No fiscal backfill allowed, legislators told

By Bill Moore

Vermont has been awarded more than $195 million in federal funding to support rural health system innovation, though state officials cautioned lawmakers the money cannot be used to replace or stabilize existing programs.

At a Thursday meeting of the House Appropriations Committee, Agency of Human Services Medicaid and Health Systems Director Jill Mazza Olsen briefed legislators on the $195,053,740 federal “Rural Health Transformation” (RHT) grant, approved by the Trump administration. The award is among the largest per-capita grants distributed nationwide under the program, which stems from the federal “One Big Beautiful Bill” passed by Congress last year.

Olsen emphasized that the funds come with strict guardrails. Grant dollars cannot be used to “supplant” existing state-funded programs, staff positions, or services already supported by Vermont taxpayers. Instead, the program is designed to spur new initiatives and modernize rural health systems.

According to Olsen, federal guidelines require projects to pursue goals that “strengthen rural access, modernize care delivery, grow and retain the workforce, expand innovative care and payment models, and advance technology and data interoperability.” The overall aim is to improve access, quality, and long-term sustainability through infrastructure, workforce, and care model transformation.

Lawmakers broadly welcomed the funding, viewing it as a potential tool to address Vermont’s long-standing health care delivery challenges. At the same time, they acknowledged the grant does little to ease immediate budget pressures as the Legislature and the Scott administration grapple with rising health care costs under the Affordable Care Act and Vermont’s complex Medicaid waiver, which requires substantial state funding and carries projected deficits.

Access to care remains a pressing concern across the state. Vermonters continue to experience delays in receiving medical services and therapies, while eldercare shortages, birthing center closures, and reductions in clinical staffing have affected communities statewide. Those pressures have intensified as Green Mountain Care Board efforts to rein in hospital budgets seek to reduce the strain on state finances.

Despite the scale of the federal award, legislators were clear the RHT grant cannot be used to “backfill” funding gaps as they work on the annual Budget Adjustment Act, which is typically used mid-year to address shortfalls and redirect funding across state government. Rising personnel costs, education funding pressures, and insurance expenses are often handled through that process.

During the committee discussion, lawmakers questioned agency staff about potential project ideas, limitations on using funds for existing tuition assistance or loan programs, and how best to improve access and outcomes while meeting federal timelines. Budget Period 1 funding under the grant must be spent by September 30, 2027.

Olsen noted that some project concepts may emerge from Vermont’s existing “Blueprint for Health,” established under Act 68 of 2025, which outlines a framework for health care payment and delivery reform across the state.

The Agency of Human Services has launched a Rural Health Transformation Program page on the Office of Health Care Reform website, including a public contact form, and plans to maintain public engagement throughout the life of the program.

Olsen encouraged Vermonters to provide input as the agency develops proposals for how to deploy the more than $195 million in federal funding aimed at reshaping rural health care delivery in the state.