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Idaho watchdog agency figured out why Medicaid rates haven’t changed

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The Joint Finance-Appropriations Committee room at the Idaho State Capitol building on March 23, 2021. The powerful committee is responsible for setting the state’s budget. (Otto Kitsinger for Idaho Capital Sun)

Legislature doesn’t trust Medicaid, while Medicaid officials can’t keep up with needs

Distrust. Fear. Unrealistic expectations. Bureaucratic delays.

Those are both the causes and symptoms of a strained relationship between the Idaho Legislature and the state’s Medicaid division — a problem that has thwarted efforts for more than a decade to change how Idaho Medicaid pays for health care.

Because of this vicious cycle, lawmakers who have financial control over Idaho Medicaid don’t “fully understand the impact of their decisions,” according to a report released this month.

The report was written by the Office of Performance Evaluations — Idaho’s independent watchdog agency that conducts evaluations at the request of the Joint Legislative Oversight Committee.

Medicaid is one of Idaho’s largest health insurers. It provides health care coverage to more than 1 in 5 Idahoans. Its $4 billion budget — coming mostly from the federal government, not directly from Idaho taxpayers — pays for everything from childbirth to nursing home care.

Medicaid’s budget has more than doubled in the past decade as more Idahoans gained health insurance, a pandemic put thousands of Idahoans in the hospital, and Idaho’s cost of living surged. But the state’s Medicaid rates have remained, for the most part, stagnant.

Medicaid’s payments for adult day care and home delivered meals have not changed since 2006, the report said.

At the same time, Medicaid’s large budget makes it an easy target for spending cuts — and political fights.

“It is clear to us that Medicaid does not have the management capacity it needs to do everything that is asked of it, to manage a $4 billion program that serves 400,000 of the most vulnerable Idahoans,” OPE Principal Evaluator Ryan Langrill told the oversight committee in a hearing this month, while presenting the OPE’s findings. “The consequences of this lack of capacity are that the Legislature does not trust Medicaid administration, the Medicaid program does not serve as a good steward of the services that rely on Medicaid, and the division cannot effectively control costs.”

Idaho Health and Welfare Director Dave Jeppesen told the oversight committee he agreed with the OPE’s findings. He said that, in his own review of Medicaid rates, he found one that was unchanged since 1999.

Previous O.P.E. evaluations found similar problems

Langrill said that problem isn’t new. It’s the same problem OPE identified in three other evaluations over the past decade.

“While the division is competent to establish a rate review process, the process will likely not succeed because management has too many competing priorities,” wrote OPE Director Rakesh Mohan in a letter to the committee. “Division management has moved from crisis to crisis while neglecting critical but less urgent work.”

In essence, Idaho Medicaid’s leadership is so occupied with putting out fires, it hasn’t built a fireproof structure. The Idaho Legislature demands the state’s Medicaid agency build that fireproof structure, but doesn’t give its administrators the right blueprints or construction budget, the report suggested.

“The Legislature should not expect dynamic management from a division with fewer staff than it had in 2009,” the report said.

But the division isn’t necessarily using its resources in the best way, either, the OPE found.

The evaluation found “that lawsuits, crises and external pressure drive the division’s strategic priorities, rather than a strong internal vision,” Langrill told the committee. “The division prioritizes new projects over the successful implementation of existing projects, in order to be responsive. There’s a sense that they cannot say no to something new, even when taking on that project would compromise existing work.”

Medicaid rates can ratchet up or down based on rate revisions passed by Medicare, a federally run program.

But some of the services covered by Idaho Medicaid don’t have a Medicare equivalent. State laws make it hard for Idaho to independently change what it pays for things like children’s developmental disability services — an example OPE gave, wherein it took three years for Medicaid rate revisions to go through the review process, be approved by the Idaho Legislature and take effect.

“State law requires the Legislature to approve changes to the fee schedule by approving a line item in the budget request for the Department of Health and Welfare,” the OPE report said. “The result is a minimum delay of 13 months between the (Medicaid) division calculating the impact of rate adjustments, developing the budget request for a new rate, and that rate going into effect.”

Changes to Medicaid payments, funding don’t come easy

This disconnect was evident in a committee hearing this session, on a bill that was pitched as a way to address a colossal spike in costs for health care staffing.

Steve LaForte, the attorney for Cascadia Healthcare, which owns more than 20 long-term care facilities in Idaho, told legislators that before the pandemic, Cascadia spent $5,000 per month on temporary nursing staff to fill labor gaps. But in December 2021 alone, it spent $1 million on temporary staffing, he said.

Many of the facilities’ residents have Medicaid and Medicare health insurance, he said. But those government insurance plans’ reimbursements are static, unable to keep up with staffing costs.

Sen. Mary Souza, R-Coeur d’Alene, asked why Medicare and Medicaid hasn’t begun to pay more for those services.

Souza’s remark went to the heart of OPE’s report: Medicaid isn’t nimble. It cannot overhaul reimbursement rates because the Legislature hasn’t given it enough support, and Medicaid officials haven’t really asked the Legislature for the support they need to make that happen.

Jeppesen responded to the report after seeing it in February. In a letter to OPE, Jeppesen said Health and Welfare agrees that Idaho Medicaid “lacks the appropriate management capacity” to create a robust rate review process.

“While we have worked to the best of our capacity to respond to provider rate reimbursement needs over the years, we acknowledge that there are opportunities for the division to improve our review processes and better communicate provider needs to the legislature,” Jeppesen wrote. “The Medicaid Division is at a critical juncture where we are finding it incredibly difficult to successfully bring up new projects and update processes with the resources available to us at this time.”

Jeppesen said the division “is strained to successfully manage the day-to-day operations of the (Medicaid) program, innovate towards more efficient operations, and clearly communicate the needs of Medicaid providers.”