Federal HR 1 will reshape Vermont Medicaid and marketplace rules, state officials tell House committee

State health officials told the House Health Care Committee on Jan. 6 that federal budget‑reconciliation changes in HR 1 will force multiple program and budget adjustments in Vermont.

Ashley Berliner, director of Medicaid policy for the Agency of Human Services, said HR 1 temporarily bans federal Medicaid funding for Planned Parenthood‑like entities for one year. "The federal impact to the state of Vermont is about $1,100,000 gross for this one year or about $600,000 in federal financial participation," Berliner said, and the state has arranged a general‑fund backfill pending court outcomes.

Berliner also summarized a multiyear phase‑down of provider taxes. States must cap new provider taxes and reduce existing provider taxes by 0.5 percentage point per year beginning in November 2027 until they reach 3.5% in 2032. She said Vermont’s first 0.5‑point reduction would reduce general‑fund revenue by roughly $18 million and that a full phase‑down could amount to an estimated $87 million in cumulative annual revenue loss in today’s dollars by 2032 if fully realized.

The briefing flagged constraints on so‑called state‑directed Medicaid payments. Berliner said HR 1 would cap new state‑directed payments at 100% of Medicare fee schedules and require phased reductions for existing payments higher than Medicare rates (10% reductions per year beginning in 2028). Agency staff said programs where the legislature has specified rates — such as primary care enhanced payments and payments for community health teams — could be implicated and that careful budget and policy design will be needed to stay in compliance while protecting provider payment levels.

Adi Stromelow, deputy commissioner at the Department of Vermont Health Access, described eligibility and enrollment changes that staff must implement. Effective Oct. 1, 2026, HR 1 alters Medicaid eligibility rules tied to immigration status; staff estimate the scale of that change in the "hundreds" and said they are still working to identify affected members for outreach. A separate change will require redeterminations for the Medicaid expansion "new adult" population every six months starting Jan. 1, 2027; Stromelow said about 55,000 people are in that group and that the change could increase the department’s workload by roughly 30%.

The department also reported a new community engagement requirement (often called a work requirement) for expansion adults that will require demonstration of work, education or community engagement (a stated default target of 80 hours per month) with statutory exceptions for pregnant people, medically frail individuals and caregivers; staff estimated roughly 30,000 members will need additional verification to demonstrate compliance with the new rules.

Officials stressed that many details depend on federal implementing guidance from CMS, and agencies are building IT work, data‑sharing connections and outreach plans to reduce paperwork burdens and limit inadvertent coverage losses. Stromelow said the department plans to use automatic verification where possible and to expand reinstatement pathways for people who lose coverage because they miss paperwork deadlines.

Officials also noted near‑term bargaining risks for Vermont’s 1115 waiver and state premium assistance, and warned committee members that some investments will be difficult to defend during federal waiver negotiations.

The committee asked agencies to return with more precise fiscal estimates and timelines during upcoming budget hearings and signaled that the House Health Care Committee and Joint Fiscal Office will closely monitor IT and implementation progress.