INDIANAPOLIS (AP) — Senate Health Chairwoman Pat Miller said Friday that Indiana's health savings account program should be used to meet the requirements of the new federal Medicaid expansion.

Miller, R-Indianapolis, is drafting a proposal that would expand coverage using the Healthy Indiana Plan and ask the federal government to cover the cost using block grants. It also would set guidelines for "navigators" required under the federal law to help residents use the insurance exchange once federal officials have set it up in Indiana.

The Healthy Indiana Plan "contains a lot of the things I think are important for consumers, including wellness and personal responsibility for their health as well as some financial responsibility, which would be a co-pay or some kind of premium based on income," Miller said.

She plans to discuss the measure in her committee next Wednesday, as lawmakers decide how to handle the federal health care law. Gov. Mike Pence has all but shut the door on running a "hybrid" insurance exchange with the federal government, and he said earlier this week the only way he would sign off on a Medicaid expansion would be if it met same the terms laid out by Miller in her new amendment.

Throughout the debate, the growing cost of Medicaid has towered over the number of uninsured residents in Indiana as a breakpoint for any expansion.

Milliman Inc., the actuary hired by former Gov. Mitch Daniels to assess the law's impact on the state has floated a series of eye-popping cost estimates over the last few years. The firm estimates that a full expansion, for all residents earning up to 133 percent of the federal poverty line, would cost $2.6 billion over the next seven years.

Broken down, that number seems somewhat less daunting. A full expansion would cost $94.5 million more next year and grow to $524.8 million a year by 2020.

The U.S. Supreme Court allowed Medicaid expansion last year in its ruling upholding the constitutionality of the federal health care law. Under the law, states can increase the eligibility under their Medicaid programs to people whose incomes equal 133 percent of the federal poverty level.

The federal health care law gives states the option to accept the expansion, refuse it or postpone a decision. But there are benefits for states that choose to expand Medicaid now: The U.S. government will pick up the entire cost in the first three years and 90 percent over the long haul. Three years of full federal funding for newly eligible enrollees — roughly $2 billion a year — is available from 2014 through 2016, gradually phasing down to 90 percent in 2020 and after.

Vastly outnumbered Indiana legislative Democrats are continuing the push to accept traditional Medicaid coverage, arguing that the Milliman analysis ignores significant cost savings as fewer uninsured residents use the emergency room for primary care, leaving insured residents to eat the cost.

House Minority Leader Scott Pelath, D-Michigan City, and Senate Minority Leader Tim Lanane, D-Anderson, also argued that Indiana should join Republican leaders in other states like Michigan, Ohio and Arizona who are approving the Medicaid expansion.

"They've already said that they are going to expand Medicaid as a way by which to implement the health care act," Lanane said. "So I believe Indiana is sort of the island in the middle, and I don't think we want to be known as the island of the uninsured."