RICHMOND, Va. -

Governor Terry McAuliffe continued his push to expand Medicaid on Monday morning, proposing a two-year pilot project that would extend health insurance benefits to up to 400,000 Virginians.

With the House and Senate still at odds over Medicaid expansion, McAuliffe said his new proposal is "a balanced and pragmatic approach to closing the coverage gap."

During a briefing for lawmakers, lobbyists, state officials and reporters, the governor said he has a letter from federal officials saying the state can withdraw from the expanded program in two years without penalty.

"I am willing to compromise," McAuliffe told the audience. "I would like to see us do this permanently, but I am willing to stand here today and say let's try it for two years when it's a hundred percent paid for. Let's try it."

A leading Republican, Senator Tommy Norment, said he wouldn't describe the Governor's proposal as a "game-changer," but he said it might be the starting point for a meaningful discussion.

House Republicans are not expected to embrace the Governor's plan.

Because lawmakers failed to pass a budget during their regular session, McAuliffe has the rare opportunity to propose his own budget as a first-year governor.

Monday morning, he outlined priorities that include a two percent pay raise for state employees, teachers, university faculty, constitutional officers and other state-supported local employees.

-------------------

Gov. Terry McAuliffe is proposing a two-year pilot of an expanded Medicaid program, a suggestion he hopes will persuade Republicans to end an impasse over the state's budget.

McAuliffe announced Monday that the federal government had approved his plan for a pilot program. McAuliffe said the approval allows the state to try expanding Medicaid eligibility to 400,000 residents with no risk.

House Republicans oppose Medicaid expansion. The federal government has promised to fund the bulk of the expansion.

The fight over Medicaid has led to a budget stalemate and a special session that is set to start later Monday.