The decision is disappointing for leaders in conservative-leaning states who considered Utah's plan a compromise approach, said Matt Salo, executive director of the National Association of Medicaid Directors, on Monday.
"A lot of states were clearly looking at this avenue as a potential kind of middle-of-the-road path," he said.
Supporters of full Medicaid expansion, on the other hand, cheered the federal decision. In a twist, the Trump administration's rejection could trigger a fallback provision in Utah expanding coverage to more people.
"It appears that the administration has made the right decision but for all the wrong reasons," said Jessica Schubel with the Center for Budget and Policy Priorities. "I would hope this decision is a wake-up call for Utah to move forward with full expansion rather than continue to debate alternatives."
More than a dozen states have declined to expand Medicaid, and cost is often cited as a concern.
Several states, though, are looking for a path forward. Georgia Gov. Brian Kemp plans to seek waivers for a more-conservative expansion, including an income-eligibility waiver similar to Utah's request.
In states like North Carolina and Kansas, Democratic governors have struggled to convince reluctant lawmakers to pass expansion plans, Salo said. In Oklahoma, there's talk of a ballot initiative similar to the ones that passed last year in Idaho, Nebraska and Utah.
The Saturday decision would also appear to shut the door on previous income eligibility requests from Massachusetts and Arkansas, though state officials in Arkansas had not received official word as of Monday.
The Centers for Medicare and Medicaid Services explained the decision by saying that additional federal funding in Utah "would invite continued reliance on a broken and unsustainable 'Obamacare' system."
The rejection came as the administration argues in a separate federal court case that the entire Obama health law should be overturned as unconstitutional. Expanding coverage for low-income patients in Utah under the umbrella of the Affordable Care Act would have undercut the White House argument that the entire law needs to go.
The decision doesn't affect those already covered under the Medicaid program in Utah, where officials have rolled out a partial expansion by paying the standard 30% while the federal government pays the other 70%.
The waiver would have increased the federal share to 90% of the cost even as Utah covered at least 50,000 fewer people than required by the Obama health care law.
It wasn't immediately clear Monday whether the state would continue to seek other waivers for other restrictions, like capping enrollment.
Meanwhile, patients are watching and waiting.
Cancer survivor Christie Sorensen, 28, isn't strong enough to work full time, so she's had to forgo tests, oxygen and drugs recommended by her doctors because she can't afford them.
The total cost of private insurance is out of reach even with subsidies, but her $13,000 part-time income is too high to be eligible for Medicaid under the plan that was approved by Utah lawmakers. Even after it was rejected by the U.S. government, the future remains unclear.
"I'm not sure what more I can physically do other than wait and see how things play out," she said.