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Medicaid Expansion in Virginia/General Assembly Update

The Virginia General Assembly adjourned on March 8, 2014, but reconvened on March 24th for a special session to resolve legislators’ differences on Medicaid expansion, an issue currently attached to a $96 billion state budget bill.  The special session ended with no resolution.  Some members believe the Medicaid expansion issue attached to the budget is so contentious that a government shutdown is possible if a budget deal is not worked out by July 1st

Nationally, Medicaid provides health and medical services to over 60 million individuals and families with low incomes.  Although the Federal government and states jointly fund the program, each state administers its own Medicaid program under the oversight of the Federal government.  Beyond Federal minimum requirements, states have flexibility to establish their own income eligibility requirements and the types of services provided.

Virginia’s Current Medicaid Program -- In Virginia, over one million people receive Medicaid services at some point during the year, costing nearly $7 billion annually (about half of which is paid for by the Federal government).  In a 2013 report, the Virginia Department of Medical Assistance Services reports:  “Virginia’s Medicaid program has long been described as a very lean program with very strict eligibility criteria…”   Virginia does not provide coverage to childless adults, and the income eligibility limits cover parents at about 52% of the poverty level.  Only 15 other states have lower income eligibility limits.  Approximately 191,000 poor, uninsured, nonelderly adults are ineligible for Medicaid.  Compared to other states, Virginia ranks 24th in Medicaid spending per recipient and 48th in Medicaid spending per capita. 

Authority to Expand Virginia’s Medicaid Program -- The Patient Protection and Affordable Care Act (ACA), which became law in 2010, required states to expand Medicaid coverage to all adults, childless or not, with incomes up to 133% of the Federal poverty level ($14,856/year for an individual and $30,657/year for a family of four in 2012).  States that refused such expansion risked losing all their Federal Medicaid payments, including funds supporting their existing Medicaid programs as well as Federal monies to fund the expansion.  Under the ACA, the Federal government will cover 100% of the costs associated with the Medicaid expansion until 2016, when the Federal share phases down to 90% by 2020. 

Under a 2012 Supreme Court ruling (National Federation of Independent Business v. Sebelius), the U.S. Supreme Court found that the ACA’s Medicaid expansion provision was unconstitutional.  By threatening to withhold all Federal Medicaid monies including those for existing programs, states would have no choice but to expand their Medicaid programs.  To remedy this, the court limited the withholding of Federal monies only to funds tied directly to expansion.  Because states no longer feared losing Federal funds for their existing Medicaid programs, states could much more easily choose to expand their Medicaid programs or not.  Thus, Medicaid expansion became optional.

 To Expand or Not to Expand – In 2014, 27 states and the District of Columbia have opted to expand their Medicaid programs, and 19 states have not.  Virginia is among five states where there is currently an open debate about possible expansion.  With that said, Medicaid expansion in Virginia is not a sure thing, and its current consideration in the Virginia General Assembly is preventing passage of the state’s two year budget to fund government operations. 

During its 2013 session, the General Assembly tried to resolve the Medicaid expansion issue by creating a new legislative Medicaid Innovation and Reform Commission (MIRC) to “review, recommend and approve innovation and reform proposals affecting the Virginia Medicaid” program.  Although the Commission has studied expanding the state’s Medicaid program since June 2013, it has not yet recommended such an expansion.

The 2014 legislative session involves a divided Virginia General Assembly, with Republicans controlling the House of Delegates and Democrats controlling the Senate.  The state’s new Governor Terry McAuliffe, a Democrat, made Medicaid expansion “the centerpiece of his campaign and his top legislative priority.”   Once in office, Governor McAuliffe indicated that he would bypass the  Medicaid Innovation and Reform Commission to expand the state’s Medicaid program to an additional 400,000 Virginians if the Commission did not do so by March 2014.  Governor McAuliffe believes that, in addition to providing health insurance to Virginia’s uninsured, Medicaid expansion will create over 30,000 new jobs and bring $2 billion in Federal money to the state.

The General Assembly’s current debate about expanding Medicaid centers around the state’s two-year $96 billion budget bill, which must be approved prior to July 1, 2014 to avoid a government shutdown.  The original Senate and House budget plans differed significantly, with the Senate plan (S.B. 30) including a private option to extend Medicaid to about 250,000 uninsured Virginians (“Marketplace Virginia”) while the House plan (H.B. 30) included no such option.  In late February, both the Senate and House passed competing budget plans, which sent the spending bills and the Medicaid expansion issue to a conference committee to iron out the differences.

The conference committee will need to address the many opposing viewpoints on the Senate’s “Marketplace Virginia” plan. In mid-February, the House of Delegates voted 67-32 on a budget amendment to its own spending plan to oppose the Senate’s Medicaid expansion plan.  The Senate, on the other hand, voted 23-17 to support its budget plan, which included Medicaid expansion.  Outside of Virginia’s legislative branch, other organizations around the state remain divided.  Supporting expansion, for example, is Healthcare for All Virginians, a coalition of organizations that include AARP Virginia, Virginia AFL-CIO, some hospital systems, associations, and various Virginia local governments.  Within the state’s business community, support is divided, with the Virginia Chamber of Commerce supporting the Senate plan, and the National Federation of Independent Businesses (NFIB) opposing it.

What Happens Now – The Virginia General Assembly adjourned without a budget or resolution to the Medicaid expansion issue, and a special session also ended with no resolution.  All parties, within and outside the state legislature, want to avoid a possible July 1st government shutdown, but significant differences related to Medicaid expansion continue.