Idaho cuts doctor pay rates for Medicaid. More cuts could come, Health and Welfare says.

Idaho will cut reimbursement rates for providers who treat Medicaid patients by 4%. 

The cuts — coupled with another Medicaid program set to end soon — could push some doctors’ offices to stop accepting Medicaid, one health leader says. State health officials say the cuts are meant to reduce rapidly rising Medicaid costs, but more cuts could come. 

The Idaho Department of Health and Welfare told medical providers about the cuts Friday. A week earlier, Idaho Gov. Brad Little ordered state agencies to cut budgets mid-year by 3% ahead of an $80 million projected budget shortfall.

Before the One Big Beautiful Bill Act, Idaho braced for federal Medicaid cuts. But not this change.

In a letter announcing the Medicaid cuts, Idaho Medicaid Deputy Director Juliet Charron said Medicaid’s budget is projected to grow by 19% — more than twice as sharp as state lawmakers on the budget committee anticipated when they set the budget. 

Health and Welfare “must take action to reduce the (trustee and benefit) trendline, which is driving the budget growth,” she wrote. Over the coming months, Health and Welfare “will continue to evaluate the need for additional actions” and “will keep providers and stakeholders apprised of any next steps.” 

Medicaid, which already pays less than other health insurance, is a largely federally funded public assistance program that covers people with low incomes, disabilities, pregnant moms and some seniors. About 354,000 Idahoans are enrolled in Medicaid, figures from the Department of Health and Welfare show. 

The cuts could push Idaho Medicaid patients into an “access to care crisis,” said Idaho Medical Association CEO Susie Keller.

“This additional 4% payment cut on top of an already major funding cut will likely push many physician practices over the edge,” she told the Sun in a written statement. “And if this happens, Idaho Medicaid patients will face an access to care crisis, especially in rural and underserved areas of the state.”

Rep. Josh Tanner, a state lawmaker from Eagle who serves in Republican legislative leadership, acknowledged the cuts put providers in a tough position. But he said he wasn’t sure if the cuts would be enough. 

The Idaho governor’s office could not be immediately reached for comment. Idaho Reports first reported on the Medicaid cuts. 

How the Medicaid provider cuts work

Starting Sept. 1, Medicaid will cut reimbursement rates for all provider types and services by 4%. Here’s how that will work, according to Health and Welfare’s letter:

• The providers: That includes hospitals, nursing and intermediate care facilities, home and community-based services for people with disabilities, hospice, ambulatory surgical centers, school-based services and more. Pharmacy benefit rates will also face 4% cuts. Tribal providers will be exempt from the cuts, since they are “reimbursed entirely with federal funds when serving tribal members.” 
• Managed care: Payments to private companies that manage Medicaid benefits will also be cut by 4%. The cuts to those payments, called capitation rates, may come through “provider rate reductions or changes to optional covered costs.” Some Idaho Medicaid services — like mental health care, medical transportation and dental care — are run by private managed care organizations. Idaho hopes to shift all Medicaid benefits to managed care by 2029, under a state law passed this year. 

Medicaid is trying to identify any opportunities to save funds internally on operating expenses and contracts, Charron wrote. But since 96% of Idaho Medicaid’s budget goes to trustee and benefit costs, which is fueling budget growth, “it is not possible to offset budget increase through internal actions alone,” she wrote. 

Waiting until the Legislature meets in January could have led to steeper cuts, wrote Charron, who will become the director of the Department of Health and Welfare next month. 

Health and Welfare “has been evaluating this trend and started to examine the need to address the increase earlier this summer, with the anticipation of needing to take action within the (state fiscal year),” agency spokesperson AJ McWhorter told the Idaho Capital Sun. 

He said many other states are seeing “unsustainable growth trends in Medicaid” and are considering or have made similar cuts. North Carolina and Washington recently announced Medicaid rate reductions, he said. 

Health and Welfare estimates the cuts will save $36.8 million in fiscal year 2026, McWhorter said.

If future cuts are needed, the Idaho Department of Health and Welfare plans to focus on having little or no impact on services, McWhorter said.

“Should we see continued growth in areas, we will examine necessary options in coordination with these offices with the goal to continue to provide accessible care to Medicaid covered individuals,” he said. Health and Welfare “is evaluating potential general fund reductions agency-wide across all divisions and programs, with the focus on little to no impact to services for Idahoans.”

Some Idaho doctors were already ‘at a tipping point’ from Medicaid cuts, Idaho Medical Association CEO says 

Idaho doctors were already bracing for a Medicaid primary care program, called Healthy Connections, to end following a Medicaid cost cutting law passed by the Legislature this year. Providers might have to limit or stop seeing Medicaid patients when the program ends, the Idaho Statesman recently reported. 

“This impending significant revenue loss has caused many practices to evaluate their ability to continue to care for Medicaid patients,” Keller, with the Idaho Medical Association, told the Sun. “Some physicians are at a tipping point and are forced to consider reducing office hours, letting go of clinical staff, or other measures that could limit patient access to care.”

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Asked how the Idaho Department of Health and Welfare would retain providers under the new cuts to provider pay rates, McWhorter said the agency must submit a plan to federal regulators after the public comment period on the cuts ends.

Health and Welfare “values our provider network and access to care for participants,” he said.

Idaho Council on Developmental Disabilities Executive Director Christine Pisani said cuts to school-based Medicaid services mean special education students won’t have the same access to public schools.

The council hopes that Medicaid “has planned for additional oversight of seniors and people with disabilities when services are cut and people are displaced,” she added. 

Idaho Hospital Association Vice President Toni Lawson said the situation will be difficult.

“We appreciate Governor Little acting now so that the impact would not be worse later,” she said in a written statement. “Like the Governor, Idaho hospital leaders are grappling with how best to deal with less than expected revenue. And like the Governor, Idaho hospital leaders will have to make some tough decisions on where to allocate scarce healthcare resources in their communities.”