The governor's office announced Friday that it had finalized a "landmark" deal with federal regulators that may change Medicaid coverage of nursing homes, prescription drugs, group homes for the disabled and even transportation for the elderly.

The plan has far-reaching implications for the 180,000 disabled, elderly and low-income residents touched by Medicaid programs last year.

The agreement gives the governor's office unprecedented authority to restructure Medicaid programs, which are now closely regulated by the federal government. In exchange, Rhode Island has agreed to limit Medicaid spending over the next five years to roughly $12.075 billion, which is about $375 million less than state negotiators had hoped.

The cost of Medicaid programs is simply unsustainable, according to the governor, who believes the new deal will allow the state to control costs while better serving residents. Medicaid consumes roughly $1.8 billion in state and federal spending this year, or 25 percent of the total state budget.

Critics, however, fear the new agreement jeopardizes programs that have long been known as "entitlements," because they are guaranteed to people who meet certain income guidelines.

If Rhode Island spends its five-year limit too soon, it would be forced to slash programs or pay for them only with state funds. Currently, the federal government pays about 52 cents of every dollar spent on Medicaid programs in Rhode Island.

Rhode Island is the first state in the nation to secure such a deal -- dubbed a "global Medicaid waiver" -- with the federal government.

Current law gives the legislature 30 days to veto the deal. An Assembly spokesman was not immediately available for comment.

The administration noted that major changes to Medicaid programs would still require public hearings and, in some cases, approval from the legislature.