(Recasts with agreement, adds comments, details; minor changes throughout)
By Hilary Russ and David Morgan
Aug 28 (Reuters) - Federal officials have reached an agreement with Pennsylvania Gov. Tom Corbett over his plan to use federal funds to pay for private health insurance coverage for up to 600,000 residents, the governor said on Thursday.
The deal highlights a growing number of Republican governors who are finding ways to accept money under President Barack Obama's Affordable Care Act, despite political opposition that has so far prevented nearly half of U.S. states from moving forward with the Medicaid expansion plan.
Corbett sought a waiver in February to use those expansion funds to instead subsidize private health insurance for low-income residents.
Medicaid expansion under Obamacare has become a tool for political jockeying, with many Republicans loathe to support it. In Pennsylvania, the dispute is partly semantic.
Corbett, who is lagging in the polls in his bid for re-election this fall, said his plan, Healthy Pennsylvania, is not expansion under so-called Obamacare.
The governor "has been clear that he would not expand Medicaid because it is an unsustainable entitlement program," a statement from his office said on Thursday.
However, federal officials said the approval made Pennsylvania the 27th state to expand Medicaid under Obamacare.
Federal health officials are "committed to supporting state flexibility and working with states on innovative solutions that work within the confines of the law to expand Medicaid to low-income individuals," said Centers for Medicare & Medicaid Services Administrator Marilyn Tavenner in a statement.
Republican governors in Ohio, Michigan and Iowa have already extended health coverage to poor constituents with Medicaid funding under Obamacare. Indiana and Utah are actively negotiating for new plans with the administration.
"The politics in these states are tough. You can't simply do the Medicaid expansion as is and expect public support," said Benjamin Sommers, a Medicaid expert at the Harvard School of Public Health.
Health reform advocates predicted that further expansions in Republican-led states will follow Pennsylvania's lead by playing down the role of Medicaid and the Affordable Care Act in their programs.
Federal officials did not approve a controversial Pennsylvania provision that would have required active job searches in order for the unemployed to receive coverage. But a voluntary job training program that reduces premium costs for participants was allowed.
The approved program will also reduce 14 current Medicaid plans to two benefit packages, one for low-risk residents and another for high risk.
Enrollment begins Dec. 1, with coverage to go into effect Jan. 1. Those earning 133 percent of the federal poverty level qualify, though the effective level is 138 percent, or $32,913 for a family of four.
About 6.4 million Americans who live below the poverty line are expected to remain uninsured in the 23 states that have not expanded Medicaid. (Reporting by Hilary Russ in New York and David Morgan in Washington; Editing by Diane Craft)