The tentative state budget deal will reduce the state's Medicaid costs by lowering the amounts that hospitals receive for treating patients under that program.

Hospitals were hoping to get a $250,000 cap on pain and suffering damages resulting from medical malpractice lawsuits. Although the controversial cap was excluded from the recently announced budget deal, a state a fund for infants born with brain damage was not.

Right now, hospital groups say, when an infant is brain damaged at birth, future medical costs are projected and then paid into a trust by the hospital's insurance company.

Daniel Sisto, President of the Healthcare Association of New York State, said this new fund will change that.

"The expenses will be paid as they occur," he said. "And just getting away from a projection should save significant amounts of dollars."

Sisto's group was one of several hospital organizations that came up with the fund proposal as part of the governor's medicaid redesign team.

The fund's details still haven't been worked out. Sisto said most of the money would likely come from state health care funds and partially from a tax on hospitals.

He expects the fund to reduce medical malpractice premiums by 20 percent at certain institutions, especially the ones in New York City. Some consumer advocates worry the fund would force patients into a bureaucratic and cumbersome reimbursement system.