BOISE — The Idaho Department of Health and Welfare is recommending that $30 million in proposed Medicaid cuts be postponed for at least a year, following an unexpected boost in federal funding.
Health and Welfare Director Dave Jeppesen made the announcement Thursday during a presentation to the Legislature’s joint budget committee.
Before the coronavirus pandemic, he said, Idaho covered about 30 percent of the cost of the Medicaid program, with the federal government picking up the remainder.
During the coronavirus pandemic, however, the federal increased its payments by 6.2 percent. That meant fewer state general fund dollars were needed to provide the same level of service.
Even with the increase, though, Idaho’s share of Medicaid costs is expected to jump by about $99 million in 2022, because of a combination of higher enrollment, higher utilization rates and mandatory price hikes.
The department initially proposed $30 million in provider rate cuts and benefit reductions as a way to partially offset that increase.
“Then, two weeks ago, the Biden administration indicated it intends to extend the temporary 6.2% increase to the entirety of 2021,” Jeppesen said. “We anticipate that this will be an additional one-time net savings of $28.7 million in (the current) fiscal year, and an additional $56 million in 2022.”
Given the extra federal funding, he said, the department is now recommending that the $30 million in cuts be postponed.
“But as we look forward, we need to continue to look for additional cost containment,” Jeppesen said. “We’re committed to doing that. We will look at everything available within the current federal rules and Idaho statutes. Anything that requires legislative approval or a statute change, we will bring back to the Legislature (in future sessions).”
Rep. Ron Nate, R-Rexburg, said the upward trajectory in Medicaid costs is “disturbing.”
“We’re going from $2.8 billion in fiscal 2020 to almost $3.6 billion (in total funds) in 2022,” he said. “That’s a nearly $800 million increase in two years.”
The state’s share of that increase is about $134 million. The expanded Medicaid program accounts for the lion’s share of that.
Idaho voters approved the expansion in 2018. It extends health care access to adult Idahoans earning between 100% and 138% of the federal poverty level.
FEDERAL GOVERNMENT PICKS UP 90% OF EXPANSION COSTS
The federal government picks up 90% of the costs. This year’s original appropriation for expanded Medicaid was $403 million, so the state’s share was about $40 million.
Lawmakers didn’t want to use any general fund dollars for the expansion, so they paid for it with a combination of Millennium Fund tobacco settlement money, cost savings in other state programs and about $8.5 million from Idaho counties, who would also save millions in indigent medical costs as more people enrolled in Medicaid.
However, lawmakers couldn’t agree on how to get the $8.5 million, and the higher-than-expected enrollment and utilization bumped costs up by an additional $22.8 million.
Consequently, legislative budget analyst Jared Tatro told the budget committee that the anticipated state cost of the program will likely be closer to $70 million this year, and $80 million to $90 million in fiscal 2022.
That will be offset by at least $32 million in savings from other state programs, he said, such as Department of Correction substance abuse treatment services that the state previously paid for, but which can now be billed to Medicaid.
More offsets are anticipated as additional state services are shifted to expanded Medicaid, he said. Nevertheless, given the disruptions in the health care system caused by the coronavirus pandemic, it will be some time before the true cost of expanded Medicaid is known.
“We need to be a little patient,” Tatro said. “Right now, we know about half the cost is offset. But I think we’ll be having this conversation for another two years before we really figure out what the cost will be.”
HEALTH, WELFARE NOW BIGGEST PART OF IDAHO BUDGET
With the recent growth in overall Medicaid costs, Alex Adams, the governor’s budget director, said health and welfare services are now the largest component of Idaho’s general fund budget, surpassing K-12 education.
The governor’s fiscal ‘22 budget recommends $3.587 billion in total funds for the Department of Health and Welfare’s Medicaid Division.
That’s an increase of 15.2% over the original 2021 budget. It includes $769.8 million in state general fund support, an increase of $45.8 million, or 6.3%.
The governor is also recommending that Idaho counties pay $12.5 million toward the cost of expanded Medicaid, although the Legislature has yet to agree on a method to capture that contribution.