The Obama administration is giving states like Indiana a little flexibility in how to expand their Medicaid programs—but nothing like what state officials hoped for after the U.S. Supreme Court struck down part of the health reform law in late June.

The law calls for all states to expand eligibility for their Medicaid programs to include adults earnings as much as 138 percent of the federal poverty limit. Indiana’s current limit for adults is just 24 percent of the federal poverty limit.

But the Supreme Court, in its June 28 ruling upholding the law, said the states can opt out of the expansion without losing all federal funding for their Medicaid programs.

Republican governors of other states, including Louisiana and Florida, have said they will not expand their Medicaid programs. So earlier this month, officials from the U.S. Department of Health and Human Services told states that are skittish about expanding that, if they do so on schedule, they can later back out of the expansion.

Republican governors were not impressed.

In Indiana, Gov. Mitch Daniels has said he would leave the Medicaid decision to the state Legislature and the man who replaces him in January. But in the meantime, the Daniels administration has continued to push for an answer from the Obama administration on whether it can use the Healthy Indiana Plan to expand Medicaid, instead of the traditional Medicaid plan.

Traditional Medicaid pays all medical charges for its members, although it has struggled to find enough doctors willing to accept its low reimbursement rates. The Healthy Indiana Plan requires participants to make some contributions into a health savings account to help cover their bills.

Late last month, federal officials sent a letter to the Daniels’ administration saying it could continue the Healthy Indiana Plan for at least one more year—to the end of 2013—while the two governments keep discussing the idea of using the Healthy Indiana Plan to expand Medicaid coverage.

“We share the state’s goal of maintaining coverage for the approximately 42,000 parents and childless adults currently enrolled in the HIP program,” wrote Cindy Mann, director of the federal Center for Medicare & Medicaid Services, in a letter proposing the one-year extension.

But that wasn’t nearly enough for Michael Gargano, secretary of the Indiana Family and Social Services Administration, which oversees the Indiana Medicaid and Healthy Indiana programs.

In a press release issued Friday, Gargano warned that Indiana officials may be forced to close enrollment in the program because its future beyond 2013 is in doubt.

“We’re disappointed that after two years, Indiana still does not have an answer about the long-term future of HIP,” Gargano said in a prepared statement. “We will be forced to make a difficult decision about continuing HIP enrollment for a program that likely won’t exist after 2013. States have been seeking answers and flexibility, and this response hampers innovation and efforts to plan.”