Department of Vermont Health Access requests midyear budget increase, $10M provider stabilization and pharmacy procurement after redetermination shortfalls

The Department of Vermont Health Access (DVHA) told the House Appropriations committee on Jan. 23 that it is asking for a midyear adjustment to its FY25 budget to cover higher-than-expected Medicaid costs per enrollee, a one-time $10 million provider stabilization fund, and initial funding to begin procurement of a new pharmacy benefit management system.

Daisy, Department staff, the agency’s presenter, said the agency’s administration line now projects $179,000,000 in spending authority after adjustments and that the administration request includes a $331,000 gross item to hire temporary staff “to help us clear the backlog of our agent blinded disabled population in the redetermination. We have a backlog within the vicinity of 1,500 still.”

The midyear program adjustment seeks approximately $83,500,000 in all funds across DVHA’s program lines, the presenter said, driven primarily by a higher cost per case than the agency projected after the federal unwinding and subsequent redeterminations. “The caseload projection stayed consistent with our expectations. It's the cost per case for the folks that are in our caseload that we got wrong last year,” Daisy said.

Why it matters: The requested increases reallocate both state general fund and federal Global Commitment funds and affect provider payments and planned procurements. Committee members pressed DVHA for detail about pharmacy impacts, provider relief criteria and the scope of the budget ask.

Pharmacy benefit procurement and Change Healthcare effects

DVHA said it will begin a multi-year procurement to replace its pharmacy benefit management system. The agency placed an initial technical-assistance request at $200,000 in general fund and $2,000,000 gross to start the RFP and procurement process. “We have to go out to procure a new pharmacy benefit management system…this is technical assistance to start that procurement process,” Daisy said.

Presenters and committee members also discussed residual effects from the February Change Healthcare cyberattack on pharmacy claims. Dr. Maria V. Mateo, MD, said claims timing and disrupted prior-authorization processes had a measurable but not fully quantified effect on pharmacy expenditures and rebate timing: “We continue to make payments to pharmacy on behalf of Medicaid patients based on their past experience…in that process, the functionality of our pharmacy system didn’t really come back and isn’t even now fully back.”

DVHA said the timing shift of manufacturer rebate billing created a one-time timing gap: rebates expected by the end of fiscal 2024 arrived later and will partly offset the program increase but are not a recurring savings.

Provider stabilization fund and other one-time items

DVHA described a new $10,000,000 one-time general fund line for provider stabilization, to be administered on a case-by-case basis by DVHA using outside accounting/financial reviewers to vet applications. The agency said $4,000,000 of previously proposed funding for substance-use-disorder (SUD) providers has been subsumed into this $10,000,000 pot.

Committee members asked how awards would be prioritized and whether the amount would be sufficient. Daisy said the program will reuse much of the prior application and review materials and that a third-party accounting firm will help vet applicants. She noted the fund is a fixed, one-time pot and acknowledged the challenge of allocating limited dollars among many providers.

Committee members cited prior examples. Daisy referenced past use of stabilization funds to bridge transitions, saying they had supported a “Franklin County Home Health Agency” transition and several federally qualified health centers (FQHCs) in earlier rounds.

Global payment pilot, ACO reconciliation and technical adjustments

DVHA said it is also adjusting one-time payments tied to a Global Payment Pilot Program and noted a $5,100,000 reconciliation tied to accountable care organization (ACO) reconciliations for 2023. The ACO reconciliation largely reflected payment-category true-ups tied to multi-year redetermination delays (for example, members reclassified by age or disability status after unwinding). Daisy described this as an artifact of the long pause in redeterminations through 2023; she said future reconciliations should be smaller once annual redeterminations resume.

Agency financial totals and legislative ask

DVHA staff walked legislators through the agency spreadsheet showing the incremental FY25 general fund ask of roughly $3,256,000 within DVHA’s budget lines and a larger all-funds increase when Global Commitment components held in the central office are included. The presenter said the total program increase DVHA is operating to accommodate is approximately $69,684,000 (all funds) flowing through the agency and that a larger portion of Global Commitment dollars—whose state and federal components are held in the central office—are not fully visible inside DVHA’s appropriation lines.

No formal votes or approvals were taken at the meeting; committee members said they would consider the adjustments when preparing recommendations for Appropriations.

Discussion items, next steps

Committee members asked DVHA to provide more detail on: - The procurement timetable and whether the incumbent could be rebid and remain the vendor; Daisy said the incumbent could bid but the RFP is good practice. - Criteria and application materials for the stabilization grants; Daisy said DVHA will provide prior financial templates and add a third-party reviewer. - The size and persistence of pharmacy cost effects tied to the Change Healthcare outage; DVHA said full quantification is ongoing.

The committee scheduled working time to draft recommendations to the Appropriations Committee.

Ending

DVHA staff closed the presentation after answering follow-up questions and the committee moved to a brief break before its service-committee work session.