House Human Services urged to restore surprise cut to residential care Medicaid rate; JFO estimates $1.07 million fix
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Summary
Presenters told the committee that implementation of a rate study produced an unexpected 33–35% cut to ERC tier 1 reimbursement; the Joint Fiscal Office estimated $1,071,550 would be required to restore the rate, and committee staff were asked to draft BAA language.
Helen Laban, executive director of the Vermont Health Care Association, told the House Human Services committee that implementation of a Medicaid "enhanced residential care" (ERC) rate structure produced an unexpected and substantial cut to ERC tier 1 payments that took effect July 1.
"It was an unpleasant surprise," Laban said, describing tier 1 cuts of roughly 33–35 percent in some cases. She said ERC tier 1 is the threshold when residents first cross into a nursing-home level-of-care classification and that the reduction has financial effects for residential care homes and assisted living providers.
Committee members asked how much would be needed to restore tier 1 payments. Nolan of the Joint Fiscal Office reported that, according to staff, "it is going to be $1,071,550 to hold them harmless, basically, to bring that rate back up," and said he would confirm whether that figure covers a full fiscal year or is retroactive to July 1.
Lawmakers traced the problem to how the 2022-based rate study was implemented after the 2024 session. The legislature had previously allocated $2,790,000 to advance rate increases called for by that study; however, when the administration implemented the changes it produced a large increase for ERC tier 3 and, in some provider categories, a sharp reduction for ERC tier 1 instead of an across-the-board raise.
Chair Teresa Wood and other members characterized the outcome as a technical error inconsistent with legislative intent. The committee discussed next steps and directed staff to draft Budget Adjustment Act (BAA) language to restore the tier 1 rate to its prior level. Committee members said they expect to submit recommendations to the House Appropriations Committee in the coming days.
The discussion also noted broader program impacts: members and witnesses said reductions in residential care reimbursement have contributed to closures and fewer available beds in recent years, and they warned that displaced residents may move to higher-cost nursing homes.
What happens next: staff will confirm costing details and whether the JFO estimate covers a full fiscal year or a retroactive correction. The committee asked Nolan and appropriations staff to draft specific BAA language to restore the ERC tier 1 rate and to include amounts in the committee's recommendation to Appropriations.
