Idaho Governor Signs $22 Million in Medicaid Disability Service Cuts Into Law
MOSCOW, Idaho — Idaho Gov. Brad Little has signed legislation that cuts nearly $22 million from Medicaid disability services, a move that will reduce reimbursement rates for residential habilitation providers serving some of the state’s most vulnerable residents — including families across Latah County who rely on those services.
Little signed House Bill 863 into law Thursday after the measure cleared both chambers of the Idaho Legislature. The bill reduces provider reimbursement rates for residential habilitation services by $21.8 million in the next fiscal year. A companion measure, Senate Bill 1435, passed the Idaho Senate the same day and officially enacts those budget reductions.
The cuts are part of a broader effort by Idaho lawmakers this year to address a state budget shortfall. The Legislature enacted deep, across-the-board spending reductions across multiple areas of government — though it largely shielded Medicaid from the worst of those cuts. The disability services reductions represent the primary exception to that approach.
Where the Cuts Come From
House Bill 863 targets pay increases that the Idaho Legislature approved in 2022 for residential habilitation providers — facilities and programs that assist individuals with intellectual and developmental disabilities in daily living skills. Those earlier raises were intended to expand services and implement a new budget structure, but that plan was never carried out due to a court order stemming from the KW v. Armstrong lawsuit, according to the bill’s fiscal note.
Because the expanded services never materialized, lawmakers behind the bill argued the elevated reimbursement rates were no longer justified. Supporters of the legislation note that even after the new reductions take effect, providers will still be reimbursed at rates approximately 33% higher than they were four years ago.
However, critics of the cuts point out that when combined with Medicaid reimbursement rate reductions made in the prior year, the cumulative impact amounts to a 10% cut for residential habilitation providers — a reduction that advocates say will squeeze providers already operating on thin margins and potentially limit access to care for Idahoans with disabilities.
Earlier this year, hundreds of Idahoans gathered at the Idaho Capitol rotunda to protest Medicaid budget cuts broadly, a demonstration organized by Idaho Voices for Children ahead of the governor’s State of the State Address in January. The turnout signaled the depth of public concern over the direction of Medicaid funding in the state.
A Difficult Choice for Idaho Lawmakers
The path to passage for this legislation was not straightforward. The bill faced two procedural delays in committee before moving forward, reflecting the difficult position many Idaho lawmakers found themselves in as they worked to balance the state budget.
Many legislators framed the decision as a choice between two undesirable options: repealing Idaho’s Medicaid expansion — which covers tens of thousands of lower-income working Idahoans — or cutting from disability services. Legislative leaders, including the chairmen of the House and Senate Health and Welfare committees, ultimately backed the residential habilitation cuts as the less damaging path forward.
Rep. John Vander Woude, R-Nampa, who shepherded the legislation, faced resistance within his own committee before the measure ultimately advanced. The bill’s sponsors maintained that the reimbursement rollback was defensible given that the original justification for the 2022 rate increases — service expansion — never occurred.
Governor Little had included the Medicaid disability cuts on a list of reductions he recommended the Legislature consider as part of his overall effort to bring the state’s budget into balance.
What Comes Next
For Latah County residents and families who depend on residential habilitation services, the practical effects of these cuts may become clearer in the months ahead as providers adjust to the new reimbursement rates in the upcoming fiscal year. Advocacy organizations are expected to continue monitoring the impact on service availability and provider capacity across Idaho’s rural communities, where access to disability services is already limited compared to urban areas.
Statewide coverage of Idaho’s Medicaid budget decisions and related healthcare policy is available at Idaho News. For more coverage across the region, visit Idaho News Network.