Hospital officials say the Shumlin administration's decision to rescind a slight increase in the Medicaid reimbursement rate doesn't bode well for the governor's signature single payer health care initiative.

The retraction of a 1.6 percent increase in Medicaid rates for the first half of fiscal year 2015 enabled the governor to identify a total of $10.8 million in General Fund spending.

Level funding Medicaid slices $3 million out of the General Fund budget, but also means the state will relinquish $4.1 million in federal match money, for a total of $7.1 million reduction in provider payments.

Beatrice Grause, CEO of the Vermont Association of Hospitals and Health Systems, says providers banked on the additional money. Hospital administrators worry that under a single payer system, health care expenditures would be subject to the political state budgeting process.

The cut for fiscal year 2015, Grause says, underscores the "potential risk to patients of investing more health care financing authority in state government."

Al Gobeille, chair of the Green Mountain Care Board, says leaders in Montpelier don't seem to grasp the broader impact of low Medicaid reimbursement rates on the health care system.

The board and other stakeholders must do a better job explaining to elected leaders how the cut affects commercial rates as well as many of the social service nonprofits the state relies on to flesh out its system of care, he said.


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"It's not thought of as funding health care for all, it's thought of as an incremental increase for a program," Gobeille said.

The cuts have an even deeper impact on nonprofit organizations that rely heavily on grants through Vermont's global commitment Medicaid waiver. The waiver gives Vermont discretion in how Medicaid money is spent.

When nonprofit mental health programs lose money and drop services, patients don't get the preventive care they need. The larger health care system also suffers because more patients seek costly emergency room care.