Vermont health and human services officials told the Senate Health & Welfare Committee on Jan. 9 that a federal budget reconciliation law known in the briefing as HR 1 will bring immediate and longer-term changes to Medicaid and marketplace programs that the state must implement over the next three to five years.

The presentation by Jill Naza Olson, Medicaid and Health Systems Director at the Vermont Agency of Human Services, Addie Stremelow, Deputy Commissioner at the Department of Vermont Health Access, and Ashley Berliner, Director of Medicaid Policy, focused on four major areas: a one-year federal prohibition on Medicaid reimbursements to Planned Parenthood; limits and phased reductions to hospital provider taxes; caps and reductions for state-directed payments; and new cost-sharing, redetermination and work-requirement rules affecting the Medicaid expansion population.

Officials said the Planned Parenthood provision took effect on 07/04/2025 and bars Medicaid reimbursement to Planned Parenthood-like entities through 07/03/2026. Ashley Berliner said the state expects about $1.1 million in gross Planned Parenthood Medicaid claims for 2025–26, representing roughly $600,000 in lost federal match, and that "Planned Parenthood Medicaid claims are being paid today by 100% state general fund dollars." Berliner added, "We are sticking with 100% state funding until which time the courts have fully settled on the decision so that we don't have to keep changing our systems and have financial exposure if and when ultimately federal prohibition stands." The presenters said Vermont will seek federal reimbursement retroactively if courts restore federal funding.

The law also forbids creation of new provider taxes and phases down the allowable hospital provider-tax cap from 6% to 3.5% beginning in 2027, with a 0.5 percentage-point reduction per year through 2032. Berliner estimated a 0.5% reduction in Vermont hospital provider taxes would lower general-fund revenue by about $18 million a year and about $87 million over five years in today's dollars.

On state-directed payments, HR 1 caps new payments at 100% of Medicare rates and requires reductions starting in 2028 for any existing state-directed payments above Medicare. Vermont officials said the state has two CMS-recognized state-directed payments (medical home and community health team payments) that exceed Medicare rates; staff are reviewing where statutory or contract language may need adjustment to remain compliant while preserving policy goals.

The bill also changes eligibility administration. Addie Stremelow said one provision effective 10/01/2026 will limit Medicaid eligibility for some lawfully present noncitizens, and the state is still determining the number affected: "We think it's in the hundreds, but it's difficult to identify," she said. Another change shortens redetermination intervals for the Medicaid expansion "new adult" population to six months (effective 01/01/2027). The agency reported about 55,000 enrollees in that group and estimated roughly a 30% increase in eligibility-processing workload; officials have proposed additional staffing and resources to handle the change.

A major operational shift will be new community-engagement (work) requirements for the same expansion population, effective 01/01/2027. Stremelow described a requirement that most members demonstrate 80 hours per month of work, community service or education, with carve-outs for pregnant people, the medically frail and certain caregivers. Staff estimated the requirement would create additional verification work for roughly 30,000 members and warned that validating community service and education—where no ready data sources exist—will be administratively challenging.

Officials said some implementation funding is available: the briefing cited a government-efficiency grant of about $1.9 million–$2.0 million for initial work and noted the state can seek enhanced federal administrative match through an advanced planning document process for longer-term IT and reporting investments.

Committee members asked about the risk of coverage losses, the potential for increased uncompensated care and where the state can exercise flexibility. Presenters emphasized outreach to beneficiaries, assisters and community partners and said the agency's guiding principle is to mitigate coverage loss while meeting federal deadlines. They pledged ongoing updates to the committee as rules and federal guidance arrive.

The committee did not take formal votes on these items during the briefing; officials asked for continued oversight and indicated they will return with more detailed technical briefings on provider taxes and other implementation issues.

The agency officials' next steps include finishing rule revisions, deploying the implementation grant funds, completing IT planning and working with CMS on regulatory guidance. The committee requested periodic written updates and additional question-and-answer briefings as implementation proceeds.