Agency of Human Services seeks $29.1M in midyear budget adjustments, advances Medicaid prospective payments for hospitals

The Agency of Human Services on Jan. 21 told the Appropriations Committee it is requesting a $29,100,000 midyear budget adjustment to cover Medicaid caseload and utilization pressures, support hospital transformation work and provide one‑time relief and transition funding for providers.

For the record, Secretary Jenny Samuelson, secretary for the Agency of Human Services, said the agency’s total appropriation across all funds this fiscal year is about $5.4 billion, with roughly $1.3 billion in state general fund. “What we have seen, in this past year is that the caseload, as we predicted it is following predictions, but utilization of health care services is up,” Samuelson said, attributing the primary pressure to higher use of services rather than unexpected enrollment growth.

The budget adjustment package includes several major elements. Rich Donahue, chief financial officer for the Agency of Human Services, described a Medicaid consensus caseload and utilization projection that requires $83.5 million gross and $35.5 million in general fund for the current year; pharmacy rebates and other offsets reduce some of that pressure. Donahue also identified a $24.5 million gross ($10.4 million general fund) increase tied to nursing‑home utilization returning toward pre‑pandemic levels, and a $1.9 million gross need in the Department of Mental Health for private non‑medical institution payments.

The agency also described requests to support hospital transformation and payment reform. Samuelson said the administration signed an agreement with the Centers for Medicare & Medicaid Services on a multi‑payer global budget pilot known as the AHEAD model; the agreement contemplates phased adoption of hospital revenue under global budgets (10% in year one, 50% in year two and 85% by year three for Medicare revenue as described by agency staff). She said the state’s goal is to expand prospective payments beyond the hospitals already participating.

To accelerate that effort within Medicaid, AHS is requesting a one‑time $4,000,000 gross appropriation (about $1,700,000 general fund) to transition six additional hospitals from retrospective fee‑for‑service to prospective payments; the agency said five hospitals previously moved into prospective payments with earlier funding. “There are 14 hospitals in the state of Vermont. Hospitals need to choose to participate. And so this is bringing on an additional six,” said Maria Jacobowski of AHS during the discussion.

Samuelson also described a separate one‑time request of about $2,000,000 to contract for technical assistance and change‑management consultants to help hospitals — especially smaller hospitals — evaluate and implement sustainability and service‑line changes recommended under Act 167 and related studies. She said this funding would pay for consultants with deep clinical and financial hospital experience to work directly with hospitals and communities.

Other items in the package include: - A $3.2 million gross service‑level increase ($1.7 million general fund) to cover higher Agency of Digital Services (ADS) billings across AHS, driven in agency testimony by increased user counts and finalized invoices for services such as licensing. AHS characterized this as a bill‑true‑up rather than a permanent rate increase. - A proposed $10,000,000 sustainability fund (general fund) to provide extraordinary financial relief more broadly across health care organizations, including substance‑use and mental‑health residential treatment providers, federally qualified health centers and other primary‑care providers that submit sustainability plans. - Funding to support skilled‑nursing facilities that were described as on the verge of closure; the agency said it provides emergency relief tied to sustainability plans (specific per‑facility amounts were not listed in the committee overview). - Support for Planned Parenthood of Northern New England to help purchase medication inventories; the agency did not specify a dollar amount for that line in the overview.

Agency staff said certain offsets reduce net general fund need: a $13.1 million decrease in general fund for childcare financial aid because of uptake in enhanced subsidies, $3.9 million in general fund savings in the global commitment appropriation due to changes in attribution for childless adults who receive an enhanced FMAP rate, and a $1.9 million general‑fund carryforward from the prior fiscal year being applied to offset current year pressure.

Committee members asked for details and timing. Samuelson said the hospital transformation work is expected to proceed using an “agile” approach — short, medium and long term planning and iterative implementation — and that the agency expects to have major changes initiated and planning completed in parts by 2026, though ongoing collaboration with hospitals will continue. On the AHEAD model, she emphasized that broader multi‑payer participation requires insurer and hospital engagement and that some employers or self‑insured plans may remain outside the multi‑payer reach.

Several committee members asked to defer deeper questions about the AHEAD model and other transformation mechanics to a future, focused briefing that would include AHS health‑care reform staff and the Green Mountain Care Board. Samuelson said the agency and the board plan a deeper dive into Act 167, hospital transformation and the AHEAD model in the near future.

No formal committee votes or motions on the budget adjustment were recorded during the presentation. Agency staff said departmental representatives (Department of Vermont Health Access, Department of Mental Health, Department for Disabilities, Aging and Independent Living and others) planned to appear later for department‑level briefings.

The AHS overview and the figures described here were presented as a high‑level summary; staff said departments could provide line‑by‑line detail in subsequent presentations to the committee.