Michael Thompson lives in Caledonia County in Vermont’s Northeast Kingdom, working seasonally at a ski resort and doing construction when weather permits. Between both activities he averages 70 hours monthly during winter and fall but struggles during mud season when construction halts and tourist activity drops. He enrolled in Green Mountain Care when Vermont implemented Medicaid expansion in 2014. Starting January 2027, Michael will need to document 80 hours monthly of qualifying activities to maintain coverage. The nearest community college offering job training programs is 45 minutes away. His volunteer fire department service does not generate hour documentation. Whether seasonal income averaging provisions will accommodate Northeast Kingdom employment realities remains uncertain.
Vermont approaches work requirement implementation as the smallest expansion state facing geographic isolation, healthcare system fragility, and unprecedented organizational transition. OneCare Vermont, the accountable care organization providing care coordination infrastructure across the state, is winding down operations at the end of 2025. The state operates Medicaid through fee-for-service managed care model with Department of Vermont Health Access functioning as public managed care entity rather than contracting with commercial MCOs. Thirteen of Vermont’s fourteen hospitals receive Medicaid disproportionate share payments, eight are designated Critical Access Hospitals, and rural healthcare capacity operates at financial margins.
The Federal Context#
H.R. 1 transforms work requirements from state-option demonstration projects into federal mandate affecting all Medicaid expansion adults. Beginning January 2027, adults aged 19 through 64 without dependent children, disabilities qualifying for SSI or SSDI, or other categorical exemptions must complete 80 hours monthly of work, education, job training, community service, job search activities, or vocational rehabilitation to maintain Medicaid eligibility. States must verify compliance through semi-annual redetermination cycles, with coverage termination for those who cannot document qualifying hours or exemptions.
The Centers for Medicare and Medicaid Services issued initial guidance on December 8, 2025, establishing data-first verification principles requiring states to check wage records and cross-program enrollment before requesting member documentation. States must provide 30-day cure periods allowing members to submit verification or exemption documentation after initial adverse determinations. CMS will issue comprehensive regulations by June 1, 2026, leaving Vermont less than seven months to build verification systems before the January 1, 2027 implementation deadline. States demonstrating good faith efforts may receive extensions through December 31, 2028.
The legislation includes $200 million in implementation funding distributed across all expansion states, though Vermont’s small population means minimal allocation. Implementation costs will substantially exceed federal support. The marketplace premium tax credit exclusion for individuals losing Medicaid due to work requirement non-compliance creates coverage void, as people terminated for verification failures cannot access subsidized marketplace coverage regardless of income.
H.R. 1 eliminated enhanced federal funding for Health Related Social Needs services effective March 2025, removing state flexibility to fund navigation supports through Medicaid. The law also restricts continuous eligibility waivers and reduces provider tax limits from 6 percent to 3.5 percent beginning 2028.
State Context and Projections#
Vermont state officials have been remarkably candid about projected coverage losses. Cory Gustafson, Commissioner of the Department of Vermont Health Access, and Michael Berliner, Director of Health Care Reform, estimated roughly half of affected expansion adults could lose coverage. This figure, approximately 32,500 people from 65,000 expansion population, is based on historical experience showing 50 percent non-response rate when additional documentation is required.
“When you ask people for additional information, they don’t fill it out and they fall off. The burden becomes too high and coverage is lost,” Berliner explained. State officials have stated that federal policymakers are “relying on the dropoff to help facilitate their proposed cuts,” acknowledging that verification systems produce coverage losses independent of actual employment status.
This projection represents one of the most straightforward state acknowledgments that work requirements function primarily as administrative burden generating coverage reductions among eligible populations. Vermont officials are not claiming aggressive compliance enforcement will maintain coverage through superior navigation services. They are projecting that verification requirements will produce exactly the coverage losses federal budget calculations anticipate.
Vermont operates under the Global Commitment to Health Section 1115 demonstration waiver, approved through December 31, 2027. The state will need to amend this waiver or submit separate application to implement federal work requirement provisions while maintaining distinctive delivery system structure.
Implementation Infrastructure Challenges#
Vermont operates one of the most distinctive Medicaid delivery systems in the nation. Rather than contracting with commercial managed care organizations, the Department of Vermont Health Access functions as public managed care entity delivering services through fee-for-service arrangements with providers statewide. This gives state direct operational control but means no MCO infrastructure exists to distribute implementation burden.
Work requirement implementation will require DVHA staff and systems to perform functions that MCOs handle in other states: member outreach, compliance tracking, verification processing, exemption determination, and appeals management. Vermont’s administrative capacity is sized for population of 648,000, not the 18.5 million expansion adults facing work requirements nationally. The state must build verification systems scaled to its expansion population but without MCO infrastructure that larger states utilize.
OneCare Vermont, the accountable care organization at center of Vermont’s All-Payer ACO Model, announced plans to wind down operations after nearly a decade. This timing creates organizational transition precisely when work requirement implementation demands maximum coordination capacity. The ACO established connections with primary care practices, hospitals, and community organizations across the state enabling care coordination and population health management that could have supported member navigation of work requirements. Whether alternative infrastructure emerges before implementation remains uncertain.
The state is participating in the federal AHEAD Model (States Advancing All-Payer Health Equity Approaches and Development), which could provide framework for continued payment reform. However, the operational capacity OneCare provided will not be immediately replicated. The loss of established care coordination infrastructure during work requirement implementation creates risk that no existing entity possesses needed navigation capacity.
Geographic and Workforce Challenges#
Vermont’s geography creates verification obstacles particularly for rural residents. The state’s 14 counties span mountain ranges, rural valleys, and isolated communities where nearest services require substantial travel. Winter weather compounds access barriers. A resident of Essex County requiring exemption documentation from specialist in Burlington faces two-hour drive in good weather, longer during winter storms.
Seasonal employment patterns complicate verification. Ski resorts, tourism, agriculture, construction, and other sectors drive Vermont’s economy with employment concentrated in specific seasons. A worker fully employed during ski season may have no wage documentation during summer months. Whether seasonal income averaging provisions accommodate these patterns depends on guidance not yet issued.
Vermont has applied for funding through the Rural Health Transformation Program created by H.R. 1, seeking at least $500 million over five years to support healthcare infrastructure. This application reflects both vulnerability of Vermont’s healthcare system and state officials’ pragmatic approach to securing available federal resources even from legislation they oppose. The state acknowledges needing federal support to maintain rural access precisely as federal policies impose coverage restrictions.
Healthcare system fragility compounds implementation challenges. The Green Mountain Care Board has documented deteriorating hospital financial health, particularly among rural facilities. Vermont healthcare costs are among highest in nation; average lowest-cost Silver plan premium is more than twice national average. Thirteen of fourteen hospitals received Medicaid disproportionate share hospital payments in state fiscal year 2024. Eight hospitals are designated Critical Access Hospitals, reflecting essential role serving rural populations with limited alternatives.
Coverage losses from work requirement implementation would increase uncompensated care at facilities already operating at financial margins. The provider tax reduction from 6 percent to 3.5 percent eliminates revenue hospitals contributed to draw down federal matching funds, compounding fiscal pressure precisely when coverage losses increase uncompensated care burden.
Navigation Infrastructure Limitations#
Vermont maintains several programs positioned to support work requirement navigation, though none are sized for scale of outreach the mandate requires. Working Bridges, partnership between United Way and employers, helps working individuals access resources for employment stability. The Office of the Health Care Advocate at Vermont Legal Aid provides free assistance to Vermonters navigating coverage issues. Eleven Federally Qualified Health Center organizations operate approximately 60 primary care and 17 dental care sites across all 14 counties.
These organizations will face frontlines of work requirement implementation, but they were designed for current enrollment support, not mass compliance verification for 65,000 expansion adults. Community organizations operate with limited staff serving populations across large geographic areas. Scaling navigation assistance to meet work requirement demands requires resources state has not allocated and federal funding will not provide.
The challenge extends beyond staffing. Many Vermonters eligible for exemptions may not understand exemption categories or know how to obtain necessary documentation. Medical frailty determinations require healthcare provider verification. A rural resident seeing provider monthly for chronic condition management must request that provider complete exemption paperwork, adding administrative burden to clinical practices already stretched thin.
Cross-Program Coordination#
Vermont’s small population creates opportunity for cross-program data integration if systems can be built effectively. The state could coordinate Medicaid verification with SNAP work requirements, unemployment insurance records, and other benefit programs. Members meeting requirements in other programs could automatically satisfy Medicaid verification.
However, each program uses different definitions, systems, and reporting periods. SNAP work requirements apply to Able-Bodied Adults Without Dependents, narrower population than Medicaid expansion adults. Integration requires system interfaces and interagency protocols that must be built during implementation window. Vermont’s small state administrative capacity limits ability to build complex integrations simultaneously with other H.R. 1 implementation demands.
Vermont Health Connect, the state-based marketplace, provides enrollment infrastructure for individuals transitioning from Medicaid. However, H.R. 1 provisions making work requirement non-compliant individuals ineligible for premium tax credits eliminate this transition pathway. The marketplace cannot serve as safety net for those losing coverage due to verification failures.
Fiscal and Political Environment#
Vermont’s budget has faced recurring shortfalls, with Medicaid spending frequently contributing to deficits. The state began paying 5 percent of expansion costs in 2017, increasing to 10 percent under normal federal matching. Work requirement implementation costs compound existing fiscal pressure.
Vermont utilizes provider taxes at maximum rate permitted under federal law to leverage additional federal Medicaid matching funds. The reduction to 3.5 percent eliminates substantial state revenue precisely when implementation costs increase. The state must finance verification systems, member outreach, exemption processing, and appeals management while losing provider tax capacity.
Political environment in Vermont strongly opposes work requirements, but state must comply with federal mandate. Governor Phil Scott, a Republican, has occasionally clashed with Democratic legislature on healthcare policy, but both branches recognize work requirement implementation is federal requirement rather than state choice. The question is not whether Vermont will implement but how state designs systems within federal constraints.
Provider Capacity and Relationships#
Vermont has 97 percent provider satisfaction with Green Mountain Care administration, demonstrating strong relationships between state Medicaid program and provider community. This creates advantage for exemption verification processes requiring provider documentation. However, high satisfaction reflects low administrative burden under current system. Work requirements add substantial paperwork demands.
Primary care practices must verify medical frailty exemptions for patients with chronic conditions, behavioral health providers must document substance use disorder exemptions, and specialists must confirm conditions qualifying individuals for disability exemptions short of SSI/SSDI. The volume of requests may overwhelm provider capacity to complete documentation for substantial Medicaid populations within compressed timeframes.
Fee-for-service payment means providers receive reimbursement for services delivered but not for administrative work supporting work requirement verification. Unless state develops payment mechanisms compensating providers for exemption documentation, this becomes uncompensated administrative burden. The tension between strong provider relationships and verification demands creates risk that providers cannot or will not complete necessary paperwork.
The Path Forward#
Vermont will implement work requirements reluctantly while designing systems to minimize coverage losses within federal constraints. The state’s candid projection of 50 percent coverage loss among expansion population reflects realistic assessment of verification barriers rather than policy enthusiasm.
Geographic isolation, seasonal employment patterns, healthcare system fragility, and OneCare Vermont wind-down create implementation obstacles compounding inherent verification challenges. The state’s small size offers opportunities for innovation and coordination that larger states cannot achieve, but also means limited capacity to absorb substantial administrative demands.
Whether Vermont pursues December 31, 2028 extension option will significantly affect implementation trajectory. Extension would provide time to develop systems and coordinate with AHEAD Model implementation, but creates prolonged uncertainty for expansion adults. Given compressed timeline between June 2026 guidance release and January 2027 implementation, extension seems likely.
Vermont officials have acknowledged that federal policymakers designed work requirements to produce coverage losses through administrative burden. The state’s implementation approach will test whether coverage-protective design within federal parameters can prevent projected outcomes, or whether verification requirements inherently generate reductions that well-intentioned state efforts cannot overcome.
Vermont did not choose work requirements. The state must implement federal mandates affecting 65,000 expansion adults while maintaining healthcare access in rural communities with limited alternatives. Success will be measured not by policy embrace but by whether state can prevent verification systems from producing the 50 percent coverage losses officials candidly project.