After a five-year battle, Virginia might finally be on the verge of expanding Medicaid coverage to hundreds of thousands of its poorest residents.

The state’s new Democratic governor, Ralph Northam, told me Friday evening that he was cautiously optimistic that an agreement to accept the Affordable Care Act’s expansion of Medicaid could be reached with his state’s lawmakers. The expansion had been at the center of a five-year fight between Northam’s predecessor, Democrat Terry McAuliffe, and the GOP-controlled state legislature.

But after Northam’s decisive victory in November with a campaign founded on Medicaid expansion, which also swept many new Democrats into the statehouse, that fight could finally end, Northam said. “I’m optimistic. I’m a the-glass-is-half-full person,” he told me at the National Governors Association meeting in Washington, D.C. “We’ve made a lot of progress. There’s still some work to do.”

Right now, state lawmakers are still technically at an impasse. The Virginia House passed a budget that did expand Medicaid but also instituted work requirements for some Medicaid beneficiaries, as the Washington Post reported. A number of Republicans, still a slim majority, joined with Democrats to approve that plan. The state’s Senate rejected Medicaid expansion, though, with Republican leaders claiming they couldn’t trust that the federal government would continue to pay 90 percent of the costs, as is stipulated under the ACA.

“There are utterances coming out of this [Trump] administration about significant adjustments that may take place in Medicaid reimbursements,” Senate Majority Leader Tommy Norment said. “What we have chosen to do is undertake a fiscally conservative and responsible approach.”

The two chambers have a few weeks to work out the differences and pass a final budget. Northam said he is working to reach some kind of compromise on Medicaid expansion, which was a cornerstone of his campaign.

The governor was noncommittal when I asked him if he would be able to support a work requirement — which has been pushed by Republicans but criticized by progressives — though he did say he did not want to punish people by taking away their health coverage.

“We certainly want to offer a carrot to people. We don’t want to penalize people... We want to encourage people to get back into the workforce rather than a stick where we penalize people,” he told me. “That would be the position I take as we move forward.”

That would seem to rule out the kind of harsher requirements approved by the Trump administration in Kentucky and Indiana, where some non-elderly, non-disabled Medicaid recipients could lose insurance if they fail to meet certain requirements for employment or job training.

What happens in Virginia will be closely watched as both a gauge of Democratic willingness to accept work requirements in exchange for Medicaid expansion and as a fresh test for the Trump administration. Though openly hostile to Obamacare and supportive of Republican plans last year to repeal the expansion, the White House has not yet been faced with a decision to approve a new state’s plan to expand Medicaid.

A plan like Virginia’s would likely require the state to file a waiver request with the administration; some Medicaid experts have questioned whether Trump officials would be willing to allow another state to expand the program.

Below is my conversation with Northam, lightly edited for clarity.

Dylan Scott

I saw that you said earlier today that you were close to reaching an agreement with the state legislature to expand Medicaid.

Ralph Northam

I’m optimistic. I’m a the-glass-is-half-full person. But this is something that we’ve been working on for five years now, to make sure that all Virginians have access to affordable and quality care. But also, as a business model, to bring those federal resources back to Virginia, so we can use them for things like the opioid crisis and mental health.

We started the session with some very good discussions, people from both sides of the aisle, in the House and the Senate. We’ve made a lot of progress. There’s still some work to do. Obviously, the House put it in their budget, the Senate didn’t. But we’ve got two and a half weeks where the two will be discussing their budgets.

We could be putting funding in higher education, K-12, giving law enforcement agents salaries that are competitive. There are consequences to limited resources. So by expanding health care and bringing those federal resources back to Virginia, it will be beneficial for our budget at the end of the day.

Dylan Scott

I know the House passed a plan with a Medicaid work requirement. Would you expect the final outcome of these talks to have that kind of a requirement?

Ralph Northam

I think a lot of it is in semantics. We certainly want to offer a carrot to people. We don’t want to penalize people. So we want to do everything we can to help people get back into the work force.

There are words like Medicaid expansion — that gets the attention of the Republicans. Work requirements — that gets the attention of the Democrats. Let’s stay away from some of that terminology and come up with a plan that’s in the best interest of Virginia. That’s what we’re working through, negotiating through right now. I think at the end of the day, it’ll be a plan that both sides of the aisle can be content with and will expand coverage for all Virginians.

Dylan Scott

So would you be willing to support a plan where people could lose coverage if they didn’t meet certain work or job training requirements?

Ralph Northam

As I say, we’re working through those negotiations right now. It’s a group from the Senate, from the House and from my office.

I would look at it as more of a carrot. We want to help people. We want to encourage people to get back into the workforce rather than a stick where we penalize people. That would be the position I take as we move forward.

Dylan Scott

Do you have any sense of how the Trump administration might respond? You would be the first state to propose a waiver to expand Medicaid since they took over. I talked to somebody yesterday who said they didn’t know that we could take it for granted that the administration would approve a Medicaid expansion plan. Do you have any concerns?

Ralph Northam

There have been areas that I have been able to work with the president on. We’ve had some great discussions with infrastructure. I had a discussion this afternoon regarding the opioid crisis that they want our help with and vice versa.

We have a plan that will be a state plan amendment and also a waiver. We are, to your question, gonna need cooperation from the federal level. The Republicans that I’m working with, they think they can have communications — as will I — to make sure that we can move forward and it doesn’t get hung up in Washington.