The Spitzer administration is likely to press ahead with its plan to extend subsidized health care coverage to children in families earning more than $80,000 a year, sources said, despite President Bush’s veto of a bill that would have had the federal government pay for such coverage with an increase in the federal tax on cigarettes.

Facing an uphill legal battle to force the Bush administration to allow New York to provide subsidized health care to children in families with incomes of up to four times the federal poverty level, Governor Spitzer is signaling that he intends to expand coverage even without federal assistance.

In recent weeks, the Spitzer administration has moved closer to the position that it would rather foot the bill itself than wait out a legal and appeal process that may not even succeed. Hopes that Congress would come to the rescue have faded, with Mr. Bush successfully defeating attempts by federal lawmakers to expand the federal State Children’s Health Insurance Program and ease eligibility requirements.

Mr. Spitzer is now leaning toward having New York pay its own way, a move that many health care advocates in the state have strongly urged.

The loss of federal support would cost New York $25 million to $30 million in the first year — money that would likely come out of other parts of the health care budget. Albany is contending with a more than $4 billion deficit.

“It’s under consideration because we believe the expansion is absolutely critical to the governor’s efforts to reach every child in this state,” Mr. Spitzer’s Medicaid director, Deborah Bachrach, said in an interview. “Our backs are against the wall because the federal government and Congress haven’t been able to act.”

The chairman of the Assembly’s health committee, Richard Gottfried, a Democrat of Manhattan, said he would “favor New York picking up the tab,” saying, “While I think it’s wrong for the federal government to be refusing to provide matching funding, I think it makes sense for New York to do the job even without the” money.

Still, Mr. Gottfried said, the choice isn’t simple. “We’re going into a budget year where there will be considerable cuts in Medicaid, so there is a careful balancing that the governor needs to think about.”

A decision by New York to assume the financial burden of providing subsidized insurance to more children would be yet another indication that the most aggressive effort underway to achieve universal health insurance coverage in America is taking place in statehouses rather than in Washington.

One of several states pursuing universal health insurance coverage, New York is starting with the state’s roughly 400,000 uninsured children.

Mr. Spitzer in April signed legislation that sought to raise the income cap of the program to 400% of the poverty level from 250%, extending subsidized coverage to an additional 70,000 children in New York. Under the plan, a family of four with income up to $82,600 would be eligible to apply for discounted premiums.

The Spitzer administration had originally budgeted on the federal government paying for 65% of the costs to provide subsidized premiums for children in families with incomes above the existing limits.

Taking the Spitzer administration by surprise, the Centers for Medicare and Medicaid Services in August announced that it would impose new stricter requirements for federal aid designed to ensure that public coverage did not supplant private coverage.

CMS rejected New York’s expansion proposal.

For a Spitzer administration roiled by investigations and struggling to push its agenda through the Legislature, the denial of the expansion was a setback.

Mr. Spitzer staged numerous press conferences with other Democrats denouncing the Bush administration’s policy and urging Congress to pass an extension of the 10-year-old Schip program that gave states more power to set their own income caps.

The governor seemed to take a hard-line stance. “If they do not grant us this waiver, if they continue to be obdurate, continue to throw poison after poison pill, continue to say to us, ‘Don’t worry about it, there’s an emergency room available for those kids,’ we will sue CMS,” Mr. Spitzer said at one of the press conferences.

The Spitzer administration’s legal challenge against the Bush administration is pending in federal court. CMS is scheduled to hold a hearing in February to consider New York’s appeal.

President Bush, meanwhile, successfully blocked attempts by Congress to expand Schip, twice vetoing legislation that would have allowed New York to raise the income cap to at least 300%.

“It’s clear that the Bush administration is going to hold off for 12 months,” the legislative counsel of Housing Works, an AIDS advocacy group, Michael Kink, said.