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About six-and-a-half million people are enrolled and now Congress has passed legislation to expand the program to cover another four million children.
But President George W Bush has vetoed it because he believes it introduces excessive government control of the health care system.
"I believe in private medicine, not the federal government running the health care system," he said.
The expansion of the joint federal-state program would have cost almost $40 billion.
While the bill had a level of bipartisan support in Congress it fell short of the two-thirds majority needed to override a veto.
The Democrats are calling the veto cruel and heartless. © 2007 Australian Broadcasting Corporation