Five Republican governors working with their Democratic counterparts on a plan to revamp Medicaid conceded yesterday the bipartisan effort has failed and said they instead hope to strike a deal with the Bush administration.

Just 10 days ago, governors and their aides optimistically declared they were on the verge of an agreement to refashion the health insurance program for 44 million low-income Americans. The compromise unraveled, both sides say, after aggressive lobbying by Democratic senators who oppose the changes.

The breakdown could complicate efforts by the administration to rein in Medicaid spending -- by moving recipients into managed-care programs, charging higher co-payments and putting a cap on federal payments. Administration officials had hoped that if governors of both parties crafted the legislation, Congress would be more inclined to adopt it.

Thomas A. Scully, who oversees the Medicaid and Medicare programs for the administration, said bipartisan support from the governors was critical. "If they don't want to do it," he said recently, "it's not going to happen."

Now it appears that any Medicaid bill is destined for sharp partisan debate -- or indefinite postponement.

Hours after the GOP governors sent a three-and-a-half page letter to Health and Human Services Secretary Tommy G. Thompson outlining their principles, Democrats countered with their own statement. Both documents, cloaked in the diplomacy of legislative language, nevertheless revealed the bitter frustration on both sides.

"It is unfortunate that with health coverage for millions at risk -- with virtually every state making wholesale cuts in Medicaid benefits and populations -- that some would choose to forfeit an opportunity to protect health care for our neediest populations," the Republicans wrote.

"We offered to continue working with our Republican colleagues," the five Democrats said. "Unfortunately, their higher priority was to write to" Thompson "recommending enactment of a one-size-fits-all federal block grant."

Medicaid, the nation's largest public insurance program, is run jointly by states and the federal government. Rising health care costs, coupled with the sluggish economy, have made it increasingly difficult for states to cover their share of the bill.

The two sides split over whether the Medicaid financing system should be changed from the current entitlement program, which guarantees money to cover everyone eligible for care, to a block grant approach that would limit the federal payments.

Republicans, led by Florida Gov. Jeb Bush, told Thompson they support the administration's desire to switch to a block grant, which the White House has dubbed an "allotment."

Democrats, led by Sen. Edward M. Kennedy (Mass.), waged an attack on the White House approach and persuaded Iowa Gov. Tom Vilsack (D) to back away from the negotiations. At a meeting last week, Kennedy urged colleagues to telephone their governors to oppose a block grant; he called a half-dozen himself, his spokesman Jim Manley confirmed.

In an interview, Vilsack said Democrats quit the talks when it became clear Republican governors "could not deliver a promise from Congress or the administration" that the federal government would pick up the costs of caring for individuals who are eligible for both Medicaid and Medicare.

Ron Pollack, executive director of Families USA, a liberal consumer group that opposes the GOP plan, predicted Medicaid legislation will not progress this year. "This is a huge victory that prevents the largest Medicaid cutback in history, offering a welcome reprieve" for millions of low-income people, he said.

HHS spokesman Bill Pierce, however, said Thompson is not ready to give up. "With the actions many states are taking, include cutting spending on Medicaid, this is just more evidence of why we need to continue try to come to agreement," he said.