Medicaid contract is stalled after a lawsuit. Now, Idaho officials are delaying privatization.

After an Idaho judge delayed the rollout of an Idaho Medicaid contract, a top state health official said the state is delaying the shift to Medicaid benefits being run by private companies.

The contract is among several healthcare contracts overseen by Idaho state government that have led to lawsuits in recent years. But this dispute comes after the Idaho Legislature passed a bill in 2025 directing the state’s Medicaid benefits to shift to being privately run, a common setup in the U.S. called managed care.

Soon after a judge issued a temporary restraining order in response to the latest lawsuit, delaying the launch of the new contract, Idaho Medicaid Administrator Sasha O’Connell told state lawmakers last month that the decision will delay privatizing Medicaid benefits by a year. State officials had hoped to complete that change by 2029, but O’Connell said it’s now looking like the change will take place in 2030.

“We had already eaten away at some of the buffer that was built into our timeline. And so this means that we are at the point now of pushing back comprehensive managed care implementation by a full calendar year,” O’Connell told lawmakers on the Medicaid Review Panel on March 26.

The Medicaid contract that is delayed deals with a major function of the program: processing medical claims for more than $300 million in payments each month. The company Gainwell Technologies, which had previously run the contract, sued the state and the new contractor in August 2025 over the state’s decision to award the contract to a competitor company, Acentra Health.

The Idaho Department of Administration, which handles contracts for state government, declined to comment, saying the agency doesn’t comment on lawsuits.

A spokesperson for Acentra Health, the new contractor, declined to comment on the lawsuit.

“We are proud to work with over 40 states to help them maximize Medicaid dollars with modern, configurable technical solutions and clinical programs that accelerate better health outcomes,” Acentra Health spokesperson Lindsey Rodarmer said.

A spokesperson for Gainwell said the company appreciated the legal review.

“We appreciate that the court is reviewing this matter as part of the state’s established procurement process,” Gainwell spokesperson Natalie Podgorski said. “Our goal has been to support a fair and transparent process that provides Idaho residents with the strongest Medicaid system possible. We value our partnership with the State and remain committed to working collaboratively to improve services and outcomes for Medicaid members and providers. We remain committed to helping advance the State of Idaho’s goals.”

Why the contract delay is stalling managed care

Right now, Idaho Medicaid already uses managed care — somewhat. But it’s more of a patchwork approach, where some services are managed by the state health department, some by managed care organizations, and some by doctors’ offices.

To privatize more Medicaid benefits will require a lot of prep work, state officials say. Here’s how the contract legal dispute will delay things.

Before the lawsuit, O’Connell told the Idaho Capital Sun in a statement that state officials were hoping the federal government would certify the new contract for Medicaid information systems by July 2028. “This would have allowed providers and the State to work through any implementation issues before the target go-live of comprehensive managed care on January 1, 2029,” she said.

But the legal delay, she suggested, leaves little time for people to get used to the new system. 

“Other options are not feasible as having our managed care organizations, providers, and participants go live with one MMIS system, only to then transition to a new system shortly thereafter would risk continuity of care, overburden the provider network, and cost more for taxpayers,” O’Connell said. 

Process used here looks like one the Legislature banned, judge writes

In its lawsuit, Gainwell alleges the state repeatedly changed the rules for the contract award through a noncompetitive bidding process.

The Department of Administration used a process that allows the state to borrow the results of another state’s competitive bidding process, and tweak it to localize needs — without using a competitive bidding process. In this case, Idaho borrowed Montana’s process for a similar contract through a process called a “cooperative purchasing agreement.”

Idaho 4th District Judge Nancy Baskin on March 17 issued a temporary restraining order, delaying the contract rollout. A decision is yet to be made on whether to extend that legal block until the lawsuit is decided, which is called a preliminary injunction.

But Baskin criticized the state’s process to award the contract in a ruling on March 2.

“The ‘process’ used for the … contracts does appear to be based on good intentions by (the Idaho Division of) Purchasing, but it also appears to have been ad hoc and was not an established, long-standing procedure used by (the Division of) Purchasing or approved via the rulemaking procedures provided in the statute,” Baskin wrote in a ruling. “In fact, (the Division of) Purchasing changed its own processes to be used during the ad hoc process to select a vendor for the … contracts.”

And she wrote the procedure the state used in this contract “is arguably the very procedure” that the Legislature repealed in 2024. 

Attorneys for the Idaho Attorney General’s Office, which is representing the Department of Administration in the lawsuit, say the state used an established process that is in line with state law. They argued that Gainwell is “asking the Court to second-guess the State’s purchasing decision.”

“In this case, Gainwell’s argument that being deprived of a fair opportunity to compete for a contract assumes that Idaho issued a competitive solicitation for the contract at play in this case. … There is no legal injury where there is no violation of Idaho law,” the state’s attorneys write. “To put it bluntly, Gainwell had no right to a competitive solicitation or competitive procurement.”

This year, the Legislature widely passed a bill with several reforms to the state’s government contracting process, which is called procurement. The bill, House Bill 889, takes effect July 1.