BOISE – With all state agencies except K-12 public schools called on by Gov. Brad Little to cut 1% out of their current year’s budget, the Department of Health & Welfare now faces a challenge involving Medicaid.

That’s because the vast majority of Medicaid spending is on providers who are providing health care services to Medicaid clients. So Matt Wimmer, Medicaid division administrator, advised the state Board of Health & Welfare that to make the cuts there, the state will have to cut payments to providers.

“For Medicaid, that’s really not possible to do unless we look at provider payments as well as our own internal structure,” Wimmer said.

He noted that payments to hospitals and nursing homes by Medicaid, the joint federal-state program that provides health care to some of the state’s poorest or most disabled citizens, grew 7% from state fiscal years 2018 to 2019, and are expected to grow another 8% in fiscal year 2020, the current year.

“And that doesn’t even count what’s happening with expansion, so that’s some pretty healthy growth,” Wimmer said.

On Jan. 1, Idaho’s Medicaid program will expand to cover the working poor who have incomes up to 138% of the federal poverty level. That’s expected to bring thousands of additional Idahoans onto Medicaid. The federal government will pay 90% of the cost for that additional population, compared to the roughly 70% share it kicks in for the existing Medicaid program.

As of Friday, about 42,000 Idahoans already had enrolled.

“We have a real strong need to be able to control that in a way that doesn’t impair the services, doesn’t have negative effects on our participants. That’s the challenge that’s set before us,” Wimmer said.

Hospitals and nursing homes currently are reimbursed through Medicaid for 100% of their allowable costs.

Wimmer’s proposal to find savings: Temporarily cut that to 90% of allowable costs, with some exceptions, including for “critical access hospitals,” which are designated rural hospitals that are the only nearby sources of care for local populations, and institutions that treat mental illness. Also excluded would be nursing facilities that offer ventilator care, because of the shortage of such beds.

“We looked at that and said those are probably the providers that are most able to bear the brunt of reductions,” Wimmer said.

The temporary cut in hospital and nursing home reimbursements would save Idaho’s state general fund an estimated $14.8 million between now and the end of the year. Wimmer said the idea would be to impose the limit only temporarily, while the department works with providers to establish a new payment method that’s based not just on costs, but also desired patient outcomes.

The change would require legislation. The department has been talking with lawmakers and providers about it, and is continuing to do so.

“We’re trying to be as collaborative as we can be,” Wimmer said. “It’s difficult, because we do have a budget hole to fill and not a lot of other ways to fill it that won’t have some really negative impacts.”

The hope, he said, is that a better payment system can be developed that “breaks that connection between just here’s your cost, we pay the cost … so we have a little bit more control over that part of our budget.”

Board members said the real answer is moving to value-based payment, rather than a fee-for-service system. Wimmer said that’s where the department is headed, with several projects already in the works to move that direction.

Dave Jeppeson, state Health & Welfare director, said, “The focus of this … is around budget reduction within the context of the current reimbursement system. … In my mind, there’s no way for us to get to value-based unless we change the reimbursement model. While the temporary reductions meet the budget need, the strategic need is this has to get to value-based.”

NATIONAL ATTENTION

Idaho’s Legislative Council argued recently over a proposal from Rep. Wendy Horman, R-Idaho Falls, to repurpose some of the state’s Office of Performance Evaluations staff to provide more budget analysis, including quick-turnaround analyses of whether state budget investments are paying off. But a prestigious national board later penned a letter against the move.

The Center for Accountability and Performance, which was established in 1996 by the American Society for Public Administration to improve public service by promoting best practices in areas including program evaluation, sent a letter from its board to Gov. Brad Little, House Speaker Scott Bedke and Senate President Pro-Tem Brent Hill. The board’s members include top officials from government, business and academia.

“During CAP’s research into best practices in these areas, we followed the work of OPE within the Idaho State Legislature, and believe that its work applies many of the best practices and compares very favorably with any independent analytical and oversight bodies in state government nationwide,” the board wrote in its letter. “Without periodic, independent, longer-term reviews of the alignment of programs with their intended missions and their cost effectiveness, it is difficult to spend taxpayers’ dollars in the most effective and efficient ways possible to achieve program outcomes, a universal goal.

“We would strongly advise you to very carefully consider any realignment or reallocation of resources associated with what we believe to be an extremely effective organization within your state legislature,” the board wrote.

Betsy Z. Russell is the Boise bureau chief and state capitol reporter for the Idaho Press and Adams Publishing Group. Follow her on Twitter at @BetsyZRussell.

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