Despite vocal opposition to Obamacare, Governor Mike Pence of Indiana just joined the ranks of conservative state officials willing to compromise with the federal government to expand health coverage for their states' poorest residents. Here's the short version:

Indiana isn't using traditional Medicaid. Instead they're trying to expand an alternative health program called Healthy Indiana. Healthy Indiana relies more on conservative health-care ideas, like using deductibles and co-pays to make individuals more careful shoppers for health care. Healthy Indiana will have to get a bit more generous to comply with Obamacare's Medicaid expansion. But it'll still require more cost-sharing from beneficiaries than traditional Medicaid. Indiana still needs to get approval for this plan from the Obama administration. Pence says he expects to formally submit the request for a waiver in June.

So, is Indiana signing up for Obamacare's Medicaid expansion?

Yep, but don't expect the governor to frame it that way. "From the very beginning of my tenure as governor, we've been saying no to the Affordable Care Act in Indiana," Pence said at today's announcement. "Medicaid is not a program we need to expand, it is a program we need to change."

Pence has proposed to expand an existing state program, the Healthy Indiana Plan, to extend affordable coverage to all Hoosiers below 138 percent of the federal poverty line. Indiana would pay for that expansion using Obamacare's Medicaid expansion funds.

Healthy Indiana is popular with its beneficiaries, but the program would have to change to become Obamacare-compliant. Right now, for example, it imposes annual and lifetime dollar limits, doesn't cover maternity care, and requires monthly contributions from most enrollees. The Department of Health and Human Services made it clear that some of these rules were unacceptable if Indiana wanted federal funds for a full Medicaid expansion.

He's billing this move as an "alternative" to Medicaid expansion, because the state is seeking permission from the feds revamp the Healthy Indiana Plan. But Indiana's special expansion still needs to play by Obamacare's rules.

What is the Healthy Indiana Plan?

In 2008, Indiana made an effort to expand health coverage for working-age adults who are historically left out of the state's Medicaid program. The federal government allowed Indiana to offer non-traditional coverage to adults below 200 percent of the federal poverty line, about $24,000 for an individual. Called the Healthy Indiana Plan, the program relies on health policies popular with Republicans, including steep deductibles paired with savings accounts for health expenses. Some believe that deductibles make individuals more cost-conscious, so they're smarter about how they spend on medical care.

Under the current program, Healthy Indiana beneficiaries make monthly contributions toward a savings account; these contributions range from $0 to $92 per month depending on income. The state supplements contributions for lower-income enrollees. Those savings are used to pay the $1,100 deductible on medical expenses.

Healthy Indiana has some elements that Obamacare is supposed to eliminate, like spending and enrollment limits and limited benefits. The Department of Health and Human Services gave Indiana an extension for the program through the end of 2014, but would not permit the state to use the current version of the program to expand Medicaid.

Why did Indiana decide to expand Medicaid now?

Indiana has a Republican governor and both legislative chambers are controlled by the GOP. State Senator Karen Tallian, a Democrat, introduced two pieces of legislation attempting to expand Medicaid earlier this year; both were blocked.

But there's a growing body of evidence that Medicaid is a great deal for states. For 2014 through the end of 2016, the federal government will pick up the complete tab for Medicaid expansion, so when states delay expansion, they're leaving federal dollars on the table. A recent analysis from the Center on Budget and Policy Priorities found that expansion only raises state Medicaid spending by 1.6% between 2015 and 2024 relative to not expanding. Since Indiana residents have to make federal tax payments, they're still helping finance expansion in other states; they're just not seeing any benefit at home.

And there's plenty of room for benefit: according to the Kaiser Family Foundation, 801,000 Indiana residents are uninsured. Many would have access to coverage through the new marketplaces, but 23 percent would be too poor to qualify for tax credits. Without Medicaid expansion, these individuals wouldn't have access to affordable coverage.

What is the governor proposing to do?

The governor is tweaking the Healthy Indiana Plan to comply with Obamacare. In order to get the feds on board, the program will have to lose restrictions on how many people can enroll — and kill the annual and lifetime limits on medical care, too. HIP 2.0, as some are calling it, will also have to guarantee certain minimum benefits, including certain preventive services and maternity care without co-pays.

Pence wants to create a two-tiered system. "HIP Basic" will be a plan that everyone below the federal poverty line is eligible for. It will require modest co-pays when a patient receives services, but it won't require a monthly premium. "HIP Plus" is a more generous — and more expensive — program that will be optional for those below poverty, but will be the default for people between 100 and 138 of the federal poverty level. HIP Plus will cover all of the same benefits as HIP Basic, plus some additional services like vision and dental. According to Pence, HIP Plus will require a monthly contribution of $3 to $25 depending on income.

There's also a provision that will allow Medicaid to directly subsidize coverage offered by an employer for eligible individuals who can't afford that insurance. Not many people, however, are likely to fall into this category.

"It’s not as if there are a ton of people making less than 100 percent of the federal poverty line who have good jobs with employer-based insurance that they have to turn down because they can’t afford it," says Aaron Carroll, director of the Center for Health Policy and Professionalism Research at Indiana University School of Medicine. "I think that’s likely rare. I’m not seeing huge numbers of people taking him up on that."

What are the benefits of a plan like this?

Some state Medicaid programs don't offer dental benefits to their adult enrollees; those are optional benefits under federal law. That means HIP Plus might be more generous than programs elsewhere.

And this expansion plan is better for enrollees than no expansion at all. It charts a new way forward for Indiana's Medicaid program, and provides other Republican states with another expansion model that they may be willing to embrace.

What are some potential drawbacks?

There is evidence that deductibles and co-pays reduce health spending, and that could help drive down the cost of Medicaid in Indiana — a potential plus of this approach. The theory is that, when there are costs associated with going to the doctor, patients will only turn up for visits when they really need them.

But there's a possible drawback here too: people aren't really good at distinguishing between the care they need and what they don't. Expenses can result in individuals putting off important kinds of care like certain screenings and high-value prescription drugs. In this particular case, out-of-pocket costs will be modest for Medicaid beneficiaries, so this may not be a big problem.

What's next for Indiana?

Receiving permission from the federal government to reshape Medicaid is a process. The state needs to make the case that their expansion plan will achieve the goals of Medicaid expansion and that it won't cost the federal government any more than a traditional expansion would.

It takes time — usually a few months — to receive federal approval for a Medicaid waiver. Once the waiver application is drafted, there's a mandatory 30-day public comment period. The application is then submitted to the federal government for approval. Michigan's waiver was approved about two months after it was submitted; Governor Pence anticipates submitting the waiver in June.