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Designated‑agency leaders tell House panel Medicaid rule changes risk closure of residential programs, displacement of vulnerable Vermonters
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Summary
Vermont Care Partners witnesses told the House Committee on Health Care that recent Medicaid eligibility changes and unresolved DMH guidance threaten adult mental‑health residential beds statewide, including Clara Martin Center’s Safe Haven, creating immediate risk of homelessness and clinical harm for long‑term residents.
Melanie Gidney, executive director of the Clara Martin Center, told the House Committee on Health Care on April 16 that Vermont’s adult mental‑health residential programs are facing an unfolding crisis that could force closures and displace residents with nowhere to go.
Gidney, testifying for Vermont Care Partners, said the state’s shift in Medicaid funding from a long‑term habilitative model to a short‑term rehabilitative model (TPL 63) and an unresolved conflict over HUD‑funded lease arrangements have produced two intersecting problems: many current residents no longer meet the rehabilitative eligibility criteria that DMH is applying, and lease‑based properties built with HUD funding may be treated as permanent housing and therefore ineligible for Medicaid residential treatment reimbursement. "Vermont's adult mental health residential programs are at risk of closure, and the people living in them face displacement with nowhere to go," Gidney said.
The witnesses emphasized the population at stake: dozens of adults with lifelong, severe mental illness who rely on structured residential supports to remain safe and stable. Gidney said many residents are aging, medically complex and often ineligible for other systems such as Choices for Care or nursing homes. "Without residential support, these individuals face homelessness, repeat psychiatric hospitalization, prolonged emergency department boarding, and serious deterioration in their health and safety," she said.
Sandy McGuire, identified by Gidney as CEO of Howard Center, described the clinical complexity in her system: Howard Center operates 54 residential beds, and "over 60 percent of the folks in our residential beds" carry a primary diagnosis of schizophrenia, McGuire said, underscoring that these residents require ongoing care rather than short‑term treatment aimed at discharge.
Witnesses said the change in billing pathways followed federal fixes around conflict‑free case management and a shift of some Medicaid services out of a waiver into the state plan. DMH, they said, is applying federal criteria that narrowly define who is eligible for the Medicaid level of support now labeled TPL 63. Gidney said that the change eliminated many eligible referrals and left programs with empty beds and no billing pathway for people who need long‑term supports.
Speakers also raised a policy tension between HUD and Medicaid: several residential programs were developed with HUD funding that requires individual leases. DMH staff have signaled that lease‑based settings may be considered permanent housing and therefore could be ineligible for the rehabilitative residential treatment reimbursement. "The issue is not clinical need. It's in the housing structure that Vermont and the federal government deliberately built," Gidney said.
The witnesses said DMH extended the implementation deadline to July 1, 2026, but as of April 16 final rules, service rates and guidance on room‑and‑board funding remained outstanding. "Medicaid does not cover room and board," Gidney said, adding that DMH had suggested those costs could fall on residents or agencies but that no formal policy or amount had been established. With less than 75 days before July 1, witnesses said there was insufficient time for agencies to plan or for orderly transitions.
Clara Martin Center announced that its Safe Haven program (four staffed residential beds) will close June 30, 2026; Gidney said that funding cuts in DMH’s proposed FY27 budget and reduced eligible referrals left the program unsustainable. Gidney and other presenters listed additional at‑risk capacity: Howard Center has multiple sites and reported 21 beds at definite lease‑based risk; Copley House in Lamoille County has 15 beds and Johnson Group Home has seven; other agencies reported smaller programs and multiple clients who no longer meet the rehabilitative threshold.
Christy Everett, director of operations at Clara Martin Center, reviewed Safe Haven’s history (opened 1998 as a transitional, HUD‑funded program) and described how federal and state policy shifts over time reduced its capacity and changed eligibility rules. Everett also told the committee that an unfunded DMH mandate to integrate crisis beds with other services would have required about $400,000 in agency‑level spending to implement.
Lawmakers asked about immediate options. Gidney urged the committee to direct DMH to issue final rules, rates and room‑and‑board guidance promptly or to consider another extension of the transition timeline. She also noted that the Senate’s homeless‑continuum bill includes supportive‑housing and voucher‑plus‑care provisions that could be leveraged to support residential services.
The witnesses said they will continue working with DMH and the legislature but warned that without immediate policy fixes and funding clarity, more residential programs could become financially unviable, producing local displacement and higher costs to the broader system. The committee acknowledged the urgency and moved on to other agenda items at the end of the panel’s testimony.
