BOISE – The Idaho Department of Health and Welfare is asking for another $108 million to pay Medicaid mental health contractors.
If approved by the Idaho Legislature, the supplemental budget request would let the state agency spend more money in its current fiscal year than lawmakers originally approved in 2024.
In its request, Health and Welfare says the additional federal funds are needed to pay private companies, commonly called managed care organizations, for a post-pandemic surge in Medicaid mental health service use that wasn’t initially factored into contracts.
Some of the requested funds would go to Optum, the company that previously ran the contract that Idaho already paid an extra $44 million for the higher care needs.
In July, Magellan of Idaho took over running Idaho Medicaid’s mental health benefits managed care contract.
Magellan’s four-year contract for the Idaho Behavioral Health Plan was initially estimated to cost $1.2 billion — and is Idaho’s largest state government contract.
The state’s actual long-term costs could change. But health officials also hope Magellan’s new preventive mental health care services will tamp down other care costs.
“We anticipate over the next couple of years that we should hopefully see those services help to decline the need for inpatient level of care, residential level of care,” Idaho Medicaid and Behavioral Health Deputy Director Juliet Charron, at the Idaho Department of Health and Welfare, told the Idaho Capital Sun in an interview. “Because ideally, we are serving someone with a more intensive community-based service that prevents them from ever getting to that crisis level of care.”
When planning contract budget, Health and Welfare didn’t predict demand surge
The $108,821,400 million that the state health agency requested as a supplemental award to its budget is all federal dollars, meant to be spent in Idaho’s current state fiscal year of 2025, which ends in July 2025.
Idaho Medicaid is a health insurance aid program for people with low incomes, children, people with disabilities and pregnant mothers.
The Idaho Legislature approves how state government agencies can spend funds, including from the federal government.
In early 2024, Idaho lawmakers set Health and Welfare’s budget — including for the Idaho Behavioral Health Plan contract that Magellan took over in July.
But in September 2023, when Health and Welfare formally requested the contract’s budget, the agency didn’t “have full information to account for increased acuity and utilization of behavioral health services” that would come, agency Director Alex Adams wrote in an Aug. 28 letter to the co-chairs of the Idaho Legislature’s Joint Finance-Appropriations Committee.
The forecast used then, Adams wrote, was based on consistent past trends.
But when actuaries re-ran the contract cost numbers in 2024, they saw Optum and Magellan were treating a population with more mental health needs than predicted.
If the Legislature doesn’t approve the supplemental budget request for the contract, Idaho mental health providers could be left unpaid and Medicaid patients could have less access to mental health care and substance abuse treatment, Health and Welfare’s budget request says.
And the agency would not be compliant with federal requirements “to reimburse our contractor based on actuarially sound capitation rates,” the request says.
Agency will give lawmakers Medicaid budget options, director tells JFAC
Idaho already paid Optum $44 million extra. And the state is working on calculating a second payment in early 2025, Charron told the Sun.
The supplemental budget request raises the contract’s initial capitation rate projection from $284 million in state fiscal year 2025 to $510.3 million, Adams wrote to lawmakers.
But that rate would fall to about $498.6 million in fiscal year 2026, when Optum wouldn’t be due for an extra payment.
Adams told legislative budget writers, in the August letter, that the agency plans to present the Legislature in January with “a menu of options for the Medicaid budget.”
“While recognizing these options always have unintended consequences that must be considered, we want to provide information that allows for a robust legislative discussion of priorities,” he wrote.
In June, Adams, the governor’s former budget chief, became director of the Idaho Department of Health and Welfare, Idaho’s largest state government agency.
Since then, he’s announced — publicly and to lawmakers — interim budget cuts in two social service programs that the agency projected fiscal issues for. And he’s pledged to work with lawmakers on long-term fixes.
Charron said that’s part of the “no surprises approach” under Adams’ leadership.
“Because they are our state policy makers and set the budget, we want to make sure that we are equipping them with all of the information that we have to make those really important decisions. And they are hard decisions,” she said. “They’re not always the kind of decisions anybody wants to have to make.”
This story first appeared on Idaho Capital Sun.
