Vermont officials warn federal proposals could cut Medicaid funding by millions

State Medicaid leaders told the House Appropriations Committee on April 9, 2025, that a package of federal proposals being discussed in Washington could reduce Vermont’s Medicaid funding by tens or hundreds of millions of dollars and would force state decisions on whether to backfill cuts, reduce services, or tighten eligibility.

Monica Ogilby, the state Medicaid director, and Ashley Berliner, director of Medicaid policy for the Agency of Human Services, outlined items in play in Congress and by federal agencies and gave dollar‑figure illustrations for Vermont during a roughly three‑hour briefing.

Why it matters: Medicaid pays for a large share of health care in Vermont and the state uses federal matching dollars to support hospitals and programs statewide. Changes in federal participation or authorities could shift costs to the state general fund, require program reductions or increase “churn” — residents repeatedly moving on and off coverage.

Ogilby said one of the clearest near‑term risks is a proposal to eliminate the enhanced federal medical assistance percentage, or FMAP, for the Affordable Care Act’s expansion (the “new adult” group). She said, “That 90% FMAP is substantially higher than our traditional FMAP rate,” and estimated losing the enhanced match would reduce federal funding to Vermont by about $80,000,000 a year for that population. Ogilby added that Vermont has about 65,000 people classified in the new adult group and that total program spending for that population is large (she said roughly $425,000,000 in benefits for that population, of which a portion now receives the enhanced match).

Berliner explained other funding levers under discussion in Washington. A one‑percentage‑point change in the regular FMAP percentage, she said, would change federal funding by roughly $18–$19 million for Vermont. She also described proposals to limit or reduce provider taxes — most of which in Vermont come from a hospital provider tax — and said one commonly discussed plan would cut a 6% cap to 3%. Berliner said losing roughly $104,000,000 in state provider‑tax match could require about $250,000,000 in gross Medicaid reductions if the state did not backfill the lost match.

Both officials flagged policy changes that would alter program rules rather than just funding. Work requirements — a policy that would require beneficiaries to verify employment or job training to remain enrolled — were described as likely to increase administrative burden, raise IT and staffing costs and increase churn. “It would require additional state staff to actually do the work to verify employment and income,” Berliner said, adding that work requirements are designed to reduce enrollment and thereby generate savings.

Per‑capita caps and block grants were described as structural changes that would fundamentally alter Medicaid. Berliner said per‑capita caps would replace the current open‑ended federal matching system with per‑member limits and estimated one illustrative cost to Vermont of about $1,000,000,000 over 10 years if less generous federal caps replaced Vermont’s existing waiver protections; she also cited an alternative national model that put the estimate as high as $2,000,000,000 over a decade.

Ogilby called rescinding or refusing to renew Section 1115 Global Commitment waivers “personally scary,” saying that loss of that waiver authority could reduce federal match to Vermont by roughly $320,000,000 a year and would “require an overhaul of the entire administrative structure of how we operate Medicaid in Vermont.” She said the administration has the authority to withdraw waivers administratively and that Vermont’s waiver renewal comes due in 2027.

Officials also noted other items under discussion in Washington, including possible reductions in disproportionate share hospital (DSH) payments (Berliner cited roughly $22,000,000 in DSH in recent years), limits on new health‑related social‑needs waiver authority (Vermont’s waiver allows up to six months of rent and medical respite beginning in 2026 but has no state match budget yet), and executive orders or CMS guidance that currently lack regulatory text and are not enforceable but could become consequential if codified.

Committee members pressed for details about who would be affected and how the state might respond. Ogilby listed four state levers the legislature or administration could use if federal funding fell: backfill with state dollars, reduce provider payment rates, reduce eligibility, or reduce optional services. She emphasized that many decisions would hinge on how Congress or CMS actions were implemented.

Where the numbers came from: Ogilby and Berliner said several figures were preliminary estimates or based on national modeling from sources such as the Kaiser Family Foundation and the Congressional Budget Office; they stressed that the federal picture was still evolving. “We don’t actually know what’s gonna happen yet,” Ogilby said. “Right now, it’s a lot of watching and waiting and modeling.”

The officials urged the legislature and the public to prepare for a range of possible outcomes while noting that some proposals, such as rescinding Section 1115 waivers or imposing per‑capita caps, would be especially disruptive if implemented.

Looking ahead: Ogilby told the committee Vermont is coordinating with other states that have similar waiver renewal timelines and is planning renewals in 2026–27 to try to preserve existing authorities. Both she and Berliner said they would return with more detailed modeling if federal proposals took clearer shape.

Ending: The briefing placed several high‑level federal options on the committee’s radar and framed next steps: monitoring federal action, sharpening state fiscal models, and considering whether and how to use limited state resources to backfill potential federal reductions.