Arkansas Business

But the Republicans in Arkansas, where Democrats had long controlled the Legislature, say the expansion might work if they can require co-pays from some beneficiaries, mandate drug tests, impose stiffer penalties for fraud and use other measures to limit expenses.

"It goes back to being able to have a system that's solvent and sustainable," said Republican Sen. Jonathan Dismang.

Democrats say they're willing to listen to the proposals, but that the benefits of the expansion should be obvious.

"If we miss this opportunity," said Democratic Sen.-elect Keith Ingram, "...then shame on us."

Republicans were encouraged by Beebe's request for federal permission to cap state Medicaid spending over the next eight years and for more flexibility on how the money is spent. DHS officials haven't responded, but a similar waiver allowed Rhode Island more flexibility in how it cares for its seniors.

"We are open to really talking about anything that seems to make sense and helps us get to yes...," DHS Director John Selig said recently.

One option was foreclosed this week when the Obama administration said states couldn't opt to cover a smaller slice of the working poor and still receive all the federal money.

Thompson, the surgeon general, said he thinks the new sharing of power between Republicans and Democrats in the state could help.

"There are states that aren't having any conversations right now because they can't get past the R and D difference and sit down at the table to discuss where they want to go and what they want to do," Thompson said.

(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, rewritten, broadcast or distributed.)