House Appropriations Committee hears briefing on FMAP and Medicaid funding risks for Vermont

Noel Langwell, Joint Fiscal Office, told the House Appropriations Committee on Feb. 28, 2025, that Federal Medical Assistance Percentage (FMAP) changes and related federal policy shifts could cost Vermont tens of millions of dollars and would affect hospitals, providers and state Medicaid programs.

The briefing explained FMAP mechanics and current Vermont figures, outlined how enhanced matching for Affordable Care Act expansion populations (the “childless new adult” group) and DSH (disproportionate share hospital) payments operate, and presented back-of-envelope scenarios for federal actions that would raise state general-fund costs.

Langwell said FMAP is the federal share of Medicaid financing and that Vermont’s fiscal 2024 total state appropriation was about $8.69 billion, with roughly $2.3 billion for Medicaid. ‘‘So 36% of our state budget are federal dollars,’’ he said, ‘‘and most of that is FMAP.’’ He described the standard match as roughly 58.8% federal / 41.2% state for Vermont’s base Medicaid services and said that, averaged across all programs in fiscal 2024, federal participation accounted for about 62% of Medicaid spending.

Why it matters: Medicaid is a large share of the state budget, and changes to matching rates or related federal rules would require either additional general-fund support or cuts to services or provider payments. Langwell and committee members flagged hospitals, the childless-adult expansion population and provider-tax limits as the primary pressure points.

Key numbers and program details discussed

• DSH payments: Vermont currently provides about $22.7 million per year in disproportionate share hospital (DSH) payments and is approximately $6.4 million below a stated federal allotment cap Langwell cited as ‘‘somewhere around $28,000,000.’’ Langwell described DSH as federal dollars passed through states to offset uncompensated care at safety-net hospitals.

• Provider tax: Langwell said hospitals pay roughly $209 million that flows into state revenues under current provider-tax arrangements; those funds historically flowed through a dedicated health fund and now go to the general fund and are used, in part, to draw federal matching dollars. He noted federal rules cap provider taxes (commonly described as 6% of net patient revenue) to prevent states from using unlimited provider taxes solely to increase federal match.

• FMAP and Medicaid scale: Langwell used fiscal 2024 figures in the briefing: total state appropriation about $8.69 billion, Medicaid roughly $2.3 billion gross. He repeated an oft-used rule of thumb from his office that a 1-percentage-point change in FMAP translates to about $19 million in state general-fund impact for Vermont.

• ACA expansion (‘‘childless new adults’’): Langwell said about 35,000 Vermonters are in the ACA expansion adult category, with roughly $225 million in gross expenses for that group. That population currently receives the enhanced match that moved to a 90% federal share (90/10) after initial transition years; Langwell estimated that if that enhanced match were removed and the population were moved to the regular match, the state general-fund cost could increase by roughly $65–$75 million annually.

Scenarios and federal policy changes the briefing flagged

Langwell outlined several policy levers in Washington that would raise state costs if implemented: ending enhanced match for expansion populations (moving 90/10 groups to the regular match); changing the FMAP formula (each percentage point change = ~$19 million state impact by Langwell’s estimate); lowering the statutory 50% FMAP floor for wealthier states; limiting or lowering the allowable provider-tax cap; and broader changes such as converting Medicaid to a per-capita cap or imposing work requirements or eligibility changes. He said the state has received compilations of potential federal proposals and noted they would likely be implemented as combinations rather than a single action.

Committee reaction and follow-up

Committee members pressed for more granular breakdowns. Members asked for (a) the dollar split of general fund vs. federal for the regular FMAP bucket, and (b) the total federal dollars flowing through all Medicaid sources. Langwell said department-level and program-level breakdowns exist but that assembling an exact statewide breakdown of every matching rate and administrative allocation would require additional work; he offered to obtain more specific totals from the Department for Children and Families or the Agency of Human Services when asked.

Langwell also explained that reducing DSH or lowering provider-tax caps would more directly harm hospitals than the state general fund — because DSH is targeted to hospital uncompensated care — but that rate or coverage cuts to Medicaid would have downstream effects on providers and services.

Quotes

"So DISH stands for disproportionate share hospitals. . . . these are payments that are intended to offset hospital uncompensated care costs and improve access for Medicaid and uninsured patients as well as the financial stability of safety net hospitals," Langwell said.

"For every dollar we spend in Medicaid, we get $2.43 of service," he told the committee when illustrating how federal match multiplies state dollars under the regular match rate.

Next steps and ending

Committee leadership asked Langwell for more detailed numbers on the makeup of federal participation and the state share under different matching categories; Langwell said he could provide those figures but needed to pull them from program-level budgets. The committee agreed to monitor federal action in mid-March and to reconvene with updated figures as Washington’s budget and potential reconciliation outcomes evolve.