DIVA outlines FY2026 Medicaid budget needs, including reentry case managers and ACO bridge funding

DIVA officials presented the department's FY2026 budget request on Feb. 25, describing personnel additions, program annualizations and several adjustments to Medicaid spending authority.

The department told the committee the administration budget bottom line is $182.2 million and highlighted staffing increases tied to pay-act rollouts and fringe costs. "We recently completed the post pandemic Medicaid renewal restart period with a 75% enrollment retention rates," said Stephanie Barrett, financial director for DIVA. Barrett said the staffing and fringe increases make up the majority of the change in the administration budget and identified one new line item: funding to add eight Vermont care coordination case management positions tied to a justice reentry initiative.

Barrett said the eight case management positions to support the Vermont care coordination initiative unit are an expansion tied to a justice reentry program that will begin in January 2026. The budget shows $924,000 associated with those positions in the personal service line; other personal-service and benefit adjustments in the administration budget total about $5.6 million (gross) and about $2.5 million in general fund.

The department also described program-level changes. DIVA reported a $46 million caseload-and-utilization adjustment in its primary Medicaid (global commitment) appropriation; across all three Medicaid-related appropriations the department said the total adjustment is about $51 million. Barrett attributed most of the change to utilization (cost per case) rather than caseload and said some of the variance traces to the post-pandemic unwinding process and midyear forecast changes.

DIVA described other notable line items: a partial-year cost estimate for the Medicare savings plan expansion scheduled to begin Jan. 1, 2026; annualization of a 15-bed psychiatric residential treatment facility (a partial-year amount in the current budget); and several rate changes, including hospice rates and the Medicare economic index adjustments for federally qualified health centers and rural health clinics.

Barrett said the department executed a contract with EDM Health Network in 2024 to expand participation in a comprehensive pain program, is engaged in major IT projects (an integrated eligibility enrollment program with a design and development plan running from 2026 to 2030), and continues to maintain a risk-assessment process for Medicaid. She also noted pharmacy rebate volatility and federal-level unknowns as key budget risks.

Officials described several accounting and one-time adjustments the committee should note: a proposed $8 million reduction in federal spending authority to correct an over-appropriation embedded in the base, an annualized $520,000 estimate if ambulance payments were adjusted to Medicare levels, and a $7.2 million increase in global-commitment spending authority for graduate medical education that the department said is matched by the university as an intergovernmental transfer (raising the total to $65.6 million; Barrett said the university provides the match).

The governor's recommendation included a one-time $10.8 million appropriation to bridge the expected gap in funding for SASH and Blueprint programs in fiscal year 2026 if the current ACO successor is not in operation. Barrett explained that, while those funds flowed through the ACO in prior years, the base budget retains those underlying costs and the bridge appropriation would cover the programs until another mechanism is in place.

Barrett also summarized long-standing obligations: a clawback tied to Part D calculations that the department estimates at roughly $47 million and which the department pays from general fund, and adjustments tied to premium-assistance and cost-sharing programs that have shifted with exchange plan selection.

Committee members asked for additional baseline details on the case-management expansion and on how many people will enroll in the Medicare savings plan after the Jan. 2026 turn-on; Barrett said those enrollment details will become clearer later in the year as the department observes trends. The department offered to provide additional documents and line-by-line information upon request.

The presentation closed with staff offering to follow up on technical questions and with no formal votes taken during the session.