The Senate passed a measure Thursday that would send $9-billion in Medicaid help to states struggling to care for the poor amid shrinking budgets.
Governors, who had pressed for the proposal, praised the 75-24 vote.
"Many states continue to face budget shortfalls and face the prospect of instituting significant cuts in health care and social services to curb expenditures," said Kentucky Gov. Paul Patton, as chairman of the National Governors Association.
The measure "is an important first step in helping states maintain service levels during the continuing fiscal crisis."
Idaho Gov. Dirk Kempthorne, the association's vice chairman, said the Senate action "ensures that many low-income families will be protected from drastic cuts."
The measure would give states $6-billion in additional federal matching funds and $3-billion in grants to help them pay for child care and other social service programs.
The Medicaid provision is attached to an overall bill easing access to generic drugs that the Senate is using for its debate on prescription drugs. Lawmakers continued to work Thursday on a compromise Medicare drug benefit proposal that they would also like to add to the generic drug bill.
The House has not passed a similar plan.
The Medicaid measure brought cooperation among Senate Republicans and Democrats, getting far more than the 60 votes needed for passage.
"This is not a bailout," said Sen. John Rockefeller, D-W.V., and a sponsor of the plan. "I would say it's very important for the states to be healthy."
Medicaid was created to provide health care to people on welfare and is financed by a combination of federal and state money. On average, Washington pays 57 percent.
But with health care spending increasing, and the economy forcing tight budgets, states have been sounding the alarm about Medicaid, one of the fastest-growing portions of state budgets.
Meanwhile, lawmakers worked on two different Medicare benefit compromises.
One would offer some drug coverage to all seniors albeit significantly scaled back from the $594-billion plan Democrats unsuccessfully brought to the Senate floor this week.
The other plan emerging would offer help only for the low-income elderly or those who already have spent a significant amount of money on prescription drugs.