The expansion of Virginia’s Medicaid program became one of the most contentious issues that the General Assembly debated in the final hours of the 2013 Session.

Governor Bob McDonnell had sent a letter to chief budget negotiators that said he would oppose any language in the budget that authorized the expansion of Medicaid unless and until “major reforms are authorized and completed, and until we receive guarantees that the federal government's promises to the states can be kept without increasing the immoral national debt.” Fearing the Republican dominated Virginia House of Delegates would oppose Medicaid expansion after receiving this letter, Senate Democrats threatened to oppose the Governor’s and House of Delegates’ transportation funding package, the Governor’s primary legislative goal for the 2013 Session, if the House of Delegates and Governor opposed the inclusion of language in the budget to receive initial funding from the federal government to expand Medicaid and reform the program.  

In the end, the two chambers created compromise language that created a ten member joint legislative Commission (consisting of five Senators and five Delegates), the “Medicaid Innovation and Reform Commission.” This Commission will be responsible for identifying and seeking federal approval for (if necessary) reforms to Virginia’s existing Medicaid program that will control costs, link payment and reimbursement to quality and cost containment outcomes and develop a commercial insurance-like benefit that includes cost sharing, among many other reform proposals. The full list of proposed ideas for reforms and respective phases for reform can be found here: 9e00349982/1c6d29fff614c86e85257b1b00756af1?OpenDocument.

Any savings derived from the reform measures are to be dedicated to the newly created “Health Reform and Innovation Fund.” Beginning in 2015, any projected savings (from approved reform measures) shall be reflected in reduced appropriations to the affected agencies and deposited into the Fund to be used to pay for the costs the state will incur as federal financial support begins to decrease.

If at any time the expected financial support for expansion falls, the Department of Medical Assistance Services (DMAS) is authorized to disenroll and eliminate coverage for the Medicaid expansion population at the direction of the Commission.  

While Governor McDonnell wrote a letter to Senate Democrats indicating his support for the concept of this Commission and its efforts to create reforms, it is still possible that he could veto or amend this language at the reconvened legislative session scheduled for April 3, 2013. On March 5, Governor McDonnell issued a press release to clarify that, despite “some media outlets and elected officials labeling [the language included in the final budget] as an approval of Medicaid expansion in Virginia, this is absolutely incorrect.” The Governor’s release stated that he sent a letter to the United States Secretary of Health and Human Services explaining that the language in the budget places a firewall against expansion consideration, unless real, sustainable cost saving reforms are implemented at the state and federal levels. He went on to say that several members of the newly appointed Commission have expressed deep concerns about expansion and that his office is currently reviewing the budget language to see what changes may be necessary during the reconvened veto session. In his letter to Secretary Sebelius, the Governor included tenets of Medicaid reform that must be developed and/or approved by the Centers for Medicare and Medicaid Services in order to ensure his support of Medicaid expansion. Those tenets include:

  • The delivery of Medicaid services through a market–based delivery system
  • Reasonable assurance from the federal government that Virginia Medicaid expansion will not contribute to a future increase in the national debt
  • CMS granting a §1115 Waiver to allow Virginia to implement Medicaid payment and delivery reforms
  • Greater flexibility beyond what is currently allowed under federal law to implement cost sharing for services provided to Medicaid recipients and the ability to require recipients to participate in mandatory wellness and preventative services
  • Flexibility around the requirement that Virginia provide all essential health benefits and mandatory services
  • Buy-in from stakeholders to design, engage in and implement cost savings strategies  

Also, the Attorney General could still issue an opinion that the language is unconstitutional in some way, as he attempted to do in the final hours of the negotiations. The Attorney General’s opinion was disregarded as changes to the negotiated language negated his argument that this Commission could not appropriate funds, as it is not permitted to do now. The Commission may only declare that states funds cannot be used. Members of the General Assembly have publicly said that they are hiring counsel to determine if the budget language is legal.  

Finally, recall that the authorization of Medicaid expansion is in the hands of the appointed members of the Commission. The House members include the following: Delegate Jimmie Massie (R- Henrico), Delegate Bev Sherwood (R- Winchester), Delegate John O’Bannon (R- Henrico) and Delegate Johnny Joannou (DNorfolk). The members from the Senate have not yet been named. It will take a vote of three of the five members from each Chamber to approve the expansion and reform of Medicaid. Convincing the members of the Commission to move forward with expansion will be challenging, as they will be fearful of the possibility of the state having to pay for expansion if the federal government’s financial support decreases in the initial years and/or the expected savings from reform are not projected to cover the potential costs of expansion, but the right proposals that prove real savings can be achieved can propel the group to continue to move forward. In addition, all members of the House of Delegates are facing re-election in November. The Commission members from the House will likely consider how their actions might affect their own, and also other House members’, campaigns for re-election, as perceived support for Medicaid expansion could become a significant campaign issue. Governor McDonnell’s term also ends in January. Thus, the new Governor elected in November will also have the opportunity to amend this budget language if expansion is not approved and implemented by the Commission before the start of the next legislative session.