CMS Approves Renewal of Vermont’s 1115 Demonstration

Health Highlights

On June 28, 2022, the Centers for Medicare & Medicaid Services (CMS) approved a five-and-a-half-year renewal of Vermont’s Global Commitment to Health (Global Commitment) Section 1115 demonstration. The Global Commitment demonstration covers nearly all of Vermont’s Medicaid program; Vermont provides Medicaid services and supports to more than 200,000 Medicaid enrollees—nearly 30 percent of the state’s population.1 In addition to authorizing five home- and community-based services (HCBS) programs and providing flexibility to design and implement innovative payment reform initiatives, the Global Commitment demonstration has permitted several flexibilities that are unique or unusual among states. These flexibilities include the ability to strengthen its health care system and social safety net by using accrued savings to fund a diverse set of “investments” in public health, health care, and health-related services and coverage expansions for Vermonters with disabilities and/or serious mental illness (SMI).

With the demonstration renewal, Vermont has obtained approval for several new initiatives that are the first of their kind nationally, including a coverage expansion for Vermonters with a substance use disorder (SUD) who have incomes above Medicaid limits, coverage of maternal health and treatment services in specialized residential facilities, budget neutrality flexibility, and waiver features to implement new care models and advance population health management. A summary of Vermont’s new and continuing initiatives follows.

Initiatives to Advance Comprehensive Coverage

Since its first approval in 2005, Vermont has offered several initiatives through the Global Commitment demonstration to advance comprehensive coverage and assist individuals in accessing the supports they need to live successfully in the community. These initiatives, which will continue over the new demonstration period, include:

  • Community Rehabilitation and Treatment program. This program provides community-based mental health services to individuals with incomes above 133 percent of the federal poverty level (FPL) who would not otherwise have been eligible for Medicaid and have been diagnosed with an SMI.2
  • Choices for Care Moderate Needs Group. This program offers HCBS to Vermonters with disabilities with incomes up to 300 percent of the Social Security Income Federal Benefit Rate who are at risk of needing nursing home care and would not otherwise have been eligible for Medicaid.
  • Marketplace subsidies. These subsidies help Vermonters who have household incomes above Medicaid limits and up to 300 percent FPL purchase coverage on the Marketplace.
  • VPharm. This program assists Vermonters enrolled in Medicare Part D with incomes up to 225 percent FPL, including those over 65 and those with disabilities, with paying premiums and co-payments for prescription drugs.3

With the demonstration renewal, Vermont obtained new authority through an 1115 demonstration to institute a new limited benefit coverage expansion for individuals with SUD whose income is above Medicaid limits. Starting in 2024, individuals with a SUD whose incomes are above 133 percent FPL, up to 225 percent FPL ($1,506–$2,548 per month for a single adult), will be eligible for the SUD Community Intervention and Treatment program, which will offer a comprehensive set of SUD benefits, including case management, recovery supports, psychoeducation, peer supports, residential treatment, withdrawal management, counseling, and skilled therapy services.

New Care Models and Efforts to Advance Population Health Management

As in prior demonstration periods, the Global Commitment demonstration continues to authorize HCBS programs for individuals with SMI, serious emotional disturbance, developmental disabilities, physical disabilities, and brain injury; Medicaid reimbursement for individuals ages 21 to 64 residing in institutions for mental diseases (IMDs) for mental health and SUD treatment;4 and, in addition to other benefits, palliative care for children and hospice. Under the demonstration, Vermont also has had the ability to obtain a federal Medicaid match for a wide range of investments in public health, health care, and health-related services for Vermonters enrolled in Medicaid or who are uninsured or underinsured. For example, the investments support Vermont’s epidemiology and tobacco cessation programs; transitional housing programs for individuals who have recently been released from correctional facilities; workforce development programs; and Vermont’s Blueprint for Health model—a multi-payer delivery system reform engine that drives local health reform and promotes integrated care.

Vermont has also obtained approval to increase spending on investments by 32 percent, to a maximum of approximately $928 million over the course of the five-and-a-half-year demonstration period, in addition to implementing the following new care models and other efforts to advance population health management:

  • Coverage of Maternal Health and Treatment Services. The Lund Home—Vermont’s residential mental health and SUD treatment program for pregnant and postpartum individuals and mothers—is an IMD offering a unique care model that allows families to stay together during treatment, regardless of length of stay. Through the Global Commitment renewal, Vermont is the first state to obtain federal Medicaid matching funds for maternal health and treatment services offered in a residential facility meeting the definition of an IMD that is focused on this specialized population.
  • Improved Access to Supportive Housing. During the demonstration renewal period, Vermont will implement a Supportive Housing Assistance Pilot that provides supportive services for Medicaid enrollees moving to supportive housing who have complex needs and are at risk of homelessness or meet other risk critera. The pilot program will offer eligible individuals an array of pre-tenancy supports, tenancy sustaining services, and community transition services. The demonstration renewal application indicates that Vermont views this program “as an important strategy for promoting equity and reducing racial disparities in homelessness in Vermont,” since as of 2018, Black Vermonters were 5.4 times more likely to experience homelessness than white Vermonters.
  • Strengthening Providers’ Data Exchange Capabilities to Advance Population Health. With the approval of the $14.9 million Medicaid Data Aggregation and Access Program (MDAAP), Vermont will leverage Medicaid funding to administer incentive payments to expand providers’ health information technology (HIT) capabilities. Vermont plans for the MDAAP funding to be used to help over 275 Medicaid-enrolled mental health, SUD, and long-term services and supports providers—which have historically been excluded from federal HIT initiatives such as HITECH—purchase the tools they need in order to capture and exchange data and use it meaningfully to improve population health. 

Budget Neutrality Flexibility

To ensure that states’ 1115 demonstrations are budget neutral to the federal government, CMS requires that these demonstrations are subject to budget neutrality “caps,” or a limit on the amount of spending that is eligible for Medicaid reimbursement. Traditionally, states have not been able to increase these caps to reflect provider payment increases; if a state was at the budget neutrality cap, it would not be able to obtain a federal Medicaid match for a rate increase. Recognizing the need for Vermont to be able to invest in providers in the coming years, the state has received federal approval to adjust its budget neutrality caps to account for provider rate increases without pursuing an amendment to the demonstration, assuming legislative appropriations. If Vermont is at the budget neutrality cap, it will be able to obtain federal Medicaid matching funds for the rate increase—a new flexibility for 1115 demonstrations.

Moving Forward

Vermont’s Global Commitment demonstration aligns with CMS’ stated priorities and vision for Section 1115 demonstrations, providing a suite of strategies that other states may look to draw upon when designing their 1115 demonstrations. In particular, with states across the country struggling with the sharp uptick in mental health conditions and SUD associated with the COVID-19 pandemic, Vermont’s demonstration approval provides examples of ways that states can leverage Medicaid to address this crisis and signals CMS’ openness to approving new flexibilities for states proposing innovative solutions to this pressing problem.

Additionally, the pandemic has created extraordinary pressures on health care providers, increasing their cost of doing business and making it more difficult for them to stay afloat. Vermont’s ability to adjust budget neutrality caps to account for provider rate increases indicates CMS’ willingness to use Section 1115 flexibility to work with states to stabilize their health care systems as the country emerges from the pandemic, and that CMS is considering the impact of COVID-19 as it develops further budget neutrality policy.


1 Vermont is the only state in the country with a public, non-risk-bearing prepaid inpatient health plan (PIHP) model for its Medicaid delivery system, where the Department of Vermont Health Access (DVHA) within the Agency of Human Services (AHS) serves as the PIHP. In this model, DVHA is able to make use of most flexibilities available to managed care plans under federal regulations, such as having the ability to make provider payment changes in a more streamlined way than would be possible under a fee-for-service delivery system. AHS pays DVHA on a fee-for-service basis for services used by Medicaid enrollees. In its demonstration renewal application, Vermont requested to transition DVHA to a risk-bearing managed care organization. CMS denied this request.

2 With the demonstration renewal, Vermont obtained approval to eliminate the income limit for individuals obtaining mental health benefits through this program.

3 Under the demonstration renewal, Vermont obtained approval to expand the VPharm benefit package for individuals with incomes between 150 to 225 percent FPL.

4 Federal law (Social Security Act §1905(a)(30)(B)) prohibits states from claiming federal Medicaid matching funds for individuals ages 21 to 64 residing in IMDs, unless they obtain authority under an 1115 demonstration or a 1915(l) State Plan Amendment or use in lieu of services regulatory authority (42 CFR 438.6(e)).

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