Idaho will cut provider reimbursement rates for residential habilitation services by $21.8 million next fiscal year. Gov. Brad Little signed House Bill 863 in late March 2026, KMVT reported on March 27. A companion budget bill enacting the cuts passed the Senate the same day.
How deep the cut goes
The cut rolls back part of a pay increase lawmakers approved for providers in 2022. Combined with last year's Medicaid rate cuts, it amounts to about a 10% rate reduction for residential habilitation providers. Supporters said rates would still be 33% higher than four years ago. The bill passed the Senate 19-15, with nine Republicans joining all six Democrats in opposition. At a hearing, a supported living provider warned that some agencies could close, and the lead attorney in the KW v. Armstrong lawsuit said the cuts could expose the state to more litigation.
Why this matters for providers and DSPs
Residential habilitation is staffed largely by DSPs, so a 10% rate cut puts pressure on wages and staffing. Idaho agencies will need to plan for the new rates, and advocates may keep pressing lawmakers next session.