An expanded proposal to require Medicaid recipients to work or prepare themselves for employment passed the House Appropriations Committee on Friday with unanimous support as bipartisan talks accelerated over expanding health care coverage for hundreds of thousands of uninsured Virginians.

All 10 Democrats on the Republican-controlled committee voted to support the rewritten proposal by Del. Jason Miyares, R-Virginia Beach, now titled the Training, Employment and Opportunity Program.

House Bill 338 now includes nine exemptions for Medicaid recipients from requirements that they either have a job, enroll in educational or workforce training programs, take care of someone with chronic illness, or engage in community work or public service. It also allows the state to waive the work requirement in areas with unemployment rates at 150 percent or more of the state average.

Miyares acknowledged the pivotal role that Appropriations Chairman Chris Jones, R-Suffolk, played in producing a substitute bill that the patron said “greatly improved the legislation.”

The vote came hours after Gov. Ralph Northam publicly signaled his willingness to talk with House Republicans about a work or civic engagement requirement they have made a condition for supporting an expansion of Virginia’s Medicaid program under the Affordable Care Act. He confirmed he had met twice this week with House Speaker Kirk Cox to discuss expansion, including once with Jones.

“We still have more work to do, but I am willing to work with them on their priorities, particularly with respect to the training and education included in that bill,” Northam told the Richmond Times-Dispatch on Friday. “I think they are willing to work with us on ours as well, and we can find a way to get this done.”

Secretary of Health and Human Resources Daniel Carey stopped short of endorsing the revised Miyares bill, but praised the committee for its work in helping to advance talks on Medicaid expansion. “We look forward to analyzing the substitute bill more fully,” Carey said. “We appreciate the efforts. These talks are ongoing.”

Del. Mark Sickles, D-Fairfax, the second-ranking Democrat on the committee, said resolving the work issue is “probably the biggest hurdle to getting a (Medicaid expansion) proposal approved in the House.”

“I hope the Senate will take a close look at what we’re doing,” said Sickles, who gave a detailed speech on the House floor on Friday that touted the extensive reforms the state has made to its Medicaid program since the U.S. Supreme Court ruled in mid-2012 that the federal government could not force states to expand their programs under the Affordable Care Act as originally required.

Northam confirmed in an interview earlier this week that he also has talked about Medicaid expansion with Senate Majority Leader Tommy Norment, R-James City, who is co-chairman of the Senate Finance Committee. Northam declined to elaborate on those  discussions.

Norment also had no comment on his confidential talks with the governor, but suggested that legislative communication with the governor had improved considerably since Gov. Terry McAuliffe, a Democrat with a less diffident demeanor than Northam, left office last month.

“Important to have open dialogue seeking common ground on Virginia Health Reform and other significant policy issues,” the majority leader said in a text message. “It was an illusion under previous administration so Governor Northam’s willingness to listen rather than lecture is a welcomed atmospheric change.”

Cost of the work requirement

The Joint Legislative Audit and Review Commission issued a report on Friday that defused a confrontation between House Republicans and the governor over the fiscal impact of Miyares’ bill. The legislative watchdog disagreed with the two fiscal impact analyses of the bill by the Department of Planning and Budget, but only in regard to the cost of applying its requirements to people who would be newly covered by expanding Medicaid eligibility for the first time to childless adults.

Technically, the work, training and education requirements of the legislation would apply only to the current Medicaid population. JLARC agreed with the most recent state analysis that about 6,200 people would be affected by the requirements in the existing program.

“Most current Medicaid recipients would be exempt from the employment and community engagement requirement because they are children, pregnant women, elderly or disabled,” the JLARC report states. “The number of projected Medicaid expansion recipients who would be subject to the requirement is the key factor in the fiscal impact.”

JLARC used the experience of Kentucky and Indiana in trying to gauge the costs of a work requirement. Those costs would depend primarily on the level of case management by social workers in helping people find work or prepare for it, as well as the expense of information technology to administer the requirement and the attrition of potential Medicaid recipients who would remain uninsured rather than comply with the new rules.

The report estimated the impact to the state general fund at $6.4 million to $10.4 million in the first year, assuming the program expands on Oct. 1, and $14.6 million to $23.1 million in the second.

Appropriations analyst Susan Massart told the committee she estimates the costs at $7.5 million in the first year and $15.7 million in the second, based on the ranges provided by JLARC.

The last state fiscal analysis had estimated the cost of implementing the law at almost $100 million in the second year, but JLARC agreed with Appropriations officials that the estimate was greatly inflated by assuming that state and local governments would have to pay the full cost of employment support services.

“Leveraging Virginia’s existing workforce development programs would most likely enable Medicaid recipients to access employment services and supports, while minimizing the general fund impact because they are primarily federally funded,” the report states.

Sickles said after the vote, “Anything we spend to help people have a more productive life is going to be far outweighed by the savings from getting low-wage workers into a Medicaid managed-care organization for routine health care.”

Northam has said he does not support a work requirement for Medicaid recipients, but favors measures to help them seek work, along with training and education to develop their skills to fill available jobs.

A spokesman for Cox confirmed Friday that the speaker and governor “have had two productive conversations about Medicaid.”

“We are pleased the governor agrees that reforms are integral to this discussion,” spokesman Parker Slaybaugh said in a statement. “Speaker Cox has shared six key principles for the dialogue with Governor Northam and we look forward to continued conversations.”

GOP principles

Those six principles begin with the work requirements in Miyares’ bill, as well as requiring that Medicaid recipients share some of the costs of insurance premiums and copayments for treatment. The GOP principles also include further safeguards against fraud in the Medicaid program, including verification of recipients’ income and financial assets; a free-market approach to serving recipients through private insurance plans; and protection in case the federal government reduces its share of the expansion cost below 90 percent.

The principle that could represent the biggest challenge is a Republican requirement that the federal government approve reforms before the state accepts federal funds under the Affordable Care Act to pay the cost of expanding Medicaid eligibility to more than 300,000 Virginians who now have no health coverage.

“We cannot accept the promise of ‘money now’ and ‘reforms later,’ ”  the speaker’s office said in its statement of principles. “The reforms must be approved by the federal government prior to accepting money for newly eligible populations.”

Such a requirement could make it difficult for Virginia to include more than $3.2 billion in federal funds in the two-year state budget that McAuliffe proposed in December and the General Assembly money committees will act upon in just over a week.

The budget estimates savings to the state general fund of almost $422 million over the biennium by expanding the program Oct. 1, but that assumes private hospitals will pay about $307 million through a tax on inpatient revenues to pay the state’s share of the cost.

In his floor speech on Friday, Sickles reminded delegates that the state had carried out 44 changes to the program recommended by the now-defunct Medicaid Innovation and Reform Commission and 28 identified by two successive JLARC studies.

“We have done so much of the hard work, Mr. Speaker, we are ready,” Sickles concluded.

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Northam cracks open door on House concerns over work issue as Medicaid expansion talks advance