to drop around 250,000 persons from its state Medicaid roles according to Sec. of HHS Kathleen Sebelius. The letter to Gov. Brewer says that because these persons were covered by Arizona under a Medicaid waiver that ends on Sept. 30, 2011, the state can simply not renew the waiver and such persons could then be dropped from coverage without running afoul of the Affordable Care Act Maintenance of Effort (MOE) provisions. However, according to the article linked, Arizona will have to cover these persons in 2014 when the ACA goes into full effect. The MOE provisions in the ACA were designed to hold state Medicaid coverage levels in place as the law expanded coverage via Medicaid. About half of the 32 Million persons who will be insured in 2020 who would be uninsured without the ACA, will be covered by Medicaid.
There will be questions about why it took so long for HHS to let Arizona know this information, as they have been discussing this move for some time. I don't know enough to say whether this is an obvious interpretation of the ACA and the existing waiver, but Arizona must have thought they needed a waiver or they wouldn't have gone to the trouble to request one.
I have a hunch that going forward, HHS is going to try to be as flexible as possible with states, and any state with a plausible plan for their Medicaid program will likely have a decent chance of getting it approved, especially if they are expanding coverage. States certainly won't get a waiver approved if they don't ask, and states who have plans they would like to undertake shouldn't be shy. The political reality suggests more flexibility for states and not less is likely to come about in the years ahead.
At this point, Arizona and Vermont seem to be at the two ends of the spectrum in regards to seeking of waivers and implementing the ACA: Arizona desiring to cut coverage, and Vermont trying to cobble together a 'single payer' approach that is really not a single (meaning one) payer, but a universal coverage scheme. Interestingly, both states say they must take their proposed steps because they cannot afford to not do so.
h/t @sarahkliff initially and @HEALTH_NOTES for the link