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Vermont Agrees to Federal Spending Cap on Medicaid

  • June 13th, 2018

[This article was originally published on October 7, 2005.  The links were updated on June 13, 2018.]

Vermont has entered into an agreement with federal Medicaid officials to create an experimental program under which the state will receive a fixed amount of federal money in exchange for flexibility in its Medicaid rules. Although it is unclear how the Vermont program will affect long-term care recipients in the state, the program will be closely watched because such "block grant" programs could have profound implications for the nation's long-term care population covered by Medicaid.

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Under the Vermont program, federal officials are allowing the state to administer Medicaid through a statewide managed care organization. The state has agreed to federal caps on spending for the next five years in exchange for the flexibility to manage the money the way they want. Vermont has agreed not to spend more than $4.7 billion over the next five years, with the federal government paying about 60 percent of that.

The Associated Press reports that the state estimates Medicaid spending will actually be $4.2 billion over the next five years. If the state is wrong, however, and spending continues to increase, the state will be responsible for any amount over the $4.7 billion. If this happens, the state could face a difficult choice: pay the health care costs or reduce benefits. In return for assuming this risk, Vermont will have flexibility with some federal Medicaid rules, including the benefits for optionally eligible individuals.

Medicaid advocates and officials in other states and in the federal government will be watching this program closely. Congress and the Bush administration have proposed similar programs in the past on a nationwide scale, but Democrats have successfully fought off those proposals. A proposal to convert Medicaid into a system of block grants was put forward as part of the conservative "revolution" of then-House Speaker Newt Gingrich. It passed Congress in 1995 but was vetoed by President Bill Clinton. In 2003, the Bush administration proposed turning over the care of optionally eligible individuals to the states, but the proposal did not go anywhere (See "Bush Proposes to Give States More Control Over Medicaid," ElderLawAnswers, Feb. 3, 2003, and "Bush Medicaid Plan Threatens Coverage for Millions of Elderly," ElderLawAnswers, Feb. 28, 2003).

The Vermont program, called "Global Commitment to Health," works by paying a fee for every person insured, and the managed care organization will be in charge of managing that money. What is unclear is how the new program will affect long-term care in the state. Vermont has a separate long-term care waiver that is also going into effect this fall. The long-term care waiver, which gives all Medicaid beneficiaries requiring long-term care a choice between home and community-based services and nursing facility care, has a separate budget. The state claims the new program won't affect the long-term care waiver program, but there are no details on how the two programs will interact.

The Vermont legislature has conditionally approved the agreement. It will make a final decision in November when more details are available, including how much money will be allotted to cover each Medicaid recipient.


Last Modified: 06/13/2018

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