Key changes may bring steep financial losses and reduced flexibility for state health services
Staff report
Vermont’s Medicaid program could face significant restructuring and funding challenges under a series of federal policy proposals currently under discussion. Testifying before the House Health Care Committee on March 21, Ashley Berliner, director of Medicaid policy for the Agency of Human Services in Vermont, outlined how the proposed changes could disrupt services, reduce funding by hundreds of millions of dollars, and strain administrative resources.
High-stakes funding shifts
At the center of the potential changes is a move to reduce or cap federal contributions to state Medicaid programs. Among the most impactful proposals:
Reduction in expansion FMAP: A proposed cut in the federal match rate for Medicaid expansion enrollees from 90% to the state’s standard rate could result in an $80 million annual loss for Vermont.
Changes to FMAP calculation: Adjusting the formula used to determine federal match rates could cost the state around $18–19 million for every percentage point lost.
Limits on provider tax rates: Capping provider taxes at 3% (down from the current 6%) could eliminate $104 million in matching funds and potentially force up to $252 million in Medicaid service cuts unless the shortfall is covered elsewhere.
Some proposals could also impact who receives coverage and how
Work requirements: Imposing national or state-level work mandates for Medicaid enrollees would likely increase disenrollment and churn while adding high administrative costs.
Biannual eligibility checks: Shifting to twice-yearly checks from the current annual review would double the staff workload and likely increase the number of Vermonters losing coverage.
Per capita funding caps: Replacing open-ended federal funding with fixed per-enrollee caps could cost Vermont an estimated $1 billion over 10 years, limiting the state’s ability to respond to changing needs.
Loss of program flexibility
Several proposals threaten the unique structure and flexibility of Vermont’s Medicaid programs. A few include:
Rescinding 1115 waiver authority: Vermont’s Medicaid program currently operates under a federal waiver that allows a broad mix of services and coverage types. Eliminating this waiver could disrupt the state’s entire Medicaid infrastructure, resulting in a roughly $320 million loss.
Ban on coverage for gender-affirming care: Some proposals would prohibit federal Medicaid funding for gender-affirming services, placing Vermont in a difficult position given its mandate to provide this care. Costs would have to shift entirely to state funds.
Elimination of HRSN services: Removing the federal authority to provide rent and respite support through Medicaid’s Housing and Related Social Needs (HRSN) waivers would erase approximately $20.5 million in planned programming.
Vermont’s Medicaid program currently covers a wide range of individuals, including children, pregnant women, seniors, and people with disabilities. Optional services such as dental care, transportation, and hospice—often not required under federal rules—are also part of the state’s offerings. The state uses various waiver programs to reach additional vulnerable populations.
The Dept. of Vermont Health Access estimates it will know more about the federal government’s actions in May or June.
