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Gov. Bill Haslam answers a question during a news conference in this file photo.

NASHVILLE - Gov. Bill Haslam and his TennCare chief aren't happy with the final federal rules on Medicaid expansion, saying they don't provide the flexibility the governor wants on cost-sharing for enrollees.

The "early read" on the 606-page set of rules, released July 5 by the federal Centers for Medicare and Medicaid Services, are "not encouraging," but Tennessee is "still having discussions," Haslam told reporters this week.

Haslam, a Republican, doesn't want to expand the state's version of TennCare, as envisioned in President Barack Obama's Affordable Care Act, to additional low-income residents.

But instead of flatly refusing to participate, he wants to use the additional federal money intended for the Medicaid expansion to buy these adults' way onto the federal health care exchanges where the uninsured can purchase private insurance.

The governor said he still holds out hope that federal officials will accept his "Tennessee Plan" that includes higher cost-sharing for people under 100 percent of the federal poverty level than the new rules allow.

"It's awfully early to get down," he said.

TennCare Director Darin Gordon said the state still is sorting through the rules. But he noted "some of the early takeaways" are the added flexibility on cost-sharing Tennessee is seeking isn't there.

The Haslam administration was looking for more flexibility in "nominal" charges on care that officials hope to use to shape enrollees' use of services and lifestyle choices.

"What they did was basically finalize what they put out in January," Gordon said. "If you're trying to read between the lines, it doesn't seem to indicate they are interested in being flexible beyond what they set out in the Jan. 22 rule. This is a final rule."

Still, Gordon said Tennessee and several other states interested in the same approach "will have some discussions" with federal officials.

Obamacare originally required states to expand their Medicaid programs to lower-income families who earn up to 138 percent of the poverty level. But the U.S. Supreme Court's decision upholding the basic law made the expansion voluntary for the states.

The federal government is picking up the full cost of the expansion for the first two years and 90 percent after that.

But with fellow Republicans in the GOP-led Legislature balking, Haslam in March announced he would try to negotiate a deal with the administration in which the entire expansion population would go into the exchanges. That would allow him to implement his own ideas on cost-cutting and promoting healthier lifestyles, Haslam said.

Haslam said the administration will decide by summer's end whether to pursue the private health insurance angle.

Rep. JoAnne Favors, D-Chattanooga, a retired nurse and health care administrator, said she continues to hope Haslam's decision will be "that we participate in the Medicaid expansion. We have too many people who are sick and poor in the state of Tennessee to not participate. It won't cost us anything directly the first" two years.

If Tennessee was a state where there were more middle-income people, Favors said, "I wouldn't be quite as concerned."

Contact staff writer Andy Sher at asher@timesfree or 615-255-0550.