PHOENIX -- It's almost a case of starting over for Gov. Jan Brewer as she weighs whether to ask legislators to provide government-paid health coverage to hundreds of thousands of additional low-income Arizonans.
A new Obama administration pronouncement eliminated a middle option that was seen as potentially palatable for Brewer and at least some cost-conscious majority Republican legislators.
The state's policymakers are now faced with what could be an all-or-nothing decision with big ramifications for the state treasury and people lacking health care coverage.
The "all" would be to provide expanded Medicaid eligibility as envisioned under an expansion included in President Barack Obama's health care law. Including changes that are mandatory for states, that course would add coverage for an additional 300,000 people in the 2013-2014 fiscal year.
The "nothing" would be to keep the state's Medicaid program — the Arizona Health Care Cost Containment System — and would have the state reject all optional increases and add only 130,000 people, most of whom are already eligible but not enrolled.
With the pronouncement by Health and Human Services Secretary Kathleen Sebelius, what's now effectively off the table is the possibility of getting the same generous "enhanced" funding rate from Washington for a partial expansion for 170,000 people that would be included in the full expansion.
"This changes the game quite a bit," said Brewer spokesman Matthew Benson.
The lack of more generous funding for a partial expansion is something Brewer "will weigh heavily in her decision," Benson added. "It's well over a $300 million difference. This isn't some academic difference."
The federal government is heavily subsidizing the Medicaid expansion, but there are state costs also.
The Legislature's budget staff estimates it'd cost the state $135 million in the 2014-2015 fiscal year to implement the full expansion, with Washington picking up the entire tab for some of the additional people covered.
But the partial expansion, which would restore an eligibility threshold to where it was before a cutback made during the Great Recession budget crisis, now carries a 2014-2015 pricetag of $478 million under the new federal decision.
That has some advocates of increased eligibility arguing it makes economic sense for Arizona to push ahead with full expansion to provide coverage for more people and secure more federal dollars for the state, its financial struggling health care providers and its overall economy.
"The more federal money you can get into our state, the better you are off economically," said Dave Wells, research director for the Grand Canyon Institute, a think tank.
However, Senate President-designate Andy Biggs said Arizona is already struggling to bear the cost of its Medicaid program — and can't risk taking on added costs, particularly if federal funding slips.
AHCCCS, which already covers roughly one of every five Arizonans, accounts for 16.2 percent of the state's current operating budget, up from 9.9 percent 10 years ago.
"We're just on an unsustainable path, and I don't know how we get off that path," said Biggs, R-Gilbert.
Sen. Linda Lopez, D-Tucson, said it'd be penny wise and pound foolish for the state to not opt for full expansion.
With eligibility for behavioral health services and other care, "I'm wondering what we're doing to the safety of our communities and the well-being of these people," she said.
Pete Wertheim, an Arizona Hospital and Healthcare Association vice president, said the industry group is exploring possible options for funding proposals in response to the federal pronouncement, which he said "made things much more challenging."
One thing that made the proposed partial expansion politically attractive is that it would have restored an eligibility level that Arizona voters mandated in 2000 when approved an initiative measure increasing eligibility.
Brewer and lawmakers last year partly suspended the voter-approved expansion, saying that funding to pay for it wasn't available because of the budget crisis.
The rollback, which was implemented as a freeze on new enrollments, was upheld by the Arizona Supreme Court. It said the Legislature had the authority it claimed to hinge implementation on availability of funding.
The state's economy and budget picture are improving," said Benson, Brewer's spokesman. "But ... we're not out of the woods yet."
Tim Hogan, a lawyer who unsuccessfully fought to force the state to lift the enrollment freeze, said the state Supreme Court's ruling effectively precludes revisiting the issue anew to try to force Brewer and lawmakers to approve an expansion.
"A court said that's a legislative decision pretty much not reviewable by the courts," Hogan said. "You'd get the same answer from the courts."