Last week, IdahoReporter.com first reported that there was no connection between the creation of a state-based health exchange and a possible loss of Medicaid funding, even though Gov. Butch Otter suggested there might be.

This week, Otter has reversed course, telling the Associated Press he misspoke at the Jan. 5 legislative preview. "I must have left the impression it was the insurance exchange," Otter told the AP Wednesday. "That's simply not right."

That’s good news for the fiscal business of the state, because Otter said the feds might threaten to drop the matching rate for the Medicaid program from 70/30 to 50/50, causing Idaho to need as much as $300 million more for the program annually.

Here’s video of what the governor told reporters about the interplay between the exchange and Medicaid funding:

One key lawmaker affirmed to IdahoReporter.com no such link exists.

House Health and Welfare Committee chairwoman Janice McGeachin,R-Idaho Falls, has spent time since the last legislative session studying the health exchanges and how they are to operate within the state. She didn’t say Otter intentionally misled reporters last week, but she suggested that maybe he’d confused some of the issues.

“I’ve never heard any such threats,” McGeachin said. “I do believe Gov. Otter had some of the issues minced up in his comments there.”

It is true that if Idaho does nothing to implement some of the changes required by the 2010 federal health reforms that the Medicaid program could lose some of its funding, but not in the way the governor explained.

The state is required to upgrade the technological system that handles and processes Medicaid enrollees so it can work within either a state or a federal health exchange program. Essentially, McGeachin said, the computers in the state’s Medicaid program need to be ready to “talk to” the systems handling the exchange.

If the state does not comply, at least in that area, the lawmaker says funding may be hurt. But even then, she points out, it’s still a big “maybe.”

“We could be putting our Medicaid programs at some risk if we don’t meet this requirements, but … it remains to be seen what that might be,” McGeachin said.

The state is planning the necessary work for the Medicaid system to integrate with whatever exchange program is formed. The Idaho Department of Health and Welfare’s 2013 budget request includes $3.84 million in state money to prepare for federal reforms.

Otter’s health care task force endorsed an initial outline of how the exchange will operate, at least in its beginning stages, last week, but it’s unclear when the Legislature will take up the issue.