The Arizona Supreme Court ruled Wednesday that a lawsuit challenging the legality of the state’s Medicaid expansion could proceed, dealing a setback to one of Gov. Jan Brewer’s signature initiatives less than a week before she leaves office.
Ms. Brewer was one of a few Republican governors who sought to expandMedicaid benefits at the state level, a crucial provision of President Obama’sfederal health care law.
Unable to garner enough support among Republican lawmakers, Ms. Brewer formed a coalition with Democrats in 2013 to push the law through a stormy special session in which members of her party angrily denounced the plan and proposed numerous amendments in an attempt to stall passage.
Since then, opponents have sought to undo the legislation through lawsuits and petition drives.
The state court’s unanimous decision Wednesday held that the method used to pay for the Medicaid expansion — an assessment placed on Arizona’s hospitals — could be challenged by the Goldwater Institute, a conservative public policy organization representing 36 Republican lawmakers who oppose the law.
The case was sent back to the lower court, the Maricopa County Superior Court, which had previously ruled that the lawmakers did not have the legal standing to sue.
If the court eventually determines that the hospital assessment is actually a tax, the state legislature would be required to approve it by a two-thirds majority instead of a simple majority.
That could spell trouble for the measure. The State Senate initially approved it by an 18-11 margin and the State House by a 33-to-27 vote.
The expansion was intended to offer health care benefits to about 350,000 residents who earn wages less than or only moderately more than the federal poverty level. There are about 250,000 people enrolled in the program, which will remain in place as the case plays out.
In a statement, Ms. Brewer said she was confident the legality of the hospital assessment, which is expected to raise about $250 million this budget year, would be upheld.
“Still, today’s ruling carries with it troubling consequences for future leaders by enabling our courts to referee legislative battles, and possibly opening a Pandora’s box for additional baseless, politically charged lawsuits,” she said in a statement.
Michael O’Neil, a longtime political analyst and pollster in Tempe, Ariz., said the Medicaid expansion would be an even more enduring aspect of Ms. Brewer’s legacy than the state’s sweeping anti-immigration measure, parts of which were struck down by the United States Supreme Court in 2012.
“She is a person of genuine conservative instincts,” Mr. O’Neil said, adding that the opportunity to expand Medicaid by using federal funds combined with the hospital assessment represented the pragmatism that has defined Ms. Brewer’s tenure.
Ms. Brewer, who could not run for re-election because of term limits, has had a rocky relationship with the state’s Republican Party and faced far more opposition while expanding Medicaid than other Republican governors who did the same, including Gov. Jack Dalrymple of North Dakota and Gov. Chris Christie of New Jersey.
Doug Ducey, the Republican state treasurer, was elected in November to succeed Ms. Brewer. A spokesman said that Mr. Ducey was reviewing the court’s ruling and would continue to consult with counsel on the best course of action. Mr. Ducey takes office Monday.
Christina Sandefur, a senior lawyer for the Goldwater Institute, said that the court’s decision on Wednesday could prove more important than the ultimate judicial ruling.
“This sets a clear precedent that state lawmakers have legal standing to defend their voting rights,” Ms. Sandefur said. “They have the right to go to court and to protect the integrity of the legislative process and the decisions they make on behalf of constituents.”
Representative Justin Olson, a Republican from Mesa who was one of the plaintiffs in the lawsuit, called the decision a significant victory.
“This is great for taxpayers, important for the integrity of our state Constitution, and now, the case can be decided on its merits instead of being thrown out on a question of standing,” he said.