Medicaid Provider Rates are the Cornerstone of Montanans’ Access to Health Care

In March, the Department of Public Health and Human Services (DPHHS) announced it may not move forward with implementing the Medicaid provider rate increase passed by the Legislature due to budget shortfalls. This potential action raised alarm bells for Medicaid health providers and could have a significant impact on providers’ ability to cover the cost of services. As policymakers consider next steps, this is a good opportunity to highlight why provider rates are so critical.

Medicaid and health care providers rely on reimbursement rates to keep their doors open across the health care system and the state of Montana. Medicaid provides critical coverage for almost one in five Montanans; including people with disabilities, families with children, and Montanans employed in low-wage sectors. Still, that care is only accessible and sustainable when health care providers are paid enough to cover the costs of delivering services, and when crucial services remain eligible for Medicaid payments. Provider rates are primarily set by DPHHS through the rule-making process and appropriations provided by the Legislature.

Montana has a complicated history of cutting provider rates in years with budgetary constraints. In the early 2000s, rates were reduced several times. Between 2002 and 2011, rates were increased four times, two of which were funded on a one-time-only basis rather than included in the base budget. Other provider rate increases were planned but not implemented due to budget shortfalls. In both the regular and special sessions in 2017, provider rates and essential services were cut again due to budget shortfalls. These cuts resulted in a significant loss of capacity for the state in behavioral health services and Medicaid customer services, all of which have still not fully recovered. In 2023, DPHHS and the Legislature acknowledged the inadequacy of provider rates in Montana and authorized a study that found rates across provider types were, on average, almost 22 percent below necessary benchmarks. 

Now in 2026, almost ten years after the cuts of 2017, DPHHS’s strategy to cope with $7 million in additional expenditures in general funds is again not to implement a planned and funded rate increase for providers across the state. Once more, the department looks to providers across the state to bear the burden of budget shortfalls. When the department is asked about the sustainability of new investments in behavioral health and rural health services, they often point to billing Medicaid as the primary method of maintaining increased capacity. These contradictory statements and policy decisions leave providers guessing, unable to plan their own budgets. The uncertainty of reimbursement rates (coupled with inflation, federal tariffs on medical supplies, and rising wages) means providers surviving on thin margins are asked to grow, expand, and provide more services with smaller margins and fewer assurances of receiving payment.

Health care providers are facing several challenges in the coming years. The Department of Health and Human Services should seek other options to mitigate budget shortfalls, rather than once again harming health care providers that provide essential services to Montanans.