Idaho Gov. Brad Little signed House Bill 863 into law Thursday, approving nearly $22 million in cuts to Medicaid disability services — a move that affects residential habilitation providers across the state, including those serving Canyon County residents with developmental and intellectual disabilities. The legislation reduces reimbursement rates for residential habilitation providers by $21.8 million in the next fiscal year, marking one of the few direct Medicaid cuts to emerge from the Legislature’s broader budget-cutting session this year.
Background on Idaho’s Medicaid Budget Decisions
Idaho lawmakers entered the 2026 legislative session facing significant budget pressure, enacting deep, across-the-board spending cuts across multiple areas of state government. Medicaid, however, was largely shielded from those reductions — with one notable exception. House Bill 863 and a companion measure, Senate Bill 1435, together represent the primary Medicaid cuts that survived the session. Senate Bill 1435, which officially enacts the reductions, passed the Idaho Senate on Thursday, the same day the governor signed House Bill 863 into law.
The cuts trace back to provider pay raises the Legislature approved in 2022. Those raises were intended to expand residential habilitation services and implement a new Medicaid budget structure. However, a court order stemming from the KW v. Armstrong lawsuit prevented the new framework from taking effect, according to the bill’s fiscal note. Because the underlying policy change never happened, lawmakers and the governor concluded that the associated funding increase was no longer justified.
Gov. Little had placed the residential habilitation rate reduction on his list of recommended cuts as the state worked to bring its budget into balance. Lawmakers ultimately followed that recommendation, though not without debate and delay on the House floor.
Key Details of the Residential Habilitation Cuts
When combined with Medicaid reimbursement rate cuts enacted last year, the new reductions amount to a 10% total decrease for residential habilitation providers. These are the organizations and group homes that provide around-the-clock care and support for Idahoans with severe developmental and intellectual disabilities — populations that often cannot live independently without structured assistance.
Supporters of the bill argue that even after the cuts, provider reimbursement rates remain 33% higher than they were four years ago. That framing was central to the argument that the reductions were a course correction rather than a devastating rollback. Rep. John Vander Woude, R-Nampa, who chairs a key legislative committee and sponsored an earlier version of the bill, was a leading figure in moving the proposal forward. The bill faced delays twice before it advanced — a sign of the political difficulty surrounding any reduction in services for vulnerable populations.
Many lawmakers viewed the vote as a forced choice: cut Medicaid expansion, which covers a broader population of lower-income working adults, or reduce reimbursement rates for disability service providers. Legislative leaders ultimately chose the latter, arguing the math supported it given the 2022 rate history.
For statewide context on Idaho’s Medicaid budget decisions and other legislative actions, visit Idaho News.
Impact on Canyon County Residents
Canyon County is home to a significant number of residents who rely on residential habilitation services, and the families of those individuals are watching the situation closely. Group homes and residential care facilities operating in Nampa, Caldwell, and surrounding Treasure Valley communities depend on Medicaid reimbursement rates to cover staffing costs, housing, and daily support services.
A 10% cumulative rate reduction raises legitimate questions about whether some providers can absorb the cuts without reducing staff, limiting capacity, or in worst-case scenarios, closing facilities. Families who rely on these placements for loved ones with severe disabilities often have few alternatives within Canyon County or the broader Treasure Valley region. Any reduction in available residential beds can place those families in extraordinarily difficult positions, sometimes forcing them to provide full-time care at home without professional support.
At the same time, fiscal conservatives note that Idaho’s Medicaid costs have grown substantially in recent years, and that reimbursement rates remaining 33% above 2022 levels represents a meaningful baseline even after the cuts take effect.
What Comes Next
With both House Bill 863 signed and Senate Bill 1435 advancing through the Legislature, the reimbursement rate reductions are expected to take effect in the next state fiscal year. Residential habilitation providers across Canyon County and Idaho will now need to assess how to operate under the revised rates.
Advocacy organizations, including those that organized a January protest of hundreds at the Idaho Capitol, are expected to continue pushing back against Medicaid cuts ahead of future legislative sessions. Families of Idahoans with disabilities are encouraged to contact their local representatives — including those serving Canyon County districts — to share how these changes affect their households. Residents can reach the Idaho Legislature through the official Statehouse website or by contacting their district offices directly.