The tax bill making its way through Congress would cause some 45,000 people in Vermont to lose health insurance over the next several years, according to initial estimates from the Vermont Agency of Human Services.
A range of proposals included in both the House and Senate versions of the bill would make it harder to sign up and stay enrolled in Medicaid, a program for low-income and disabled people which covers about 19% of the state. It would also limit access to the state marketplace, Vermont Health Connect, for people who don’t get coverage from an employer and purchase their own plans.
The bill also prevents Planned Parenthood health centers from receiving Medicaid reimbursement or federal grants for family planning and preventative health services, estimated to cost health centers in the region some $5 million.
Vermont's health care system is really vulnerable and a shock like this will destabilize the whole thing.Mike Fisher, Office of the Health Care Advocate
Having fewer people with health insurance causes worse health care outcomes because people delay care, often ultimately requiring more expensive treatment. And it means providers don’t get paid when uninsured people do end up in the hospital. That will impact everyone seeking health care in the state, said Mike Fisher, the state’s chief health care advocate at Vermont Legal Aid, not just those covered by Medicaid or the state marketplace.
“Vermont's health care system is really vulnerable, and a shock like this will destabilize the whole thing,” he said. “We won't be able to keep hospitals open. We'll lose providers.”
The proposals come at a time when coverage in Vermont is the highest it’s been in years — about 97% of Vermonters have health insurance, among the highest rates in the U.S., and about 70% of people with insurance can afford their medical costs, according to a Department of Health survey published last month.
“It may represent a high water mark of what we've been able to achieve,” Fisher said.
Red tape
State officials have said the bulk of the proposed health care changes come down to adding red tape. Many Medicaid participants will have to prove they meet certain work requirements every six months, along with other eligibility reviews.
“They're literally going to have to fill out more paperwork,” said Ashley Berliner, who leads Medicaid policy development at the state. “They'll have to prove eligibility twice as often.”
This extra paperwork is why she expects about 30,000 people in the state to lose Medicaid coverage, particularly people without disabilities or kids, who would have to prove they meet the work requirements. A Senate version of the bill released this week also adds those requirements for parents with kids over 14 years old.
“That’s based on historical experience — when we ask individuals to submit documentation, we have a 50% response rate. So that's where that number is coming from,” Berliner said.
If someone doesn’t meet the standard for work requirements — about 80 hours a month — they would also be ineligible to get insurance on the state marketplace.
“So there's literally nowhere for them to go to get coverage,” said Addie Strumolo, who leads policy work at the Department of Vermont Health Access.
Additional changes proposed by Congress limit eligibility for insurance, particularly for people in the U.S. without permission who would otherwise qualify for Medicaid.
Currently, the state uses its own funding to cover about 350 children and pregnant women under a program called the Immigrant Health Insurance Plan, at a cost of about $1.1 million a year. A provision in both the House and Senate versions of the tax bill would penalize Vermont by about $26 million a year if it continues the program.
Under the proposed changes that would impact the state marketplace, people would have less flexibility on when they can sign up for a plan. The proposals also effectively eliminate automatic renewal, making the enrollment process more cumbersome every year.
“The proposal is to have to get a box of paperwork for everything about your residency, your citizenship, your lack of offer of coverage from your employer, your income,” Strumolo said. “It's really pretty extreme in terms of the level of burden that it would impose upon enrollees in the marketplace and the state.”
To meet those requirements, she estimates her department will have to hire up to five to seven new full-time employees.
Doubling the cost of premiums
Another major impact to the state marketplace is something that’s not in any of the proposals floated by Congress. Under current law, a federal tax credit is set to expire at the end of this year that has allowed more people to qualify for subsidies to pay for health insurance.
“That’s at least a doubling of everyone's premiums on the exchange,” Strumolo said.
Since 2021, premiums for certain plans have been almost free for people just over the poverty line and capped at 8.5% of household income for higher earners. Without those subsidies, someone living alone who makes just over $60,000 a year would have to pay the full price for their monthly premiums — an average sticker price of over $1,200 a month this year in Vermont.
With more expensive plans, healthier people are more likely to choose to go without insurance, further raising rates for everyone else, and the sickest people are more likely to stay enrolled.
“"This is a description of death spiral,” said Fisher. “More people can't afford it, and so more healthy people leave. It sort of feeds on itself.”
Between the expiration of the subsidies and other changes proposed under the tax bill, the state expects about half of the people who currently get coverage on the state marketplace to leave, about 15,000 people over the next few years.
Fewer federal and state dollars
Overall, the state is expected to lose over $325 million in federal funding, between changes to Medicaid and the state marketplace.
“It is a direct cost shift from the federal government to the state of Vermont to the health care providers to compensate,” Berliner said.
On top of losing federal dollars, another provision introduced by the Senate this week would cap how much the state can charge for something called a “provider tax” on hospitals, nursing homes, and other providers for seeing patients. This money goes into the general fund to pay for the state’s share of Medicaid. If not backfilled with other general funds, it would require about $211 million a year in Medicaid cuts, a representative from the Agency of Human Health said by email.
“It creates a really big hole in our Medicaid budget,” added Fisher.
The details of what will ultimately make it into law are still in flux. But the changes currently being discussed in Congress would have an outsized impact in the state, according to Fisher.
“This affects the whole health care system,” he said. “It affects providers that all Vermonters depend on.”
