A report criticizing the state's Medicaid program and a rebuke from the governor guarantee even more scrutiny of Ohio's most costly agency during the impending budget debate.

The report was released two weeks before Gov. Bob Taft announces his spending plan and after he warned that spending in the $10 billion health program must be reduced because its soaring growth is jeopardizing the state's ability to balance the budget.

The two-year budget determines how much money the state's human services agency will have to pay for everything from nursing home care to hospital stays for poor children.

Medicaid, the state-federal program for poor children and families, already was attracting attention this year. A legislative committee has been studying ways to slow the program's growth, and state Auditor Betty Montgomery has urged that the system be audited.

''It's obvious that Medicaid has a huge bull's-eye on it,'' said Mary Yost, a spokeswoman for the Ohio Hospital Association. ''It's clearly a much more intensive process this year than in budgets pass.''

The report by the state's watchdog said the Department of Job and Family Services failed to collect millions of dollars in overpayments for incorrect or fraudulent bills from doctors and hospitals. It also referred to a ''bunker mentality,'' saying the agency rejects outside criticism or suggestions.

In response, Taft ordered Barbara Riley, director, to create a plan for fixing the system by the end of next month.

Taft earlier proposed freezing Medicaid payments to children's hospitals and a 3 percent cut in the reimbursement the state provides nursing homes. Lobbyists for both groups will fight hard to stop the proposals.

House Speaker Jon Husted said the report confirms suspicions that lawmakers have long had about the Medicaid program.

He welcomed the report's findings so close to the budget's introduction and said he's told members of the House Finance Committee to ask Riley about the report during hearings.

Riley said she's known about the investigation for months and doubted it would change much of what she'll tell lawmakers about the Medicaid budget.

''It's going to add probably a few sentences of what my testimony might otherwise have been,'' she added.

Inspector General Tom Charles, a Taft appointee, said there was no pressure from the governor on the report's timing and he gave no thought to its effect on the budget. The investigation started in July.

''I put a report out when we're able to get it done and we're comfortable with it,'' Charles said.

Andrew Welsh-Huggins is the statehouse correspondent for the Ohio Associated Press.