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Federal involvement complicates Medicaid cuts

Federal involvement complicates Medicaid cuts

Idaho Freedom Foundation staff
January 19, 2010

Idaho lawmakers looking to trim the state budget face challenges with cutting Medicaid due to federal money funding the system and federal rules on the program.

Medicaid is a joint federal and state program that pays for health services for those who can’t afford it, especially for low-income families and those with development disabilities.  Medicaid payments make up 79 percent of the Department of Health and Welfare’s (DHW) $2 billion total budget.  The federal government pays for 78.4 percent of Medicaid using a dollar-matching formula.  That means any additional cuts to Medicaid funding coming from Idaho lawmakers will be magnified by a reduction in federal money coming to Idaho.  However, with Idaho’s bleak budget picture, those cuts may be necessary.

“If you don’t have the money, cuts are your only option,” Jerome Republican Rep. Maxine Bell said.  She said cuts will be difficult, because many people who recently lost their jobs are looking for services from Medicaid and other programs.  “It’s a vicious circle,” she said.  Bell and other Republican leaders oppose raising taxes for Medicaid and other health services.

The federal government is covering an additional share of Medicaid costs for now, thanks to the stimulus program approved last year by Congress.   Normally, 69.8 percent of Idaho’s costs are covered.  With that extra matching money comes limits preventing Idaho from reducing Medicaid eligibility.  That additional funding is scheduled to run out at the end of December, but DHW’s Medicaid Administrator Leslie Clement say it could be extended by Congress.   Clement called the potential reduction a cliff.  Gov. Butch Otter recommends scaling that cliff by taking $68 million out of the tobacco Millennium Fund.

“To reduce state dollars and the corresponding federal portion is daunting,” Clement said.  She said that recent cuts in recent holdbacks of $11.4 million from state funds and $54.8 million overall to Idaho health care providers have been hard to swallow but prudent.  “We don’t believe that we’ve crossed that line where we’ve seen harm… My concern is how much more we can do with confidence that there won’t be harm done.”

Boise Democratic Sen. Nicole LeFavour said those cuts harmed the state, because most Medicaid money goes to health care providers.  “That’s 54.8 million out of the economy,” she said.  “That’s a pretty staggering loss to the economy.”

Clement told lawmakers that the state has limited flexibility in where to make Medicaid costs, dealing with the scope, amount, and duration of health care benefits offered.  “We have to be careful what we get rid of, and what the resulting consequences might be,” she said.  Majority Republican lawmakers have said cuts will be coming, but have yet to say exactly where the Medicaid budget will be reduced.

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