The House leadership’s agreement with conservative Democrats on health care legislation drew fire from state officials worried about increased Medicaid costs and liberal lawmakers upset about a proposed reduction in subsidies for low-income families to buy insurance.

The pact with the Blue Dogs, announced Wednesday, would trim $20 billion from the bill’s 10-year price tag by requiring states to cover 7 percent of the cost of expanding Medicaid, the state-federal health program for the poor and disabled. The current version of the bill calls for the federal government to pay for the expansion indefinitely.

In addition, the agreement would cut $100 billion by making insurance subsidies available to families and individuals only after they spend 12 percent of their incomes on premiums, up from 11 percent in the existing bill.

The proposed reductions were necessary to offset demands from the Blue Dogs that drove up costs elsewhere in the legislation. For example, the agreement would exempt many small businesses from having to provide health insurance to their employees and would lay the groundwork for more-generous fees for hospitals and doctors treating patients in any new government-created insurance program. Conservative Democrats from largely rural areas of the South and Midwest said the changes were essential to protect small businesses and providers in their districts.

Some governors immediately voiced displeasure about the Medicaid change. In a letter today to House and Senate Democratic leaders, Republican Gov. Arnold Schwarzenegger of California said that the federal government should help states decrease their Medicaid costs. “If Congress thinks the Medicaid expansion is too expensive for the federal government, it is absolutely unaffordable for states,” he wrote. “I cannot and will not support federal health care reform proposals that impose billions of dollars in new costs on California each year.”

State Medicaid officials also voiced their unhappiness. While contributing seven percent to the expansion of Medicaid “doesn’t sound like a lotthat’s money right now that every state would have difficulty coming up with,” said Tony Keck, health policy adviser to Louisiana Gov. Bobby Jindal, a Republican. “What kind of long-term liability does it create for the states?” Over the last eight to 10 years, Keck said, the cost of Louisiana’s Medicaid program has doubled.

Ann Kohler, director of the National Association of State Medicaid Directors, said that “states cannot afford any additional pressures on their budgets at this time.”

The nation’s governors, struggling with reduced tax revenues and expanded Medicaid enrollment as part of the recession, have been cutting optional benefits for enrollees, such as dental care for adults. Under the House legislation, Medicaid would be expanded to famlies and individuals with incomes up to 133 percent of the federal poverty level, or about $29,400 for a family of four.

The National Governors Association did not return calls Thursday.

Meanwhile, liberal members of the Energy and Commerce Committee protested the reduced subsidies in the bill and vowed to find alternative savings to offset the deal with the Blue Dogs – an agreement that was essential to ending an impasse with the conservatives that threatened to prevent committee action on the legislation before the August recess.

Rep. Edward Markey, D-Mass., a senior member of the committee, vowed to work with his liberal colleagues “to minimize the impact on the poor.”

Rep. Lois Capps, D-Calif., a former elementary school nurse and a committee member active in health care issues, said the agreement with the Blue Dogs “presents one more challenge to getting the bill passed in the best possible way.” She added that “our task at this moment is to find more acceptable offsets.”

Seemingly on the defensive, House Speaker Nancy Pelosi, D-Calif., said of the Blue Dogs, “No, I don’t think there is any disproportionate influence when members speak out in favor of their own constituents.”

Energy and Commerce Committee Chairman Henry Waxman, D-Calif., said he and his staff would work with the Blue Dogs and other committee members to find acceptable cuts in the bill that would cover the cost of the agreement and also bring down the overall cost of the bill from the current estimate of $1.04 trillion to less than $1 trillion.

According to committee staff estimates, the change in the method for reimbursuing health care providers would add $75 billion to the cost of the bill, while the expanded exemption for small businesses would cost an additional $30 billion. The Medicaid and subsidy changes would save $120 billion, according to estimates.

Rep. Mike Ross, D-Ark., a leader of the Blue Dogs who helped negotiate the deal, said that it wasn’t clear how the committee would make additional cuts, in order to bring down the overall cost of the bill to under $1 trillion.

He said a number of proposals are under review, including reforms in the health care delivery system and hospital purchasing practices, that might save an additional $53 billion over the next decade. However, he said he has left it to Waxman and the committee staff to figure out those savings.

“I know the math doesn’t add up, but they’ve pledged us they will find the additional savings,” Ross said in an interview. “They’re going to bend the cost curve.”

Jennifer Evans contributed to this story.