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Madison - The state will turn down $38 million in federal money that could have gone to implementing the federal health care law in Wisconsin, Gov. Scott Walker said Wednesday.

The Republican governor said he was returning the money because he won't seek to create a health care marketplace that is called for under the federal law. The move followed sustained criticism of Walker by conservatives who oppose the health law passed by President Barack Obama and Congress in 2010.

The governor has consistently opposed the federal law, but for a time last year Walker had said that he wanted the state to develop its own plan for the marketplace so Wisconsin would have more control over how the law is implemented.

"I have directed the Department of Health Services to notify the federal government that we will discontinue any development on a health exchange and that Wisconsin will turn down funding from the (federal) program," Walker said in a statement. "Stopping the encroachment of ObamaCare in our state, which has the potential to have a devastating impact on Wisconsin's economy, is a top priority."

The so-called health exchange is a marketplace for individuals and small businesses to buy insurance coverage under the federal law.

Under that legislation, Wisconsin must prove to the federal government by Jan. 1, 2013, that the state is prepared to implement its own exchange plan. Otherwise, the federal government will impose its own plan when the exchanges start in 2014.

Robert Kraig, executive director of Citizen Action of Wisconsin, said the decision was a mistake because the exchanges could have provided consumers with more affordable options for their health care.

"It's a terrible move for the state," Kraig said.

Kraig said he believed the state had spent about $1 million of the federal money. He said he was unsure if the state would need to repay that money if it is not moving forward with the exchange.

State Sen. Frank Lasee (R-De Pere), a vocal critic of implementing the exchanges, praised the decision by Walker.

" 'Obamacare' creates huge new subsidies for literally half or more of the people who have private insurance today," Lasee said. "We can't afford it as a nation . . . and I don't think we should cooperate with it."

Democrats have said that it's important to prepare for the new law while Republicans including Lasee have said they think that might not be needed because it might be struck down. The U.S. Supreme Court has scheduled for the end of March several days of oral arguments to examine whether the law is constitutional.