Amends existing law to revise provisions regarding provider payment.

LEGISLATURE OF THE STATE OF IDAHO Sixty-eighth Legislature Second Regular Session - 2026 IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 759 BY HEALTH AND WELFARE COMMITTEE AN ACT1 RELATING TO PUBLIC ASSISTANCE; PROVIDING LEGISLATIVE INTENT; AMENDING SEC-2 TION 56-265, IDAHO CODE, TO REVISE PROVISIONS REGARDING PROVIDER PAY-3 MENT; PROVIDING THAT CERTAIN ADMINISTRATIVE RULES CONTAINED IN IDAPA4 16.03.26 SHALL BE NULL, VOID, AND OF NO FORCE AND EFFECT; AND DECLARING5 AN EMERGENCY.6

Be It Enacted by the Legislature of the State of Idaho:7

SECTION 1. LEGISLATIVE FINDINGS AND INTENT. The Legislature seeks to8 increase transparency for taxpayers and to support appropriation reductions9 for Medicaid rates paid to residential habilitation providers. Medicaid10 pays more than $176.5 million in general funds to help people with disabil-11 ities live independently with residential habilitation and other home and12 community-based services. The Governor's recommendation calls for the Leg-13 islature to pursue policy changes to support the Department of Health and14 Welfare in achieving budget reductions for Medicaid, including an option15 to reduce rates for residential habilitation. In 2022, the Legislature ap-16 propriated funds pursuant to Chapter 252, Laws of 2022, to increase payment17 rates for these services to implement a new service array and budget tool18 associated with the K.W. v. Armstrong lawsuit, but these funds are no longer19 appropriate since a court order halted implementation of the new services20 and budget tool. To support ongoing accountability for taxpayer dollars and21 ensure the Legislature has the needed information to effectuate its appro-22 priation responsibilities, this act requires the department to report how23 those funds are used.24

SECTION 2. That Section 56-265, Idaho Code, be, and the same is hereby25 amended to read as follows:26 56-265. PROVIDER PAYMENT. (1) Where there is an equivalent, the pay-27 ment to medicaid providers:28 (a) May be up to but shall not exceed one hundred percent (100%) of the29 current medicare rate for primary care procedure codes as defined by the30 centers for medicare and medicaid services; and31 (b) Shall be ninety percent (90%) of the current medicare rate for all32 other procedure codes.33 (2) Where there is no medicare equivalent, the payment rate to med-34 icaid providers shall be prescribed by rule. All home and community-based35 services without a medicare equivalent rate shall be cost-surveyed annu-36 ally with fifteen percent (15%) or more of responses being audited. The37 department shall use information from the cost surveys and other sources38 to evaluate rate adequacy. Payment rates shall be developed to include39 allocations to direct care worker wages, employee-related expenses, pro-40 gram-related expenses, and general and administrative costs.41

2 (a) On an annual basis, providers are required to expend at least the1 amount allocated to direct care worker wages and employee-related ex-2 penses to these categories.3 (b) Failure of the provider to meet the requirement in paragraph (a) of4 this subsection may result in a department-approved corrective action5 plan, closure of intake, or termination of the provider agreement.6 (c) The department shall summarize this audited cost survey work by7 provider type and service in a publicly available report no later than8 December 31 of each calendar year.9 (3) Notwithstanding any other provision of this chapter, if the10 services are provided by a private, freestanding mental health hospital11 facility that is an institution for mental disease as defined in 42 U.S.C.12 1396d(i), the department shall reimburse for inpatient services at a rate13 not to exceed ninety-one percent (91%) of the current medicare rate within14 federally allowed reimbursement under the medicaid program. The reimburse-15 ment provided for in this subsection shall be effective until July 1, 2021.16 (4) The department shall, through the annual budget process, include17 a line-item request for adjustments to provider rates. All changes to18 provider payment rates shall be subject to approval of the legislature by19 appropriation.20 (5) Notwithstanding any other provision of this chapter, the depart-21 ment may enter into agreements with providers to pay for services based on22 their value in terms of measurable health care quality and positive impacts23 to participant health.24 (a) Any such agreement shall be designed to be cost-neutral or cost-25 saving compared to other payment methodologies.26 (b) The department is authorized to pursue waiver agreements with the27 federal government as needed to support value-based payment arrange-28 ments, up to and including fully capitated provider-based managed care.29 (c) Beginning with the 2024 performance period and for all future per-30 formance periods thereafter, federally qualified health centers and31 any organization owned and controlled by a federally qualified health32 center shall be exempt from any financial risk in value-based payment33 agreements created pursuant to this section.34 (6) Medicaid reimbursement for critical access, out-of-state, and35 state-owned hospitals shall be as follows:36 (a) In-state, critical access hospitals as designated according to 4237 U.S.C. 1395i-4(c)(2)(B) shall be reimbursed at one hundred one percent38 (101%) of cost;39 (b) Out-of-state hospitals shall be reimbursed at eighty-seven percent40 (87%) of cost;41 (c) State-owned hospitals shall be reimbursed at one hundred percent42 (100%) of cost; and43 (d) Out-of-state hospital institutions for mental disease as defined44 in 42 U.S.C. 1396d(i) shall be reimbursed at a per diem equivalent to45 ninety-five percent (95%) of cost.46 (7) The department shall equitably reduce net reimbursements for all47 hospital services, including in-state institutions for mental disease but48 excluding all hospitals and institutions described in subsection (6) of49 this section, by amounts targeted to reduce general fund needs for hospital50

3 payments by three million one hundred thousand dollars ($3,100,000) in state1 fiscal year 2020 and eight million seven hundred twenty thousand dollars2 ($8,720,000) in state fiscal year 2021.3 (8) The department shall work with all Idaho hospitals, including in-4 stitutions for mental disease as defined in 42 U.S.C. 1396d(i), to establish5 value-based payment methods for inpatient and outpatient hospital services6 to replace existing cost-based reimbursement methods for in-state hospi-7 tals, other than those hospitals and institutions described in subsection8 (6) of this section, effective July 1, 2021. Budgets for hospital payments9 shall be subject to prospective legislative approval.10 (9) The department shall work with Idaho hospitals to establish a11 quality payment program for inpatient and outpatient adjustment payments12 described in section 56-1406, Idaho Code. Inpatient and outpatient adjust-13 ment payments shall be subject to increase or reduction based on hospital14 service quality measures established by the department in consultation with15 Idaho hospitals.16

SECTION 3. The rules contained in IDAPA 16.03.26, Department of Health17 and Welfare, relating to Medicaid Plan Benefits, Section 051.; and Section18 052., shall be null, void, and of no force and effect on and after July 1,19 2026.20

SECTION 4. An emergency existing therefor, which emergency is hereby21 declared to exist, this act shall be in full force and effect on and after its22 passage and approval.23