Vermont Enacts Significant Legislation Addressing Healthcare Costs and Hospital Budgets
On June 12th, 2025, Vermont Governor Phil Scott signed S0126 into law, in which the state aims to improve quality of care and healthcare access by stabilizing healthcare costs through Medicare-based price regulation, creating global hospital budgets, and establishing a more stable and high-quality state healthcare network. The new law intends to do so through controlling costs for commercial insurance, managing hospital costs by using price caps, and overseeing and assessing administrative processes. The law tasks the Green Mountain Care Board (GMCB) with accomplishing these objectives.
Vermont's current system for hospital payment reform is primarily driven by its All-Payer Accountable Care Organization (ACO) Model, also known as OneCare Vermont. The ACO model sets a total cost of care target for a defined population of patients. This model has been in place since 2017, and the GMCB is the state's regulator, overseeing hospital budgets and payment reform initiatives. The GMCB currently reviews and approves hospitals' budgets, but this process is essentially an annual negotiation. While the GMCB can approve or deny a hospital's proposed budget, it doesn't set a hard cap on all revenue. The ACO model's incentives and shared savings/losses are the primary mechanisms for influencing provider behavior, not direct government mandates on spending.
Under the new legislation, the Board will be required to set healthcare provider rates through Medicare-based price caps by 2027, establish global hospital budgets by 2030, and create uniform payment methods. The Board may approve and establish payment methods that encourage cost efficiency, better health outcomes for underserved patients, and strong evidence-based health services.
The new law directs GMCB to establish price caps on what hospitals may accept as full payment. The caps will be based on Medicare rates, or other appropriate benchmarks, with potential adjustments to account for local cost drivers.
The Board is also required to establish standards for global hospital budgets, which set a predetermined cap on a hospital's annual revenue from hospital services. This cap guarantees a stable revenue for the hospital, though it limits the potential for increased profits due to increased services. These caps are intended to incentivize hospitals to improve efficiency, and GMCB is authorized to review hospital finances, including costs and compensation plans, and make recommendations to increase efficiency. The GMCB is required to establish a global hospital budget for non-critical access hospitals by 2028 and for state hospitals by 2030.
Additionally, the new legislation will create a statewide health care delivery strategic plan, create two new healthcare advisory committees, study the feasibility of creating an integrated clinical and claims data system, and expand GMCB’s oversight of hospital networks.
Vermont has passed other items of legislation this year that affect healthcare reimbursements and pricing. House Bill 0482 was enacted on June 5th, 2025, and allows the Green Mountain Care Board to reduce reimbursement rates to an insurance company if that insurance company is in financial distress. House Bill 266 was enacted on June 11th, 2025, and caps the cost hospitals can charge for hospital-administered outpatient drugs. Overall, Vermont has demonstrated a strong push towards limiting healthcare prices and making healthcare pricing more affordable.
This collection of bills is getting enacted while residents of the state are dealing with rising insurance costs, and healthcare facilities are struggling financially. Hospitals have voiced concerns that the effect of this legislation will further strain hospitals financially, driving more consolidation, closures, and service cutbacks. The impact of this legislation will likely be monitored by other states looking for their own solutions to address healthcare spending.
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