The Cuts Keep Coming: 4% Cut to Idaho’s Medicaid Proposed

Idaho will reduce Medicaid reimbursement rates by 4% starting Sept. 1 due to budget shortfalls.

BOISE, Idaho — Idaho’s Medicaid program plans to cut reimbursement rates to healthcare providers by 4% as the program faces budget shortfalls that far exceed legislative projections.

On Aug. 22, the Idaho Department of Health and Welfare (DHW) sent a memo to doctors who treat Medicaid patients stating that the state will reduce its payments to cover costs by 4%. The memo states the rate cuts will start on Sept. 1.

The state’s Medicaid budget is now projected to grow 19% this year, more than double the 8% increase estimated by the Division of Financial Management during the legislative session during the legislative session when the IDHW budget was passed by the Joint Finance and Appropriations Committee.

Idaho contributes approximately one-third of funding for traditional Medicaid coverage and roughly one-tenth for Medicaid expansion, with the federal government covering the remainder. The federal government covers $3.4 billion, while Idaho covers approximately $1 billion.

The increase in the budget projection, according to the Idaho Hospital Association (IHA), is attributed to the rise in the number of people visiting doctors, resulting from both population growth and rising healthcare needs. Many of them are also using Medicaid.

The proposed cuts still require a public comment period and final approval from the Centers for Medicare & Medicaid Services before they can be implemented. Federal regulations require Idaho Medicaid to submit an access analysis and monitoring plan to CMS following the public comment period.

“If Idaho Medicaid does not implement rate adjustments, service cuts would be needed to stay within our budget,” an IDHW spokesperson said.

The department declined to specify what services might be eliminated if the rate cuts are not approved.

However, some light was shed by the IHA, which represents 53 hospitals across the Gem State, from small facilities like Cascade Medical Center to the entire St. Luke’s Health System. The association said, while they appreciate that action is being taken now before it worsens and potentially leads to deeper cuts, absorbing a 4% cut won’t be easy.

Q&A with IHA’s Toni Lawson
Lawson: Our hospitals are going to have to make tough decisions, and some of them are going to be able to deal with a 4% decrease easier than others, and I think it will be most difficult for our small rural hospitals.

Brian Holmes: In what way?

Lawson: Some of our hospitals, right now, about 50% of our hospitals are operating at about a 1% margin. Some of them are operating at a negative margin right now, so every percentage counts, every percentage point. So, suddenly reducing Medicaid reimbursement by 4% will have an impact.

Holmes: I mean, are we looking at staffing cuts, are we looking at services being cut?

Lawson: Staffing cuts are always the last thing you look at because those are the people who provide care. We already struggle in Idaho to keep healthcare workers. We’re already understaffed in many areas, so staffing rates would probably be last on the list, but they’ll have to look at services as well. I think that right now, the most vulnerable areas you’ll see are labor and delivery and behavioral health services. Those are areas that already operate at a negative margin in most cases, and hospitals continue to provide those services because the community needs those services. They’re going to be faced with some tough decisions.

Holmes: If that isn’t implemented, I was told services would have to be cut. Do you have any idea what that would be?

Lawson: Well, I don’t want to speculate what they have in mind, but the services that can be cut are what are considered optional services. The optional services list includes things like vision, dental services, physical therapy, some prescription coverage, and occupational therapy.

Holmes: I guess the bottom line is, given this memo and this 4% cut, how big of an impact will this have?

Lawson: (sigh) I don’t know that this 4% cut is going to be the most impactful thing. We have so many things coming down the line right now. We have a bill from Congress that just passed that is going to have an impact on Idaho. We have insurance premiums increasing, which is going to have an impact on Idaho. We have approximately 7500 Idahoans who are going to move into the ranks of the uninsured because of the bill that passed in Congress, so it’s not that this 4% cut is going to close hospitals or cut services, but the combination of things, you know, is becoming more and more difficult to absorb.

Holmes: Just one more thing? As they say, death by a thousand cuts.

Lawson: Yeah, it’s just, I don’t know how much more, particularly our small hospitals, can take. I don’t know where the tipping point is going to be. This is a Medicaid budget issue, but if hospitals close services, they don’t just close for Medicaid patients, they close for all patients.

The financial strain is already pushing some medical practices toward difficult decisions, according to the Idaho Medical Association.

“This impending significant revenue loss has caused many practices to evaluate their ability to continue to care for Medicaid patients,” said Susie Keller, CEO of the Idaho Medical Association. “Some physicians are at a tipping point and are forced to consider reducing office hours, letting go of clinical staff, or other measures that could limit patient access to care.”

What happens in the future?
Additional cuts to healthcare funding may be forthcoming as House Republicans in Congress consider another reconciliation bill that could reduce previously allocated funds, potentially including Medicare cuts, according to an ABC report.

The association’s data reveals the precarious financial state of Idaho hospitals. While industry standards recommend hospitals maintain 200 days of cash on hand to weather crises, the reality is far different among the 53 hospitals the association represents.

One hospital had fewer than two days of cash reserves, three or four had less than 30 days, and 11 hospitals lacked sufficient funds to operate for 100 days.

The public comment period for the 4% Medicaid reimbursement cut is currently open. You can email mcpt@idhw.idaho.gov.