Gov. Butch Otter told reporters at the Capitol Thursday that the federal government could yank some of its matching funding for the Medicaid program if lawmakers don't move to create a health insurance exchange, a provision of the 2010 federal Affordable Care Act.

One national health policy expert doubts Otter’s claim.

John Graham, senior medical policy researcher with the Sacramento-based Pacific Research Institute (PRI), said the Idaho governor is off-base with his assessment of the situation. "I'm quite certain it's not in the law," Graham said. "This is the first time I've heard of it." PRI describes itself as a non-profit advocate for personal responsibility and individual liberty.

Graham wouldn't speculate as to the political reasons behind Otter's claim, but did suggest that the Idaho governor might have some misinformation. "Maybe he's confused," Graham said. "If they (Otter's office) could cite the part of the bill it's in, I'd be more confident."

But as for Idaho losing Medicaid money if it doesn't create an exchange, Graham says that notion's bunk. "No one else has ever heard of it," he said. "I don't know where he's making this up from.”

The governor, meeting with reporters at the annual legislative preview, said that he's heard that the state could lose a large amount of Medicaid funding – known as the Federal Medical Assistance Percentages, or FMAP -  if the exchange isn't created this year, a move that could have dire effects on Idaho's budget. As it stands, the feds pay about 70 percent of the state's Medicaid budget and Idaho pays the rest. Otter told reporters that he believes the state could see an even split with the federal government without the exchange.

But where did Otter get the information? His spokesman, Jon Hanian, told IdahoReporter.com Thursday the two state departments in talks with the federal government about exchanges, health and welfare and insurance, have said as much.

Hanian was quick to clarify, however, that the threat of the loss of funds isn't material quite yet. "The consensus was if we do nothing there is a possibility we could see a change in the FMAP ratio from the current 70-30 match to a 50-50 match or anywhere in between," Hanian said. "That is part of what the governor was referring to this morning."

If Otter is correct, the loss of the funds could blast a hole in budgets for years to come. The Medicaid program is asking for $1.9 billion in funds for fiscal year 2013 and, of that, more than $1.3 billion in federal dollars. Otter said the even split for Medicaid could cost Idaho $300 million more in state funds each year.

There is some amount of interplay between the exchange and the Medicaid program, but Otter’s reference to a possible loss of $300 million in federal funding for the program is the first time that information has been presented. Through the exchange system, those with qualifying incomes will be shuffled into applying for Medicaid instead of private insurance and the same year that the exchanges are expected to be operational - 2014 - is also the same time when a good deal of newly-eligible Idahoans can come on the Medicaid roles, though the feds are picking up 95 percent of their cost for at least four years.

Dick Armstrong, head of the Idaho Department of Health and Welfare, told lawmakers last year that the new eligibility guidelines could put 100,000 more Gem State residents on the Medicaid program.