(Adds Democrats response, paragraphs 5-8)
By Corrie MacLaggan
AUSTIN, Texas, April 1 (Reuters) - Texas Governor Rick Perry on Monday firmly reiterated that the state will not expand its Medicaid program, saying it is a broken system that needs to be reformed by allowing states more flexibility.
Perry, who notified the Obama administration last summer that his state would not expand Medicaid, was joined on Monday by other Texas Republican officials, including U.S. Senators John Cornyn and Ted Cruz.
"Seems to me April Fool's Day is the perfect day to discuss something as foolish as Medicaid expansion, and to remind everyone that Texas will not be held hostage by the Obama administration's attempt to force us into the fool's errand of adding more than a million Texans to a broken system," Perry told reporters at the state Capitol.
In Texas, Medicaid expansion would cover more than 1 million new low-income Texans by 2017, according to the state Health and Human Services Commission.
About two dozen demonstrators stood outside the room where the press conference was held, chanting loudly and holding signs with slogans that included "Rick Perry take the money."
Supporters of Medicaid expansion say that it is a good deal because the federal government would cover 100 percent of the costs for the first three years and 90 percent after that.
Texas Democratic officials who support Medicaid expansion held their own Capitol press conference later on Monday, calling on the governor to drop his opposition to expanding the program in the state that has the nation's highest percentage of uninsured people. About 24 percent of Texans are uninsured.
"Governor, 'No' is not a public policy response," said state Representative Trey Martinez Fischer of San Antonio.
He was joined by fellow Democrats including brothers U.S. Representative Joaquin Castro and Mayor Julian Castro of San Antonio.
'NOT FREE MONEY'
Medicaid makes up a quarter of the state's budget and could jump to nearly a third if the state accepts the expansion, Perry said. Just 30 percent of Texas doctors accept new Medicaid patients, and the governor said he worries that could decrease if the expansion happens.
Perry and his fellow Republicans argued that there is economic sense in turning down funding from Washington, given that it ultimately comes from taxpayers.
"It's not free money, it's our money," said Ted Cruz, the freshman U.S. senator. "The federal government is much like an unscrupulous individual trying to convince a junior high kid to start smoking...They start by giving a few cigarettes and saying, 'Just try it.' And there's a bait and switch that's coming."
The Texas Republicans' opposition stands in contrast to efforts by Republican governors such as Jan Brewer in Arizona, John Kasich in Ohio and Rick Scott in Florida to get Medicaid expansion approved by their state legislatures.
Last June, the U.S. Supreme Court upheld President Barack Obama's health care overhaul, but allowed states to opt out of a provision expanding the Medicaid program.
Since then, 25 governors have indicated support for Medicaid expansion, 15 say they are not participating and 10 others remain undecided, according to the Advisory Board Company, a consulting firm that is tracking the issue. Of those who are undecided, three are leaning toward not participating, it said.
Expanding Medicaid would boost the Texas economy, save local tax dollars and dramatically increase the number of Texans with health insurance, said Anne Dunkelberg, associate director of the Center for Public Policy Priorities, which advocates for low-income Texans.
Austin resident Dana McBride, who works part-time caring for people with disabilities, said that she and her husband are uninsured and would likely be covered under Medicaid expansion.
"I'm blessed to have good health, but you never know," she said after the Democratic press conference. (Reporting by Corrie MacLaggan; Editing by David Bailey, Scott Malone, Steve Orlofsky and Leslie Gevirtz)