This paper reviews problems that the Medicaid program poses for health care reformers and how the Clinton plan would deal with them. The Clinton plan represents a compromise between preserving or expanding the Medicaid program and eliminating it. The plan would seek to extend services to those without insurance and reduce health care costs, partly by limiting services and increasing out-of-pocket costs for Medicaid beneficiaries. All Medicaid beneficiaries would be included in the same basic system of health care that the plan proposes for other Americans, All current beneficiaries would remain eligible for Medicaid, but services would be reduced for many of them. However, services that are important for persons with severe mental illness would be maintained. The plan also would increase out-of-pocket costs for premiums and services, and these increases could be significant for some beneficiaries.