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Virginia expands health coverage for 25,000; Medicaid expansion stalled

No, Virginia, this isn't Medicaid expansion—but it's a little something.

Faced with a Virginia legislature that refuses to expand Medicaid benefits to about 400,000 poor adults, Gov. Terry McAuliffe, a Democrat, on Monday moved to put an extra 25,000 uninsured people on state-sponsored health coverage.

Terry McAuliffe
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Terry McAuliffe

McAuliffe's plan, included in the report "A Healthy Virginia," will cover about 20,000 people with serious mental illnesses, and 5,000 children of low-income state workers. The governor was able to extend coverage to those new people without the legislature's consent by issuing several emergency regulations and an executive order.

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McAuliffe's program will cover a small fraction of the 400,000 poor adults who currently are uninsured and barred from receiving Medicaid benefits.

Virginia is one of 23 states that have not embraced the Obamacare program that allows nearly all adults who earn up to $15,521 to qualify for Medicaid, the joint federal-state health coverage program. McAuliffe in June failed to get his state's legislature to pass Medicaid expansion.

It is not clear that he will have better luck with legislators during the next session, although the governor 's health secretary on Monday reiterated the need for expanded benefits as he outlined the new coverage for the 25,000 people.

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"These initiatives are no substitute for Medicaid expansion," wrote the health secretary, Dr. William Hazel Jr. "The need in our Commonwealth is great. Hundreds of thousands of our own citizens will continue to go without access to affordable health care until we close the coverage gap. This report introduces the initial critical steps that we can take to increase coverage, but it is only the beginning."

Republicans in the state's legislature, like their party counterparts in other nonexpansion states, have opposed extending benefits to more poor adults in part because of stated fears that the federal government ultimately will renege on its promises to pay the lion's share of the costs of the newly eligible.

For the first three years of expansion, the federal government is footing 100 percent of the costs, and that share will decrease over time to 90 percent of costs.

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About 190,000 adults in Virginia fall into a "coverage gap," where they would qualify for coverage under expanded Medicaid, but earn too little to qualify for subsidies to buy private Obamacare insurance, according to Kaiser Family Foundation estimates.

McAuliffe's plan can be read here.

By CNBC's Dan Mangan