DVHA outlines FY27 plan to close $75M shortfall with program reductions, rate changes and IT investments

Deshan Bros, introducing themself as the agency executive commissioner for the Department of Vermont Health Access (DVHA), told the Senate Appropriations Committee on March 31 that the agency built its FY27 budget around five cross-agency priorities—housing; substance use and mental health; healthcare affordability; sustainability and quality; and workforce resilience—and that a $75 million shortfall shaped the administration’s proposals.

DVHA presented a topline FY27 figure it read as “1.3 billion 579 million,” and staff directed committee members to page 47 of the budget book for the line‑by‑line roll-up. Agency staff acknowledged at the hearing that the presentation included at least one apparent roll‑up typo and said they would correct and report back to the committee.

To reduce costs, DVHA recommended eliminating several contracts and modest programs it said had not delivered expected returns. The agency proposed ending the Medicare Advocacy Program contract—used to help enroll dual‑eligible beneficiaries to pull in Medicare dollars—after finding that its return on investment had fallen (the presentation cited ~60% ROI in 2024 and ~50% in 2025). DVHA also proposed discontinuing a temporary per‑diem emergency department payment for mental‑health and pediatric stays (initiated July 2022), and eliminating modest dental incentive payments to encourage private dentists to accept Medicaid because those incentives “did not measurably increase access,” the commissioner said.

Policy changes in the DVHA proposal include a targeted rate increase for a youth hospital‑diversion program operated by Northeastern Family Institute following a required rate review. DVHA also described ongoing implementation work tied to HR1, the recently enacted state policy that will change eligibility and administrative requirements (including new six‑month eligibility determinations for some adults and community‑engagement components). DVHA estimated HR1 implementation will require roughly 12 new eligibility positions and requested about $5 million in one‑time funds for systems changes; the agency said it has about $2 million in federal grants that will help match those costs.

On member cost sharing, DVHA proposed raising prescription co‑pays—reporting a move from $1 to $4 for preferred drugs and $3 to $8 for non‑preferred drugs (the agency noted the state last updated these cost‑sharing levels in 2001). Committee members repeatedly raised concerns about the effect of higher co‑pays on very low‑income Vermonters; DVHA replied that several vulnerable groups (children and pregnant women) are exempt from the proposed charge increases and that the existing 5% out‑of‑pocket cap remains in place.

DVHA also described several IT and operations items: MMIS (Medicaid management information system) amendments to support prior‑authorization interoperability ($150,000 GF, $1.14M gross in testimony), a consolidation that would allow DVHA’s analytics platform to replace a HEDIS contract, and increases to data‑warehouse maintenance and licensing costs. The agency said it plans to lease new office space in Pilgrim Park and cited ongoing maintenance obligations for a new school‑based electronic health record expected with the transfer of certain school‑day services from the Agency of Education to DVHA.

DVHA closed by noting it had used a prior $10 million provider stabilization appropriation to support providers and that staff had awarded or were in the process of awarding those funds. The commissioner said the administration had tried to minimize new initiatives and instead focused on targeting investments that best advanced affordability and system sustainability.

Next steps: DVHA said staff would correct the cited presentation roll‑up errors and return with clarified line items. Committee members requested additional detail on utilization‑management savings and expected impacts of benefit‑design changes on low‑income members.