Bentley said if the federal government tries to set up an exchange in Alabama, he will consider it an unconstitutional attempt by the federal government to create a state agency and will consider filing a states' rights lawsuit.
Alabama's Medicaid program currently serves more than 900,000 in Alabama, or about one out of every five residents. A new study by the University of Alabama at Birmingham estimates the Affordable Care Act could add 260,000 to 330,000 adults and children whose household incomes are below 139 percent of the federal poverty level.
The federal government would pay for the expansion for three years, and then the state would pick up a small portion of the cost.
Bentley said the structure of Medicaid is financially unsustainable and the only way he would consider an expansion is if major changes occur, such as the federal government giving block grants to the states and leaving eligibility decisions to the states.
Waggoner said the state can't afford an expansion of Medicaid. "Medicaid is about to bankrupt the General Fund budget now," he said.
The Senate's Democratic leader, Roger Bedford of Russellville, said Bentley is displaying a "total lack of leadership" and denying Medicaid coverage to about 7 percent of Alabama's citizens.
State Health Officer Don Williamson, who is overseeing Alabama's Medicaid Agency in the absence of a permanent director, said the governor doesn't want to expand Medicaid until its funding and other issues are corrected. "By just adding to the system, you don't make anything better," Williamson said in Montgomery.
Associated Press writer Bob Johnson in Montgomery, Ala. contributed to this report.