The conferees planned to present the deal in House and Senate caucus meetings to see whether there is enough support for it in both chambers, the lawmakers said.
Democrats have vowed to defeat the transportation package unless the General Assembly adopts budget language that would make it easier to expand Medicaid under the federal Affordable Care Act.
A group of budget conferees have been trying to work out differences in House and Senate budget amendments related to Medicaid expansion.
Under the House bill, Medicaid could not be expanded unless Washington allowed Virginia to implement certain reforms to the way the program for the poor, disabled and elderly is run in the state. The House bill further specified that once those reforms were in place, the General Assembly would have to authorize expansion, likely requiring a special session.
The Senate bill also called for reforms, but it would have allowed state health officials to move ahead with expansion, without approval from the General Assembly, once they had been implemented.
The compromise worked out by budget conferees would allow a 10-member conference committee to authorize the expansion once the reforms are implemented, according to the two legislators.
Under the federal Affordable Care Act, states have the option to open their Medicaid programs to people with incomes up to 138 percent of the national poverty level — about $32,000 for a family of four — with the federal government paying the entire cost for the first three years. The federal share gradually declines to 90 percent.
Virginia would initially receive about $2 billion a year from Washington under the program. But some Republicans, including Gov. Robert F. McDonnell (R), have been skeptical that Washington will have the money to make good on that promise.
Disagreement over Medicaid threatened to derail not only the budget amendments, but an ambitious transportation funding package meant to raise about $880 million a year for Virginia roads, highway and transit.
Democrats on Thursday were threatening to withhold support for the transportation bill unless the budget amendments included language making it easier to expand Medicaid.
Shortly after news of a Medicaid deal started spreading through the Capitol Friday, the House voted to pass the transportation package.
But the spokesman for Gov. Robert F. McDonnell (R) said there was no connection.
“Transportation and Medicaid have absolutely nothing to do with each other,” spokesman Tucker Martin said. “They are completely separate and independent issues. And they are being dealt with as such.”