Owen Foster, chair of the Green Mountain Care Board, in 2023. File photo by Glenn Russell/VTDigger
The wishlist for achieving a more stable health care system in Vermont is a long and lofty one: By 2031, the Agency of Human Services says it aims to strengthen the rural health care workforce in the state and increase access to timely care in those rural areas, all while increasing quality and reducing cost.
One big piece of achieving those goals rests in moving more of the health care Vermonters receive outside of hospitals, the agency argues in its latest vision for hospital transformation, made public last week.
In a bid for a five-year federal rural health grant worth at least $500 million to the state, the agency proposes a sweeping range of expenditures, ranging from the broad — like allocations for incentivizing primary care providers to increase appointment access — to the specific — like funding more recovery housing for those with substance use disorders or investing in dialysis and ventilator units in nursing homes, rather than hospitals.
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by Olivia Gieger
October 31, 2025, 5:26 pmNovember 3, 2025, 4:39 pm
What might become a reality depends in part on grant funding decisions the federal government is expected to make by the end of this year.
The national opportunity became available in September after funding for the program was inserted into the federal budget reconciliation package to win the needed support of rural Senate Republicans concerned about the impacts of Medicaid spending cuts in that bill.
Since then, health care professionals across Vermont have closely watched how the state might use the grant, to solidify the otherwise eroding foundation of the health care system in the state.
“It does give us a lifeline if we use it really well,” Owen Foster, the chair of the Green Mountain Care Board, told VTDigger in October, before the state submitted an application.
Still, now that the agency’s application is public, much remains up in the air about how much funding will come to the state and what exactly it will go toward when it does.
The new funding availability comes at a time when the majority of Vermont’s hospitals face serious solvency risks and Vermonters bear some of the highest health care costs in the country. At the same time, the state’s rural populations are overall less healthy than the rest of the state, with higher rates of chronic disease, obesity, opiod-related death and suicide.
Many providers, patients, regulators and lawmakers in the state agree that the system is in dire need of a radical reboot. Some are still waiting for the details of that reboot to become more concrete.
“The proposal is more of a list of priorities than a detailed plan of what Vermont would do with federal funds if or when they arrive,” Alex Garlick, a UVM political science professor who specializes in health care policy but who is not involved in the application process, told VTDigger.
“The ideas for shoring up the delivery of rural health care are sound, but I’d categorize them as incremental instead of transformational,” he said.
‘A holistic view’
Part of the plan’s high-level scope is because of how the federal government plans to dole out the funding.
The Centers for Medicare and Medicaid Services said they will award $10 billion a year between 2026 and 2030. Each year, half of that will go equally to each approved state — suggesting that each of the 50 eligible U.S. states are expected to get $100 million per year. The remaining $5 billion pot will go to states based on a more competitive grant evaluation criteria.
Agency staff think it’s likely that Vermont will receive only its share of the half promised to all states, said Jill Mazza Olson, AHS’s director of Medicaid and health systems, who oversaw the application process. The federal agency has already posted its scoring metrics that the state can judge its eligibility against.
Nevertheless, the state proposed a budget for $200 million of spending each year in part to make a bid for the higher amount. But also the state agency can’t be sure which of the proposed priorities the feds will accept as ways to spend the state’s allocation, so Olson says the agency intentionally made the application flexible.
Olson said her agency tried to build upon programs for health system transformation that the state has already set in motion largely through a 2022 law, known as Act 167, a bill focused on shoring up the state’s hospitals.
That was a practical necessity because the application needed to come together quickly: CMS released the applications in mid-September and gave states until Nov. 5 to submit them.
“It’s a really really short amount of time to develop a plan and get the kind of input that you want when you’re doing something as complex as this,” Olson said.
Still, while trying to move quickly by building off existing projects, Olson said that the agency also tried to broaden the scope beyond hospital-specific reform. Often receiving care in a hospital is more expensive than getting the same treatment in an outpatient clinic or independent facility.
“If we’re going to have less care in hospitals, we’re going to need more care somewhere else,” Olson said. “There are other providers who we haven’t really engaged with in the same way on transformation.”
Specifically, the application identifies investments in staff, technology and supplies for nursing homes, home health care, community mental health and substance use clinics, as well as through increased support and training for EMTs and paramedic emergency response teams.
Garlick, the UVM professor, specifically pointed to training programs for licensed nursing assistants and supporting primary care as good ideas for ways to strengthen the delivery of rural health care.
“There are also outside-the-box considerations, including grants to increase the housing stock available to health care workers, which show the state is taking a holistic view of the problems related to health care finance,” he said.
A far bigger federal challenge
Health care officials remain clear-eyed about the importance these funds can have in boosting a system in such dire straits.
“Vermont’s healthcare system, including all provider types, remains under significant financial strain,” Foster, the care board chair, wrote in a Friday email to VTDigger. “We are seeing many service line closures and disruptions to patient care. Hospitals are expected to continue to experience great financial pressure at a time when Vermonters cannot afford to pay more for healthcare.”
Foster wrote that he was optimistic that Vermont’s application for the program would garner support, adding that he was encouraged by its recognition of the importance of preventative care and community-based providers. “Vermont has committed to intentional and meaningful health system transformation, and these critical funds would bolster our ability to transition Vermont into a sustainable and modern health system,” he said.
Still, strong headwinds remain against the rural health care system across the country as well as in Vermont.
The changes to Medicaid enshrined in the big budget reconciliation President Donald Trump signed into law this July could result in a $137 billion loss to rural hospitals over 10 years, an analysis by the health care news organization KFF found. Comparatively, this five-year $50 billion rural health transformation grant, also included in that law, cannot balance the scale.
“The dollars that are available to us are really addressing a different set of concerns than the dollars that we’re losing. This is an opportunity, and we want to use this opportunity, but from a policy perspective it doesn’t make up for [other losses],” Olson said.
Those losses don’t include the potential drop in income that rural hospitals can expect to come as a result of the loss of some of the federal subsidies for plans purchased on Vermont Health Connect, the state’s Affordable Care Act marketplace. Thousands of Vermonters are expected to reduce or entirely drop their insurance due to the increased expense.
The KFF authors also point out another imbalance of this funding opportunity that Vermont officials are also keenly aware of: While the changes to Medicaid would require future congressional action to ever reverse the cuts, this federal funding opportunity is finite. After five years, it is gone.
“It’s one-time money, so we have to think about how we can invest in ways to sustain it or turn things on and off,” Olson said.
It’s an opportunity, she sees, to strengthen the system at the root, to do things like invest in concrete pieces of equipment — ventilators, mobile care technology — or programs that will have long dividends for the state, like education and training for the health care workforces.
She is wary of seeing it as the catch-all solution for all the challenges the system is facing.
“The rural health transformation grant is not our entire healthcare system or all the things we’re doing on healthcare reform,” she said. “It’s an opportunity that we want to make the best of, even if it does not solve all of our problems.”
Correction: A previous version of this story misidentified Jill Mazza Olson.