Senate committee reviews bill to extend Medicaid coverage for long-term residential treatment for people with co-occurring disorders

The Senate Health and Welfare Committee on Feb. 6 reviewed S.36, a bill that would require the Agency of Human Services (AHS) to provide Medicaid coverage for medically necessary long-term residential treatment for beneficiaries with co-occurring substance use and mental-health disorders, with minimum stays of 30 days when medication for opioid use disorder (MOUD) can address the substance use disorder and 60 days when MOUD cannot successfully address it. The bill’s effective date is listed as July 1, 2025.

The bill matters because committee members said current payment and placement practices can create a “revolving door” in which patients leave treatment too soon and are readmitted soon after. Committee discussion focused on how Vermont’s Medicaid payment model — which AHS described as an episodic or bundled rate modeled on an average 14-day stay — affects facilities’ incentives and whether the episodic rate reflects clinical best practice.

“Katie McGlenn, Office of Legislative Counsel, said the bill adds a new section to Title 33, directing the agency to provide coverage for medically necessary long-term residential treatment to Medicaid beneficiaries with co-occurring substance use disorder and mental-health conditions,” Katie McGlenn said during the committee’s walkthrough of the draft. McGlenn noted the proposal requires that the treatment be prescribed by a health-care professional practicing within the scope of their license and that the residential program participate in Vermont’s Medicaid program.

Committee members cited an AHS email summarizing current practice: there is no fixed maximum length of stay, but there is also no additional reimbursement beyond the episodic payment for a single continuous stay. The email states the episodic rates were modeled on a roughly 14-day average stay and that members can be readmitted after three days and receive a new episodic payment if they relapse and require a new stay. In the committee’s paraphrase of that email, “the rate is based on the stay itself and not the number of days,” and facilities make the medical determination about when to discharge a patient.

Committee members raised practical and policy questions the bill does not yet answer: Which facilities qualify as “long-term residential treatment” providers for Medicaid? Which facilities accept Medicaid today, and which do not? How are clinical decisions about admission and discharge made (single clinician, treatment team, facility staff, or an outside prescriber)? Does the episodic rate reflect clinical best practice, or should the ratebuilding assumptions be revised? Several members warned that keeping more patients longer under the current episodic payment could financially disadvantage facilities if rates are not adjusted.

A person who spoke during the meeting recounted a personal example of a family member who left treatment and later returned to substance use; the speaker said the family member died after using fentanyl-laced opioids. The committee used the story to underscore the stakes of treatment-duration decisions.

Committee members asked AHS to provide additional information and testimony, including a list of long-term residential treatment facilities across the state and which accept Medicaid, specifics on how episodic rates were modeled, and clarification of who makes medical discharge decisions in facilities. The committee chair said staff would try to schedule AHS and other clinical witnesses for committee testimony as early as the following week to answer those questions.

What the bill would change

- Adds a new section to Title 33 (Medicaid chapter) requiring AHS to cover medically necessary long-term residential treatment for Medicaid beneficiaries with co-occurring substance use and mental-health conditions. - Sets minimum coverage periods: not less than 30 days when a beneficiary’s substance use disorder can be successfully addressed with MOUD and not less than 60 days when it cannot. - Retains clinical decisionmaking about discharge with the treating provider(s) and requires participating residential programs to be enrolled in Medicaid.

Next steps

The committee plans additional hearings and requested AHS provide a written summary and witnesses to explain rate-setting, identify Medicaid-participating facilities, and clarify clinical and operational practices. No formal vote on S.36 occurred at the Feb. 6 meeting.

For context: AHS uses an episodic (bundled) payment modeled on an average 14-day stay and allows readmission after three days with a new episodic payment; the bill would establish statutory minimum coverage lengths and uses the term MOUD rather than the older phrase “medication-assisted treatment.”