Vermont Health Access Seeks Major Midyear Budget Adjustment as Medicaid Redeterminations Continue

The Department of Vermont Health Access asked the Senate Committee on Appropriations on Jan. 23 for a midyear budget adjustment totaling roughly $1,250,000,000 across its core appropriation lines, citing updated caseload and utilization forecasts, technical corrections and one-time timing issues after a pharmacy claims outage.

The request, presented by Deshaun Gross, principal at the Department of Vermont Health Access, and Stephanie Barrett, financial director, includes a $175,000,000 net change in the department's administration line and a program-level adjustment of just over $1,000,000,000. "We have about 1,500 cases left of age of blind and disabled caseload that has not been fully redetermined yet," Gross said, describing a short-term need for temporary staff to clear redeterminations without disrupting routine operations.

Why it matters: Medicaid is an entitlement program and the department said it needs adjusted spending authority to continue paying providers and maintain program operations. The largest driver is a consensus caseload-and-utilization forecast that the department and its budget partners update periodically; revised utilization estimates and reconciliation payments to accountable care arrangements also contributed.

Officials told the committee that in the administration budget they are requesting temporary staffing to complete redeterminations, amendments and technical adjustments to the MMIS (Medicaid Management Information System) contracts, and funding for technical assistance as the department prepares for a future pharmacy benefit manager (PBM) procurement. Barrett said the PBM procurement request will fund scoping work and development of an RFP; she described the $2,000,000 (of which $200,000 general fund was referenced for the current year) as capacity-building money to develop the procurement over several years. "This is very early stage of the procurement process. We have to actually develop the RFP, and everything that's involved in that," Barrett said.

On operating lines the department is also correcting an overstatement of federal spending authority, a $8,000,000 downward adjustment to federal funds described as a timing/rightsizing correction. Gross said the federal funds had been left in the base in error when one-time general funds had originally supported a prior-year item.

The program-level increase — just over $1,000,000,070 — is split across three appropriation lines because of accounting rules tied to the Medicaid waiver (global commitment), state-only programs and other items not in the waiver such as DSH (disproportionate share hospital) payments and CHIP. Gross said the "caseloading utilization adjustment" reflects a consensus forecast adopted by the emergency board and updated with more recent quarters of experience; that process is the main driver of the large increase.

Officials also described a one-time offset arising from the February Change Healthcare cyber outage. Change Healthcare delayed pharmacy rebate invoicing; those rebate receipts arrived later than expected and partially offset the department's midyear ask when invoicing resumed in July–September. Gross called that rebate recovery "one time in nature" and said it reduced the net midyear ask.

Additional program components cited: - Accountable Care Organization reconciliation: the department said reconciliations for attributed lives and cost of care for calendar-year 2023 are largely complete and that an overhang related to redeterminations increased current-year reconciliation payouts compared with prior expectations. - Global Payment Program pilot: last year five hospitals opted into a pilot to prospectively pay an uncaptured portion of Medicaid claims; the department is requesting $4,000,000 one-time to expand participation and to cover tail claims accuracy after reviewing actual claims experience. - Provider stabilization grant pool: the administration recommends lodging a $10,000,000 one-time general fund appropriation in DVHA to support stabilization grants for certain provider types (substance use treatment providers, primary care, mental health providers and others). Gross said the department would use external accounting support to vet requests and that the fund would be finite and administered case-by-case.

Committee members asked about the relationship between Medicaid adjustments and private insurer solvency, and Gross said the DVHA request reflects Medicaid program operations and caseloads, not the broader dynamics of commercial insurers. Committee members also asked whether the department could stop paying providers if spending authority were not adjusted; Gross said the department cannot spend money that is not appropriated and that, in a hypothetical shortfall, payments to providers would stop.

The department did not present a formal vote to the committee during this session. Officials said some requested items are technical corrections or will return in subsequent budget materials; the PBM procurement scoping and provider stabilization fund were described as items that will appear again for committee review.

The department provided committee members an "ups and downs" spreadsheet and a narrative. Gross said the department's caseload projections have come into closer alignment with actuals compared with past forecasting cycles but that utilization increases after redetermination had driven the midyear ask. "We were hopeful that the trend looks right now that it's flattening," Gross said of utilization trends, while noting mixed signals in commercial markets.

Ending: DVHA officials said they will return with additional documentation and that several elements of the request are one-time or technical in nature. The committee did not take a formal recorded vote on the items during the hearing; members asked for supplemental detail on several line items and for continued updates as the department finalizes rebate reconciliations and the PBM procurement timeline.