Brewer and AHCCCS said cutting benefits and eligibility was the only way to keep the burgeoning program intact. AHCCCS currently covers more than 1.3 million Arizonans.
AHCCCS operates under a Medicaid waiver, requiring that any changes be "likely to further the objectives" of Medicaid.
Mann said HHS Secretary Kathleen Sebelius didn't believe eliminating coverage for 60,000 low-income parents furthered the Medicaid mission.
Under Brewer's proposals, parents earning more than 75% of the federal poverty level would be allowed to remain on AHCCCS, but no one else would be eligible and those who fell off the rolls for any reason could not get back on.
AHCCCS estimated that about 30,000 people, or half of the parents in that category, would lose benefits in the first year, for savings of $17 million.
Sebelius and the CMS also denied a plan to require AHCCCS members to re-enroll every six months, instead of annually. A similar proposal was rejected last year. It would have saved an estimated $15 million. Sebelius already has approved two major AHCCCS reductions, for savings of $260 million.