LITTLE ROCK — A Medicaid expansion funded mostly with federal dollars is the best, and possible only, way to avoid severe cuts to Medicaid services, Gov. Mike Beebe said Wednesday.

A day earlier, state Department of Human Services officials testified before a legislative panel about $319 million in proposed cuts to Medicaid over two years as part of a plan to address a looming shortfall in the state Medicaid budget. The proposed measures include eliminating coverage for the lowest tier of nursing home care — affecting between 10,000 and 15,000 seniors who need assistance with some daily functions — and the equivalent level of care for in-home patients.

The Beebe administration also is proposing spending $312 million in general revenue and $140 million in surplus funds over the next two years to help balance the Medicaid budget.

Talking to reporters Wednesday, Beebe called expanding Medicaid "the first option" for avoiding the cuts in nursing home services.

"Medicaid expansion would create the kind of freedom all throughout the Medicaid budget to be able to avoid that," Beebe said. "There may not be any other realistic option, but we won’t preclude or foreclose any thoughts or ideas by anybody."

Republican legislators said they intend to propose other ways to address the shortfall that would not involve drastic cuts to Medicaid services.

Under the federal Affordable Care Act, the federal government would pay the full cost of Arkansas’ Medicaid expansion for the first three years, after which the state’s share of the cost would gradually increase to 10 percent. The U.S. Supreme Court has said the expansion must be optional for states, and some states have said they will opt out.

Expanding Arkansas’ Medicaid program to include people earning up to 138 percent of the federal poverty level is expected to add about 250,000 people to the Medicaid rolls.

State Sen. Michael Lamoureux, R-Russellville, who will serve as Senate president pro tem in the session that begins in January, said expanding Medicaid is one alternative for dealing with the shortfall, but "there are numerous other alternatives," including cutting spending in other areas of government.

Lamoureux said he did not consider the proposal presented Wednesday to be a serious one. He said he expects Beebe and legislators to hammer out a better plan in the coming weeks.

"I don’t think anybody thinks we’re going to throw senior citizens out of nursing homes," he said.

Rep. Bruce Westerman, R-Hot Springs, the leader of the Republican House Caucus, said he was not surprised by Beebe’s comments.

"That’s almost exactly what I expected to happen, to announce some drastic cuts and then say the only way to avoid the cuts is to expand Medicaid," he said. "You’re blending issues that in my opinion aren’t the same issue."

Westerman said Republicans favor alternatives such as reducing waste, fraud and abuse in the system and creating a system of co-pays.

"I think there are some creative ways out there to address the shortfall other than just saying we’re going to cut services to nursing homes if we can’t expand Medicaid," he said.

Rep. David Meeks, R-Conway, said he believed that "if you look at waste alone, we’re looking at at least $20 million, probably more, that we can find in the budget, without making any cuts anyplace else, that we can put toward Medicaid."

Sen. Jonathan Dismang, R-Searcy, said that as far as he is concerned, "everything is on the table (for cuts), and that includes other agencies and programs outside DHS."

Beebe said he will consider "whatever thoughts the General Assembly may have," but he questioned where else the budget could be cut.

"Could you cut elsewhere? Well first of all, you’ve got 50 percent of that (general revenue) budget you can’t cut. It’s K-12 (education). Constitutionally, you can’t cut it, period. I’m not for letting bad people out of prisons. … I think we cut our nose off to spite our face if we cut higher ed," he said.

Raising taxes to avoid the cuts is not a viable option "in this climate," Beebe said.