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Federal HR1 limits on provider taxes could cut Vermont Medicaid dollars and hospital revenue
Summary
Lawmakers were told HR1 phases down the longstanding 6% safe-harbor for provider taxes to 3.5% by FY28, freezing existing rates and projecting roughly $15M loss in year one and about $113M annually by FY33 unless Vermont offsets the loss with new revenues or policy changes.
Members of the House Ways & Means committee were briefed Jan. 27 on how the federal reconciliation package (HR 1) will restrict state provider taxes and reduce Vermont’s ability to draw Medicaid federal matching funds.
The change "phases down that 6% cap ... so we go from 6% down to 3.5%," said Jen Farbic of the Office of Legislative Council, describing the legal limit and the freeze on new or higher provider taxes under the new federal law. The provision takes effect in state fiscal year 2028, presenters said.
The committee’s healthcare analysts framed the mechanics: "For every $1 of state dollars we put in, we draw $1.43 of federal dollars for a total gross of $2.43," a presenter said,…
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