By Sam Douglass

The Vermont Agency of Human Services is rushing to implement and review applications for in-state proposals to use $195 million in federal funding before a September 30 deadline.

Lawmakers on the Senate Health & Welfare Committee received an update Thursday from AHS on the status of the funding and how the state plans to use it. Director Jill Mazza Olson and Sarah Rosenblum, said Vermont will receive $195 million in 2026 for its first year of funding and has put out notices for six opportunities to bid with plans for ten more. According to the newly created public webpage, the submission periods for the first six proposals end starting April 10.

Each state was required in the fall of 2025 to present a plan with their application for the use of funds. States were given a list of appropriate uses and were asked to choose at least three for how funds are to be used if awarded. These included attracting and retaining rural workforce, assisting rural areas in optimizing and aligning health care services, and expanding access to addiction and mental health care. Vermont had only a few weeks to develop a plan before the December deadline.

AHS did not expect to receive as much money as it did, Olson said. Vermont ranks among the highest recipients per capita in funding, yet received nearly double the anticipated amount, with some much larger states awarded less funding.

The funding is not a grant, Olson reminded the committee. With federal funding comes federal scrutiny and reporting to the Centers for Medicare & Medicaid Services. This includes federal approval of subrecipients and in-state disbursements.

Additionally, there are limits to what funds can be spent on including construction and direct-to-provider payments. CMS has been clear that funds cannot be used to increase property value, said Olson. Provider payments are limited to a maximum of 15 percent of the total award, in this case, over $29 million. However, what is considered a provider payment has not been clear but federal guidance has since clarified that any use of funds to provide direct care counts toward the 15 percent limit. 

As the deadline for the second year of the program approaches, there is some confusion about how Vermont will demonstrate compliance or show that the state hit certain milestones laid out by CMS, said Olson. Currently, states are racing to put out requests for proposals (RFPs) and making decisions on obligating funds before the September 2026 deadline as unused first-year funds are returned to be used for the next year’s awards.

Under H.R.1, also known as The Big Beautiful Bill Act, many states will receive hundreds of millions for rural health care. The bill included $50 billion to be disbursed over five years (fiscal years 2026 through 2030) to provide annual funds to states that apply. According to Rosenblum, applicants were required to submit a one-time application by December 31, 2025, and if awarded, will be scored year to year against their application based on their progress to determine the amount a state receives the next year.

H.R.1, signed into law by President Donald Trump in 2025, included numerous policy areas: health care, tax reform, agriculture, energy, border security, and infrastructure. The bill also included a number of highly controversial budget cuts and restructuring that elicited concern from both sides of the aisle in Washington. Major reforms to Medicaid, Affordable Care Act marketplaces, and the Supplemental Nutrition Assistance Program (SNAP), drew harsh criticism from Vermont’s congressional delegation.
Medicaid restructuring in particular is projected to reduce spending by $911 billion over the next ten years, bringing significant changes to health care finance and operations, especially for struggling hospitals. When the changes to Medicaid were being considered, lawmakers in Washington expressed concern of their effects on rural hospitals, which were already at risk of closure nationwide. $50 billion in new spending for rural health care was added to alleviate these concerns, and now states are figuring out how best to use it.