The Department of Health and Human Services plans to cut costs in the Medicaid program by an estimated $220 million in state and federal funds to help balance the governor’s two-year budget – a proposal that is expected to draw fire from providers particularly in the mental health area.

The actual savings to the state general fund would be $74 million and the rest would be in federal matching funds, which are given to the state on a 2-to-1 basis for Medicaid services.

DHHS Commissioner Brenda Harvey gave an overview of the program changes Tuesday to the Appropriations Committee, which is holding hearings on the budget all week.

Harvey said the cost savings would be achieved through better management of chronic disease, more focus on prevention for adults on Medicaid and better control of the costs associated with behavioral health. Included in that initiative is a plan to standardize payments to mental-health providers.

“DHHS now pays different rates to different providers for some behavioral health services – as much as 50 to 100 percent more to some providers than to others,” Harvey told the committee. “Our highest rates are clearly higher than other states and the average in New England,” Harvey said.

She said standardizing the rates, which will be “the most controversial” aspect of her plan, would save taxpayers $20 million over two years.

Better managing chronic conditions like diabetes and cardiac and lung disease and focusing on prevention could help save up to $42.4 million over two years, and better managing behavior health care would save another $11.5 million.

Sen. Richard Rosen, the assistant minority leader in the Senate, who sat in on Tuesday’s hearings, said he believes the savings can be achieved if the department sticks to and manages its plan.

“The department does not have a good track record on delivering on savings initiatives, so there’s a high level of skepticism,” Rosen said. “The numbers are there if you have the right team.”

The $74 million in savings are part of a package to balance Gov. John Baldacci’s $6.4 billion, two-year budget. Other controversial aspects of his plan include raising the cigarette tax by $1 to bring in $131 million and cutting the number of school districts in the state to 26 to save $36 million.