Department of Disabilities, Aging and Independent Living officials told the House Appropriations Committee on Jan. 18 that most of their budget adjustment request addresses rising Medicaid nursing-home bed-day costs, a request for extraordinary financial relief for several facilities, and a delayed cost settlement with the Vermont Veterans’ Home.

"Our mission is to make Vermont the best state in the nation in which to grow older, live with a disability with dignity, respect, and independence," Commissioner Dr. Rowan Jill Bowen said in opening remarks.

Bowen and agency staff summarized the department’s divisions and then walked the committee through the Budget Adjustment Act (BAA) items for the department. Agency witnesses described three large categories driving the request: (1) higher nursing-home Medicaid bed-day costs tied to rising utilization and higher acuity; (2) requests for extraordinary financial relief (EFR) to keep some nursing facilities solvent this fiscal year; and (3) a cost-settlement payment the state must make to the Vermont Veterans’ Home for a prior fiscal year.

DAIL officials told legislators the single-largest line in the department’s BAA related to nursing-home Medicaid bed-day pressures, which they quantified as roughly $24.5 million to address inflationary and utilization-related costs. Agency witnesses said those pressures reflect two trends: a return to pre-pandemic nursing-home utilization levels and higher clinical acuity that increases per-patient costs. Agency staff said that change in acuity is partly driven by a federal shift in how nursing-home case mix and payment are measured (the Patient-Driven Payment Model, or PDPM), which results in a higher payment level for many residents.

The department also requested funding to cover extraordinary financial relief (EFR) for nursing facilities, which agency staff said this fiscal year is roughly $21 million. Agency witnesses told the committee that about a third of Vermont’s licensed nursing facilities have qualified for EFR this year — a figure the agency estimated at about 10 facilities, noting rough counts and that the number is approximate. DAIL staff said EFR is a stringent, short-term mechanism intended for providers that otherwise would likely be unable to meet operating obligations.

Committee members asked whether rebasing the nursing-home rate-setting system will reduce the need for EFR. Agency staff said the next rebasing — which will use 2023 calendar-year costs rather than older, pandemic-era years — should better reflect current costs and therefore materially reduce future reliance on EFR, although it may not eliminate all need for short-term relief.

Committee members pressed the agency on the mechanics and cash flow of the Veterans’ Home settlement. DAIL staff described the Veterans’ Home settlement as an annual cost-settlement payment that reconciles actual costs against prior-year rates; the settlement in question covers fiscal-year 2023 costs and therefore appears in this adjustment cycle because of the lag in cost reporting and rate-setting. Witnesses said the department treats that settlement as a recurring, known administrative process, but that the settlement amount and timing have historically led to large one-time BAA requests rather than building the expected amounts into the Veterans’ Home base budget.

The department also proposed smaller, program-specific coding and collective-bargaining items. DAIL described a roughly $1.0 million, budget-neutral internal coding change for the HireAbility program required by a federal audit: expenditures that had been coded to grants will be recoded to an administrative appropriation to meet federal accounting requirements. Developmental services staff told the committee they are also seeking about $1.9 million connected to a recently negotiated collective-bargaining agreement for independent direct-care workers (the statute-mandated bargaining for those workers), which the agency said includes roughly $1.0 million in negotiated bonuses and higher minimum rates to retain and recruit workers who are usually hired by service recipients and not by the state.

Committee members and agency witnesses discussed several related capacity and workforce issues. Agency staff said home- and community-based services utilization remains the majority of long-term care placements and that those programs grew during the pandemic; nursing-home utilization fell during the pandemic and is returning toward pre-pandemic levels. The agency noted specific pressures including high costs for agency/traveling nurses, a heavy reliance on licensed nursing assistants at nursing facilities, and recruitment challenges for shared-living and other residential providers.

Legislators asked for clarification on several point estimates provided in testimony (for example, the number of facilities receiving EFR and exact settlement figures for the Veterans’ Home). Agency staff noted some numbers were approximate and offered to supply more detailed documentation to the committee.

The committee chair also reminded members of the BAA process timeline: the committee will hold a straw poll on Jan. 31, JFO staff will perform follow-up calculations, and the committee is scheduled to vote out its final BAA recommendation during the first week of February, with floor action to follow that week.

No formal committee vote on any item occurred during this hearing; the testimony was presented for the committee’s consideration and questions.

The agency said it will return to the committee with more specific numbers and documentation, including Veterans’ Home settlement details and the expected fiscal impact of the upcoming rebasing on nursing-home rates. The committee will use those materials as it prepares the Jan. 31 straw poll and subsequent committee vote.