6.9 million in reductions for Health Policy and Services, which includes $4.2 million in Medicaid. By limiting eligibility for Medicaid, the agency plans to cut back by an additional $1.3 million.

Although many of those changes were put in place earlier this year, a new round is set to begin July 1. Cutbacks made earlier increased the amount of money people on Medicaid pay for prescription drugs and reduced reimbursement rates for most providers of Medicaid and mental health services.

New cuts to mental health programs include stopping payments for room and board for therapeutic foster care and therapeutic group home care, at a savings of $500,000 in 2003; eliminating or refinancing school-based programs at a savings of $800,000 and reducing the amount of time seriously mentally ill adults spend in day treatment, at a savings of $230,000.

In Medicaid, the agency plans to decrease reimbursement for pharmacies, at a savings of nearly $1 million; limit dental coverage for adults to basic services, at a savings of $403,087; and eliminate optional services for able-bodied adults at a savings of $2.8 million.

The agency has also cut back on its own costs of doing business by $5.8 million.

Gray said Montana has been luckier than other states this year. Montana's programs are being scaled back but aren't actually losing money, while other states' Medicaid programs are actually losing state funding, she said.

"Lots of states have cut the base, and we haven't cut from the base at all," Gray said. "We've only made cuts in certain areas because of increases in others. Our appropriation hasn't been cut."

Because the state is not going to have as much money as expected by mid-June 2003, however, state Budget Director Chuck Swysgood has warned all agencies that they may have to cut their budgets by as much as 10 percent. All agencies must submit a proposal by May 10 outlining budget cuts of 3 percent and 10 percent. For the health department, this would come on top of the program changes already planned.

Gray said everyone in the department worries about the effects of the cuts on people who need services.

"They have very limited incomes, and they have to choose between food and paying (for medications), and, well, maybe they won't choose what we want them to," she said.

State Sen. John Cobb, R-Augusta, has called on both lawmakers and Gov. Judy Martz to call a special session of the Legislature to fix the health department's budget -- so far to no avail.

In an op-ed piece last week, Cobb questioned how lawmakers could "morally justify" additional cuts to programs.

"Due to the cuts, some poor people no longer can receive health or mental health services, and we ask hospitals and many other health care providers to take less to care for more poor, and then pass on the difference in costs to the rest of us," Cobb wrote.

But Bob Andersen of the state budget office said the department and his office are working hard to meet the requirements set by the Legislature last year.

"We're just trying to adjust the programs to try and sty within the amount that was appropriated by the Legislature," Andersen said.