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Lawmakers waste $161 million in taxpayer funds on Medicaid ineligibles cut from the program

Lawmakers waste $161 million in taxpayer funds on Medicaid ineligibles cut from the program

Niklas Kleinworth
April 19, 2023

This post was updated on April 25, 2023 at 9:18 am to correct a calculation error. The legislature budgeted for the removal of 13,000 ineligibles from the rolls meaning that of the 27,582 already cut from the rolls, 14,582 were unaccounted for in the FY2024 budget. This cost taxpayers $161 million more than necessary, not the previously referenced $282 million.

The Legislature wasted hundreds of millions of taxpayer dollars to fund beneficiaries who are not even on the program — money that could have gone to tax relief.

Three weeks after lawmakers voted to remove just a fraction of ineligible beneficiaries from the program, new data reveals that legislators overbudgeted for Medicaid by an estimated $161 million. This means that conservative lawmakers and Idaho Freedom Foundation analysts were correct in their assessment that more cuts could have been made, despite opposition from the leftist establishment. 

Historically, Medicaid spending has grown faster than spending in other government programs, but this trend was accelerated by the combined effects of Medicaid expansion and pandemic policies. The Idaho Freedom Foundation has warned Idahoans about this issue for some time now. However, years passed as lawmakers acknowledged the problem and failed to act, even though the program’s expenses grossly outpaced projections.

Medicaid expansion took effect in 2020, providing government health coverage for able-bodied, childless adults. Bringing more people into Medicaid  was originally projected to cost $412 million per year, but it will now cost more than double that, with the governor’s recommendation for the 2024 fiscal year breaking $1 billion.

While bringing more people onto Medicaid gave the program an oversized budget, implementing federal pandemic policies at the same time made matters worse. 

The federal overreaction to the pandemic forced many Americans out of the workforce and onto government welfare programs. With Medicaid co-funded between the federal government and the states, lawmakers in Washington, D.C., offered to pay a larger percentage of the costs to help keep states afloat. The catch was that states that took the increased federal funding had to implement a program called “Continuous Enrollment,” or “Medicaid Protection.” Under this scheme, states could not remove anyone from the rolls who had not voluntarily disenrolled, died, or moved out of state. Many people who were suddenly eligible for Medicaid after losing work during the pandemic eventually regained employment or private health coverage, but did not disenroll from the program once they became ineligible. This kept the rolls filled with beneficiaries who should not be collecting government benefits.

The Idaho Department of Health and Welfare (IDHW) estimates that there are nearly 154,000 on the rolls whose eligibility is unknown. For perspective, the department estimates that the population of Medicaid and Children’s Health Insurance Program (CHIP) participants is 450,000. This means that nearly 1 in 5 Idahoans are on Medicaid, with 1 in 3 of those participants potentially ineligible for the benefits they receive.

These participants would have remained on the rolls until the conclusion of the federal public health emergency. But the passage of the federal Consolidated Appropriations Act last year allowed states to start cleaning ineligible beneficiaries from their Medicaid rolls starting April 1.

Despite this federal policy change, the IDHW’s original budget proposal accounted for virtually no reduction in enrollment. Conservatives pushed back on this $4.7 billion monstrosity, pointing out it would be unlikely that virtually all those under Medicaid Protection would remain eligible after the redetermination process.

Conservative legislators, like Rep. Josh Tanner of Eagle and Sen. Scott Herndon of Sagle, proposed an alternative budget, estimating only half of those on Medicaid Protection would remain in the program. This reasonable proposal would have saved about $829 million in spending. The establishment rejected this proposal, however, and opted to send the full $4.7 billion request to the House floor, where it failed by a single vote.

After the Joint Finance-Appropriations Committee reconvened over the issue, conservatives appeared to work out a compromise that would have budgeted for a cut of 40,000 ineligible enrollees, saving taxpayers $442 million. Instead, leftist legislators like Rep. Britt Raybould, R-Rexburg and Sen. Julie VanOrden, R-Pingree, passed a budget that cut funding for a mere 13,000 ineligibles. This move saved $152 million, well short of what was possible.

Some legislators would have harmed taxpayers even more by opposing any cuts at all. Though he opposed the final version of the budget, Rep. Rod Furniss, R-Rigby, debated in committee and on the House floor in favor of delaying cuts until next year.  He claimed that this is due to a 12-month lag in claims reporting, which required the state to fund services administered last year with the new budget.

Rep. Furniss’ assertions were patently false. IFF analysts noted that not all claims accumulate over 12 months for all providers. This means that there is no 12-month delay that would prevent the Legislature from making cuts right away. These arguments, though faulty, were still persuasive enough to sway some lawmakers to vote for modest cuts over more aggressive proposals from conservatives.

With a price tag of $4.5 billion, the Medicaid budget for the 2024 fiscal year is the largest spending bill ever to pass out of the Idaho Legislature. Much of that funding will be wasted on paying for ineligible beneficiaries who simply should not be on the welfare rolls.

As of this writing, IDHW redetermined the eligibility of 43,419 beneficiaries. Of this group, the department removed 27,582 people who were verified to be ineligible to participate in the program. This constitutes an ineligibility rate of 64%, meaning that even conservatives underestimated the amount of overspending.

Though some legislators argued that excess funds will be reverted to the General Fund in the 2025 fiscal year, their argument misses the point. The Medicaid program makes no attempt at cost containment. Flooding the program with funding only perpetuates fiscal irresponsibility. Arguing for a several-hundred-million dollar reversion next year only transforms the program into a state piggy bank for tax dollars that should be in the hands of working Idahoans now, not in a couple of years.

If not for persistence from conservative lawmakers and research from the Idaho Freedom Foundation to draw attention to this issue, Idahoans would have overpaid for Medicaid by another $152 million. While this could be considered a success, Idahoans are still overpaying for the program by hundreds of millions of dollars when it did not have to be that way.

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