Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoons for the latest edition — and read all previous columns here.

Republican governors are making a big ask of the Obama administration in return for cooperating on the Medicaid expansion: They want to overhaul the underlying insurance program that covers 60 million low-income Americans.

If the Obama administration agrees, the battles over the health-care law could have an unexpected resolution: A larger, but more conservative, Medicaid program.

Emerging deals show governors exploring approaches that would significantly reshape the program, such as moving beneficiaries into privately managed health coverage or giving enrollees a greater financial stake in their health care.

“The way to approach this is as a leverage opportunity,” Tevi Troy, a former Health and Human Services official under George W. Bush, said. “I think the smart governors will not just say ‘we’ll take the money’ but say, 'Okay, give us the opportunity to reform Medicaid.' ”

While Republicans tend to oppose the Affordable Care Act, the president’s signature legislative accomplishment, they increasingly recognize it as the law of the land.

Now that it has survived a Supreme Court challenge and the 2012 election, many conservative analysts are urging governors to take any opportunity they can to shape the law’s many reforms.

“There’s a lot of ‘let’s make a deal’ going on and a willingness to try new things,” said Robert Laszewski, president of Health Policy and Strategy Associates.

That is especially true with the Medicaid expansion, where the federal government needs states’ cooperation to expand the entitlement program to cover 17 million more Americans.

Twenty-three states have indicated that they will participate in the program, including seven states with Republican governors. Thirteen governors have pledged to opt out of the program, with the rest still deciding.

Medicaid is run as a state-federal partnership, with the two governments splitting the health-care bills. The federal government sets the ground rules for certain populations and services that the Medicaid program must cover, such as low-income pregnant women. It regularly grants states waivers to test out new ways to deliver care, or to provide health insurance coverage to a non-traditional population.

Marilyn Tavenner, acting administrator of the Center for Medicare and Medicaid Services, acknowledged the role that flexibility would play in states’ decision-making.

“For many of them, they have waivers in process,” she said in a recent interview. “So we are trying to be flexible and work as quickly as possible on waivers.”

Hours before announcing his decision to expand Medicaid, Florida Gov. Rick Scott had two waivers approved by Health and Human Services. The new flexibility will allow the state to move nearly all Medicaid enrollees into privately managed plans.

This will include populations that receive long-term care benefits, who tend to be a more vulnerable and expensive group.

Scott said he told Health and Human Services Secretary Kathleen Sebelius that the waiver was a pre-condition for Florida's participation in the Medicaid expansion in a meeting last January.

“For us to make a decision where we go forward, we’ve got to get these two waivers done,” Scott recounted telling Sebelius in that conversation.

Virginia Gov. Bob McDonnell has urged legislators not to move forward on the Medicaid expansion before the state gets the sign-off on a waiver his administration submitted to the federal government in 2012.  His plan would expand private management of Medicaid statewide and also explore new ways to increase cost-sharing for certain, higher-income beneficiaries.

Holding out on the Medicaid expansion, McDonnell argued, gives the state maximum leverage in obtaining new flexibilities.

"Unless we maximize the concessions from the federal government in obtaining these reforms prior to considering any specific expansion, our cost savings opportunity will be lost," McDonell wrote in a letter to state legislative leaders. "We have one chance to do this right."

Indiana Gov. Mike Pence will only consider the Medicaid expansion if he can move forward using the state’s Healthy Indiana Program, which puts new enrollees in a private-style plan with a high deductible.

“We are not pursuing an expansion of Medicaid,” Pence said. “Any consideration in the future would be predicated on the ability to do so within the framework of the Healthy Indiana Plan.”

That program, launched in 2008 under the George W. Bush administration, is unique in the Medicaid program in that it includes a $1,100 deductible paid for by the Medicaid program and the enrollee. The goal is to lower the cost of care by giving Medicaid patients a financial stake in their own health-care spending.

"It is a consumer-driven plan that is a win for taxpayers and, more importantly, a win for recipients because it encourages people to make the kind of choices that are going to improve their lives," Pence said.

Arkansas Gov. Mike Beebe hopes that federal flexibility will help secure his Republican legislature’s support for the Medicaid expansion.

Legislators there proposed a plan that would use the government dollars to enroll some beneficiaries into private health insurance plans, sold on the new health insurance exchanges.

“We’ve had a number of specific requests from the legislative leadership that a few weeks ago most folks would have thought not to be possible,” Beebe said. “But after meeting with Secretary Sebelius and her team, some things we thought might not be possible are indeed possible."

Not all governors are open to the Medicaid expansion as a means to achieving more flexibility. Iowa Gov. Terry Brandstad told reporters at the National Governor's Association meeting that his state would not move forward with the expansion as he continues to pursue a federal waiver.

"We’re not going to do that," Brandstad said of the Medicaid expansion. "But we are working to try to get a waiver [for] a more modern system that gets people to take more responsibility for their own health and partners with them to provide better health services."

KLIFF NOTES: Top health policy reads from around the Web.

Florida's Medicaid expansion still has to survive the legislature. "No Medicaid expansion can take place without the explicit authorization of the state legislature. And in Florida, where Gov. Rick Scott (R) made national news last week by reversing his opposition to the expansion, the Republican-controlled legislature remains very skeptical." Avik Roy in Forbes.

Is rate-setting the answer to our health-care cost woes? "We don't know what the impact of rate setting (price controls) would be on health-care spending in the U.S. It's possible that rate setting could prevent some of the most egregious practices recorded in the Brill article, but that depends on what's enacted and how it's enforced. Whether rate setting would substantially slow the rate of growth of health-care spending isn't clear." Marty Gaynor in Compassionate Economics

The latest group to advocate for the Medicaid expansion? The AARP. "AARP said Monday it's 'ramping up' an advocacy push to persuade governors to take part in the Medicaid expansion. The lobbying effort includes advertising and in-person lobbying in more than 40 states, AARP said." Sam Baker in the Hill.