Idaho still has a budget problem. Despite significant progress on the spending front in the 2025 legislative session, the biggest government program with the biggest budget in Idaho’s history, Medicaid, went unscathed. 

Overall, the fiscal year 2026 (FY26) Medicaid budget appropriation was $5.25 billion, 37% of the $14.1 billion state appropriation for all programs in Idaho, including education, public safety, and every other function of state government. Just one program, Medicaid, dominates Idaho’s budget. 

Within the overall Medicaid budget, the problem centers on one major issue: expanding Medicaid to able-bodied adults in FY20. It was sold to Idahoans on a promise to cost just over $400 million. And now, in this budget, just five years later, it will cost over $1.3 billion. The time is long overdue to repeal the expansion of Medicaid to able-bodied adults and return to budget sanity.

The Medicaid budget bill S1201, with all its excess and bloat, garnered 59% of the overall votes in the Legislature. A majority of the Republicans in both chambers voted for the bill.

Let’s examine why this happened and the implications for Idaho.

The proponents of this unruly budget relied on a number of messages opponents could not overcome. Here are their claims, along with some reality-checks for answers:

1. Medicaid is an entitlement program, and “we” have to fund it as long as it exists. However, it would be a simple fix to run policy bills that could change who is eligible.
2. “The budget was really a maintenance budget.” In truth, the budget was 11.5% higher than the prior year, and the enhancement portion was a $674 million increase over the maintenance portion.
3. We passed a reform bill with H345 to save $15.9 million. This savings of $15.9 million was from a $5.25 billion budget, about three tenths of one percent. According to the big spenders, this small reform bill made it okay to ignore the $674 million enhancement this year (S1201).
4. Federal money, which makes up 66% of the overall budget, is just our federal taxpayers’ dollars coming back to Idaho. This is the biggest laugh line. For starters, if the federal government is running a $2 trillion annual budget deficit, it is clear that “we” Americans are getting back more in total than we are paying into the federal coffers. But more specifically, Idaho is a net tax recipient state, meaning that we get more than we pay in. It is not possible to bemoan federal fiscal incontinence and then support a program that is one of the biggest contributors to it. 

Now for the rest of the story

There are only three ways to reduce the explosive growth of Medicaid: 

1. Reduce the number of people on the program, 
2. Reduce the services they receive, and/or 
3. Pay providers less for those services. 

To truly begin to reverse the excess budget, there must be some combination of those three changes. The Idaho Freedom Foundation (IFF) has talked about this before, and we look forward to the day when the Legislature tackles these core issues.

Let’s look at reducing the number of people on Medicaid. The most obvious target for reducing the number of people receiving services is to reduce services for able-bodied adults who were added during the Medicaid expansion in FY20. This cohort of roughly 99,000 of the 349,000 on the program are not the disabled, the children, or the pregnant women that people think of when they think of the most vulnerable. This group is mostly single, able-bodied adults. 

House Bill 138 (H138) was a thorough reform bill targeting the able-bodied recipients, and had the reforms not worked as intended, the bill would have triggered a full repeal of Medicaid for able-bodied adults. Sadly, although it passed the House, Senator Van Orden, Chair of Senate Health and Welfare, refused to give it a hearing. The budget just for the expansion population was about 26% of the entire budget. Meaning that up to $1.36 billion could have been saved with H138. Had the reforms worked to rein in spending, at least $100 million would have been saved.

Other avenues for savings include reducing services, which could include pharmacy benefits and dental benefits. But no policy bill was brought forward. All the services provided under the Medicaid program went unquestioned and unchallenged for another year.

Finally, paying providers less would be a reasonable way to cut costs and the budget. But doing so risked the ire of the hospital association and various medical providers. So, changing provider payment rates did not happen either.

There were other unanswered questions, and the final debate on Medicaid dodged them. A document was provided to rebut IFF’s original analysis of the budget, and it is instructive on what defenders of this gargantuan program think. Let’s return to some of the details here. 

1. The Medicaid Management Information System (MMIS) cost was estimated at $186.6 million over seven years back in 2023. What was never answered was why the appropriation for the last three years at over $394 million is necessary. The Legislature was told the state share was only 10% of the cost at around $17 million. This means we should ignore federal funds that are driving the national debt toward $37 trillion and ignore the appropriations generally. We were simply told that the program was “on budget,” not told what the projections are now. The answer is that the Legislature is being asked to appropriate and then revert funding each year and then appropriate the funds the next year. So, although the actual expenditures have barely begun, the money pot has to be kept full to ensure that money is ready to flow. Historically, this speaks to the indifference when 90% of a program is federally funded, so legislators need to keep an eye on MMIS.
2. IFF was unduly criticized for pointing out that the reform bill, House Bill 345 (H345), booked all of the savings as a given in the budget. Yes, it is true that the net savings for FY26 were estimated at $15.9 million, and the new staff headcount was not needed until FY27, but here is the rest of the story. The savings include getting nearly $14.5 million of co-pays from an entitlement population and getting federal waivers approved for work requirements. And the department will need 17 more staff to do all of this by FY27. We supported the reform bill H345 as a fallback to the reform with real teeth, H138. But we won’t fool ourselves or anyone else into believing that these savings are anything but small and optimistic.
3. The Hospital Assessment Fund line item (also known as the Upper Payment Limit) was described as a self-assessment by hospitals to keep them whole. However, this ignores the key points: 59% of this line item is new federal funds, and the entire process has been described as “Medicaid Money Laundering” by Brian Blase in a detailed report.
4. Finally, the Medicaid population is forecast to increase by 15,476 people from FY25 to FY26. Based on the cost projections in the Legislative Budget Book, these additions should cost about $220 million. It’s simple math: 15,476 people times $14,221 per person per year. Instead, the population forecast adjustment line item contained $220 million and an extra $156 million, meaning a total of $376 million for reasons that were not explained. The real danger here is that over budgeting will send excess funds into the Medicaid Stabilization Fund. And the General Fund portion will not be reverted back. The silly notion put forth that we have to “pay our bills” was used to justify providing the huge appropriation up front. Bills are paid when due, not based on forecasts.

All of this to say that Medicaid has not been reformed — not even close — and it will bedevil the Idaho Legislature and crush other budget gains until one simple reality is faced. The able-bodied adult population must be removed from the Medicaid rolls. Every other avenue for reform has failed. There is no other alternative.  Conservatives should simply push for the repeal of Medicaid expansion. The system is impervious to any other reform!